<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1996
Registration No. 333-04595
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ALTERNATIVE LIVING SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8361 39-1771281
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
450 N. SUNNYSLOPE ROAD WILLIAM F. LASKY
SUITE 300 ALTERNATIVE LIVING SERVICES, INC.
BROOKFIELD, WISCONSIN 53005 450 N. SUNNYSLOPE ROAD, SUITE 300
(414) 789-9565 BROOKFIELD, WISCONSIN 53005
(Address, including zip code, and telephone (414) 789-9565
number, including area code, of (Name, address, including zip code, and
registrant's principal executive offices) telephone number, including area code, of agent
for service)
Copies to:
ALAN C. LEET, ESQ. CHRISTOPHER M. KELLY, ESQ.
ROGERS & HARDIN JONES, DAY, REAVIS & POGUE
2700 CAIN TOWER NORTH POINT
229 PEACHTREE STREET, N.E. 901 LAKESIDE AVENUE
ATLANTA, GEORGIA 30303 CLEVELAND, OHIO 44114
(404) 522-4700 (216) 586-1238
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
---------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement.
/ /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE FEE(3)
=================================================================================================
<S> <C> <C> <C> <C>
Common Stock,
$.01 Par Value........... 6,900,000 Shares $18.00 $124,200,000 $42,828
=================================================================================================
</TABLE>
(1) Includes 900,000 shares to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as amended.
(3) $33,707 previously paid.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
ALTERNATIVE LIVING SERVICES, INC.
CROSS REFERENCE SHEET FURNISHED PURSUANT
TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING PROSPECTUS CAPTION OR PAGE
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary, Risk Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Risk Factors, Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Principal and Selling Stockholders
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus,
Underwriting
9. Description of Securities to be
Registered............................... Description of Capital Stock
10. Interests of Named Experts and Counsel..... Legal Matters
11. Information with Respect to the
Registrant............................... Prospectus Summary, Risk Factors, Use of
Proceeds, Dividend Policy,
Capitalization, Pro Forma Financial
Information, Selected Consolidated
Financial Data, Management's Discussion
and Analysis of Financial Condition and
Results of Operations, Business,
Management, History and Organization,
Principal and Selling Stockholders,
Certain Relationships and Related
Transactions, Description of Capital
Stock, Shares Eligible for Future Sale,
Additional Information, Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
</TABLE>
- ---------------
* Not applicable or answer thereto is negative.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 5, 1996
PROSPECTUS
6,000,000 SHARES
[ALS LOGO]
COMMON STOCK
------------------
Of the 6,000,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), offered hereby (the "Offering"), 3,187,500 shares of Common
Stock are being sold by Alternative Living Services, Inc. ("ALS" or the
"Company"), and 2,812,500 shares of Common Stock are being sold by certain
existing stockholders of the Company (the "Selling Stockholders"). The Company
will not receive any proceeds from the sale of shares by the Selling
Stockholders. A substantial portion of the proceeds from this Offering will
benefit affiliates of the Company. See "Use of Proceeds" and "Principal and
Selling Stockholders." Prior to this Offering, there has been no public market
for the Common Stock. It is currently anticipated that the initial public
offering price will be between $16.00 and $18.00 per share. See "Underwriting"
for a discussion of the factors considered in determining the initial public
offering price. It is anticipated that approximately 500,000 shares of Common
Stock will be offered outside of the United States. The Company intends to apply
to list the shares of Common Stock on the American Stock Exchange ("AMEX") under
the proposed symbol "ALI".
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THE OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $ $ $ $
- ----------------------------------------------------------------------------------------------------
Total(3) $ $ $ $
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"). See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,600,000.
(3) The Company and certain Selling Stockholders have granted the Underwriters a
30-day option to purchase up to an additional 900,000 shares of Common Stock
on the same terms and conditions as set forth above solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholders will be $ ,
$ , $ and $ , respectively.
------------------
The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by the Underwriters, and subject to various prior
conditions, including the right to withdraw, cancel or modify the Offering and
to reject orders in whole or in part. It is expected that delivery of stock
certificates will be made in New York, New York on or about , 1996.
------------------
NATWEST SECURITIES LIMITED
MCDONALD & COMPANY
SECURITIES, INC.
THE CHICAGO CORPORATION
The date of this Prospectus is , 1996
<PAGE> 4
[Map of the United States with markings indicating the Company's operating
residences and residences in progress. Also includes a montage of photographs
depicting a Company residence under construction. The Company's logo will appear
on the top of this page.]
---------------------
Crossings(R) and WovenHearts(R) are registered service marks of the Company
and the Company claims service mark protection in the marks Wynwood (SM) and
Clare Bridge (SM).
---------------------
FOR UNITED KINGDOM PURCHASERS: The shares of Common Stock offered hereby
may not be offered or sold in the United Kingdom other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments, whether as principal or agent (except in circumstances that do not
constitute an offer to the public within the meaning of the Public Offers of
Securities Regulations 1995 or the Financial Services Act 1986), and this
Prospectus may only be issued or passed on to any person in the United Kingdom
if that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or a person to whom
this Prospectus may otherwise lawfully be passed on.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 5
On Gatefold (two pages): On the left side will be photographs of the
Company's Clare Bridge and Crossings models, together with a description of each
such model, and a series of photographs of residents and the interiors of the
Company's residences. On the right side will be photographs of the Company's
Wynwood and WovenHearts models, together with a description of each such model,
and a series of photographs of residents and the interiors of the Company's
residences. The Company's logo will appear accross the bottom of the Gatefold.
The phrase "ALTERNATIVE LIVING SERVICES...uniquely positioned to offer four
assisted living product lines" appears accross the top of the Gatefold.
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, financial statements, including the notes thereto, and pro forma
financial information and notes thereto appearing elsewhere in this Prospectus.
Prospective investors should consider carefully the information set forth under
"Risk Factors." Unless the context otherwise requires, references made to the
"Company" or "ALS" shall mean Alternative Living Services, Inc., its
"Predecessor," as described in the Notes to Summary Consolidated Financial and
Operating Data, and its subsidiaries. Unless otherwise indicated, all share and
per share data (i) assumes the Underwriters' over-allotment option will not be
exercised and (ii) gives effect to the 1,812.55 for one stock split with respect
to the Common Stock effected on May 17, 1996 (the "Stock Split"). This
Prospectus contains certain forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from the
results anticipated in these forward-looking statements as a result of certain
of the factors set forth under "Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Alternative Living Services, Inc. is a leading national assisted living
company operating 57 residences with an aggregate capacity of approximately
2,500 residents. Of these total residences, the Company owns 17, leases 23,
holds equity interests in and operates eight and manages an additional nine. The
Company provides a full range of assisted living services in its residences for
the frail elderly and free-standing specialty care residences for individuals
with Alzheimer's disease and other dementias. ALS and its predecessor have
operated assisted living residences since 1981 including specialty dementia care
residences since 1985.
The Company provides a broad continuum of personal care (such as assistance
with bathing, toileting, dressing, eating and ambulation), support services
(such as housekeeping, laundry and transportation) and health care (such as
medication administration and health monitoring) to its residents. In addition,
the Company offers a wide range of specialized services, including behavior
management and environmental adaptation programs, to residents who suffer from
Alzheimer's disease and other dementias. All of these services are provided on a
24-hour basis in "home-like" settings which emphasize privacy, individual choice
and independence. The Company operates four distinct assisted living product
lines, each serving a particular segment of the private pay elderly population.
Each assisted living product line is designed to permit residents to age in
place by meeting their personal and health care needs across a range of pricing
options.
- Clare Bridge -- These specially designed free-standing residences serve
the programmatic needs of individuals with Alzheimer's disease and other
dementias. This upper-income model accommodates 24 to 52 residents and is
primarily located in metropolitan and suburban markets. The average amount
paid by residents for the month of March 1996 was approximately $3,090 (or
$103 per day).
- Wynwood -- Designed to serve primarily upper-income frail elderly
individuals, these larger, multi-story residences are typically located in
metropolitan and suburban markets. The capacity of this model ranges from
50 to 72 residents. The average amount paid by residents for the month of
March 1996 was approximately $2,530 (or $84 per day).
- Crossings -- These residences provide supportive services and personal
care to elderly individuals in apartment-style settings. This model
typically accommodates 60 to 80 residents and is generally located in
metropolitan areas. The average monthly amount paid by residents for the
month of March 1996 was approximately $1,600 (or $53 per day).
- WovenHearts -- These smaller residences serve primarily moderate-income
frail elderly individuals. This model accommodates 20 residents and has
been expanded to accommodate 26 residents and is primarily located in
smaller communities and rural markets. The average monthly amount paid by
residents for the month of March 1996 was approximately $1,560 (or $52 per
day).
Since 1993, the Company has experienced significant growth through its
aggressive development program and several strategic acquisitions. During this
period the Company has developed or acquired 48 residences with an aggregate
capacity of approximately 2,400 residents. The Company intends to continue its
development strategy and is currently constructing 19 residences (i.e.,
construction activities have commenced and are ongoing) and is developing 28
residences (i.e., the site is under control and development activities such as
site permitting, preparation of surveys and architectural plans and negotiation
of construction contracts have
3
<PAGE> 7
commenced). Of these residences, 21 are scheduled to open during 1996. The
Company also intends to continue to pursue strategic acquisitions of assisted
living operations. In keeping with its acquisition strategy, in May 1996, the
Company acquired New Crossings International Corporation ("Crossings"), an
assisted living company which operated 15 residences with a capacity of
approximately 1,420 residents throughout the Western United States. This
strategic merger provides the Company with access to several new geographic
markets and complements its existing assisted living product lines with the
addition of apartment-style assisted living residences. In January 1996, the
Company acquired Heartland Retirement Services, Inc. ("Heartland"), an assisted
living company which operated 20 WovenHearts residences throughout Wisconsin. As
a result of this transaction, the Company has broadened its assisted living
product lines to serve frail elderly individuals in moderate income markets and
rural communities.
The Company's management team has extensive operational and strategic
experience in the health care industry. The Company's President and Chief
Executive Officer, William F. Lasky, founded the Company's predecessor and has
been actively involved in the assisted living industry for over 15 years. Mr.
Lasky currently serves as Chairman of the Assisted Living Facilities Association
of America ("ALFAA"), the nation's largest dedicated assisted living trade
organization. The Company's Chairman, William G. Petty, Jr., has held senior
management positions and has managed strategic investments in companies in the
long-term care, assisted living and senior living industries. Mr. Petty served
as the Chairman, Chief Executive Officer and President of Evergreen Healthcare,
Inc. ("Evergreen"), a NYSE-listed operator of long-term care facilities, from
June 1993 until July 1995, when Evergreen merged with GranCare, Inc.
("GranCare"), for which he now serves as Vice Chairman. See "Management."
The assisted living industry is a rapidly growing segment within the long
term care industry. The Company's target market, which consists of seniors age
75 and older, is one of the fastest growing segments of the United States
population. According to the United States Census Bureau, this age group is
expected to grow by 33.5% between 1990 and 2000. The Company believes that the
market for assisted living services, including dementia care services, will
continue to grow due to (i) the aging of the U.S. population, (ii) rising public
and private cost containment pressures, (iii) declining availability of
traditional nursing home beds given nursing home operators' increasing focus on
higher acuity patients, (iv) quality of life advantages of assisted living
residences over traditional skilled nursing homes and (v) the decreasing
availability of family care as an option for elderly family members. The Company
believes that it is well positioned to capitalize on these trends given its
growth, operating strategies and extensive experience in the assisted living
industry.
THE OFFERING
Common Stock offered by:
The Company............................... 3,187,500 shares
The Selling Stockholders.................. 2,812,500 shares(1)
Total Common Stock offered.............. 6,000,000 shares
Common Stock to be outstanding after the
Offering.................................. 12,710,849 shares(2)
Use of proceeds to the Company............ For repayment of $15.3 million of
indebtedness and accrued
interest, including $8.7 million
in bridge financing provided by
an affiliate in connection with
the Heartland acquisition, for
the development, construction and
possible acquisition of assisted
living residences and for general
corporate purposes, including
working capital. See "Use of
Proceeds."
Proposed American Stock Exchange Symbol... ALI
- ---------------
(1) In the event the over-allotment option is exercised in full, an additional
150,000 shares will be sold by the Company and an additional 750,000 shares
will be sold by the Selling Stockholders.
(2) Excludes 789,149 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock outstanding as of June 30, 1996 at a
weighted average exercise price of $6.08, including options granted under
the Company's 1995 Incentive Compensation Plan (the "1995 Plan"). See
"Capitalization" and "Management."
4
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary consolidated financial and operating data of the
Company is qualified in its entirety by the more detailed information in the
financial statements and the pro forma financial information (including the
notes thereto), appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------- ------------------------------------------
PRO FORMA PRO FORMA
PRO FORMA AS ADJUSTED PRO FORMA AS ADJUSTED
1993(1) 1994 1995 1995(2) 1995(2)(3) 1995 1996(4) 1996(5) 1996(3)(6)
------- ------ ------- --------- ----------- ------ ------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue.............. $2,788 $4,956 $10,464 $38,153 $38,153 $2,081 $ 4,325 $11,609 $11,609
Operating loss................. (124) (390) (1,046) (3,476) (3,476) (420) (1,352) (1,343) (1,343)
Interest expense, net.......... (56) (301) (813) (2,537) (1,129) (180) (391) (692) (340)
Equity in income (losses) of
unconsolidated affiliates.... -- (1) (438) (47) (47) 39 (85) (28) (28)
Minority interest in losses of
consolidated subsidiaries.... -- 49 112 125 125 23 45 45 45
Net loss before extraordinary
items........................ $ (180) $ (643) $(1,746) $(5,753) $(4,345) $ (538) $(1,804) $(2,030) $(1,678)
====== ====== ======= ======== ========= ====== ======= ======== =========
Net loss....................... $ (180) $ (643) $(1,746) $ (538) $(1,804)
====== ====== ======= ====== =======
Net loss before extraordinary
items per share.............. $(0.22) $ (0.30) $ (0.69) $ (0.38) $(0.18) $ (0.22) $ (0.20) $ (0.13)
====== ======= ======== ========= ====== ======= ======== =========
Net loss per share............. $(0.22) $ (0.30) $(0.18) $ (0.22)
====== ======= ====== =======
Weighted average shares
outstanding(6)............... 2,959 5,863 8,304 11,374 2,959 8,060 10,240 13,310
====== ======= ======== ========= ====== ======= ======== =========
OTHER OPERATING DATA (END OF PERIOD)(7):
Number of residences........... 12 13 19 52 52 15 42 57 57
Total resident capacity........ 160 340 616 2,368 2,368 474 1,081 2,502 2,502
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
---------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(5) ADJUSTED(3)(5)
------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 6,816 $ 10,449 $ 44,543
Working capital (deficit)...................................................... 5,672 (4,537) 35,585
Total assets................................................................... 53,824 92,227 126,321
Long term debt, less current installments...................................... 30,632 30,747 22,075
Stockholders' equity........................................................... 19,350 32,131 80,925
</TABLE>
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(1) The Company was organized December 14, 1993. In connection with the initial
capitalization of the Company, substantially all of the tangible assets of
two operating companies were contributed to the Company (collectively
referred to herein as the "Predecessor"). For purposes of this summary
financial data, amounts for the year ended December 31, 1993 represent the
sum of: (i) the results of operations of the Predecessor for the period from
January 1, 1993 through December 13, 1993; and (ii) the results of
operations of the Company for the period from December 14, 1993 through
December 31, 1993. Per share amounts for 1993 are not presented as they
would not provide comparable or meaningful information. See "History and
Organization -- The Company and its Predecessor."
(2) Gives effect to the following transactions (collectively, the "1996
Transactions") as if such transactions had occurred on January 1, 1995 with
respect to statement of operations and other operating data for the year
ended December 31, 1995: (a) the January 26, 1996 acquisition by the Company
(effective as of January 1, 1996) of all outstanding shares of common stock
of Heartland for cash and shares of Common Stock; (b) the January 1996 sale
and leaseback of two of the Company's residences; (c) the May 24, 1996
private placement of shares of Common Stock; (d) the May 24, 1996
acquisition of the remaining general and limited partnership interests not
owned by the Company in various partnerships comprising the operations of
ALS-Midwest (as defined herein) for a combination of cash, notes and shares
of Common Stock; and (e) the May 24, 1996 merger with Crossings pursuant to
which all outstanding capital stock of Crossings was exchanged for shares of
Common Stock. See "Pro Forma Financial Information."
(3) Gives effect to the sale by the Company of 3,187,500 shares of Common Stock
(assuming an initial public offering price of $17.00 and the application of
the net proceeds therefrom), as if such transaction had occurred on January
1, 1995 and 1996 with respect to statement of operations for the year ended
December 31, 1995 and for the quarter ended March 31, 1996, respectively,
and as of March 31, 1996 with respect to the balance sheet data. See "Pro
Forma Financial Information" and "Use of Proceeds."
5
<PAGE> 9
(4) The results of the Company for the three months ended March 31, 1996 include
the operations of Heartland, which was acquired effective as of January 1,
1996. See "History and Organization -- Acquisition of Heartland Retirement
Services, Inc."
(5) Gives effect to (a) the May 24, 1996 private placement of shares of Common
Stock; (b) the May 24, 1996 acquisition of the remaining general and limited
partnership interests not owned by the Company in various partnerships
comprising the operations of ALS-Midwest for a combination of cash, notes
and shares of Common Stock; and (c) the May 24, 1996 merger with Crossings
pursuant to which all outstanding capital stock of Crossings was exchanged
for shares of Common Stock, as if such transactions had occurred on January
1, 1996 with respect to statement of operations for the quarter ended March
31, 1996, and as of March 31, 1996 with respect to the balance sheet data.
(6) The weighted average number of shares of Common Stock outstanding does not
include 117,647 shares, the net proceeds from the issuance and sale of which
have been designated for general corporate purposes.
(7) Includes residences which the Company owns, leases, holds equity interests
in and manages.
6
<PAGE> 10
RISK FACTORS
Potential investors should consider carefully the following factors, as
well as the more detailed information contained elsewhere in this Prospectus,
before making a decision to invest in the Common Stock offered hereby.
HISTORY OF, AND ANTICIPATED, OPERATING LOSSES
The Company has experienced significant operating losses and net losses in
each year since inception, primarily as a result of the Company's development,
construction and residence lease-up activities as well as the incurrence of
certain expenses to establish its corporate infrastructure to support future
planned growth. For the years ended December 31, 1993, 1994 and 1995, the
Company incurred operating losses of $124,000, $390,000 and $1.0 million,
respectively, and net losses of $180,000, $643,000 and $1.7 million,
respectively. For the three months ended March 31, 1996, the Company incurred an
operating loss and net loss of $1.4 million and $1.8 million, respectively.
After giving effect to the 1996 Transactions, for the year ended December 31,
1995 and the three months ended March 31, 1996, the Company incurred operating
losses of $3.5 million and $1.3 million, respectively, and losses before
extraordinary items of $5.8 million and $2.0 million, respectively. See "History
and Organization" and "Pro Forma Financial Information."
Newly opened assisted living residences typically operate at a loss during
the first six to 12 months of operation, primarily due to the incurrence of
certain fixed and variable expenses in advance of the achievement of targeted
rent and service fee revenues from the lease-up of such residences. Of the
Company's 57 residences, 21 have been open for 12 months or less. In addition,
the development and construction of assisted living residences involve the
commitment of substantial capital over a typical six to 12 month construction
period, the consequence of which may be an adverse impact on the Company's
liquidity. Currently, the Company has 19 residences under construction and an
additional 28 residences under development. In the case of acquired residences,
resident turnover and increased marketing expenditures which may be required to
reposition such residences, together with the possible disruption of operations
resulting from the implementation of renovations, may adversely impact the
financial performance of such residences for a period of time after their
acquisition.
The Company plans to use approximately $28.3 million of the estimated net
proceeds of the Offering to develop, construct and, to the extent opportunities
are available, acquire additional assisted living residences. See "Use of
Proceeds." Principally as a result of the Company's development and construction
activities, the Company anticipates that it will incur additional operating
losses for at least the next 12 to 18 months as the operating expenses
associated with developing and operating new residences and supporting its
corporate infrastructure necessary to manage the Company's growth strategy will
be only partially offset by operating profits generated by stabilized
residences. There can be no assurance, however, that the Company will achieve
profitability or that the Company will not experience unforeseen expenses,
difficulties, complications and delays which could result in greater than
anticipated operating losses or otherwise materially adversely affect the
Company's financial condition and results of operations. See "-- Development and
Construction Risks," "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," and "Business -- Business Strategy."
ABILITY TO CONTINUE GROWTH; ABILITY TO MANAGE RAPID EXPANSION
The Company has and expects to continue to pursue an aggressive expansion
strategy focused on developing, constructing and acquiring assisted living
residences. The Company's prospects are directly affected by its ability to
develop, construct and, to a lesser extent, acquire additional residences. The
Company's ability to continue to grow will depend in large part on its ability
to identify suitable and affordable development and acquisition opportunities
and successfully pursue such opportunities, identify and obtain necessary
financing commitments and effectively operate its assisted living residences.
There can be no assurance, however, that the Company will be successful in
developing, constructing or acquiring any additional residences or that it will
be able to continue to achieve or exceed its historical growth rate.
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The Company's rapid expansion places significant demands on the Company's
management and operating personnel. The Company's ability to manage its recent
and future growth effectively will require it to continue to improve its
operational, financial and management information systems and to continue to
attract, retain, train, motivate and manage key employees. If the Company is
unable to manage its growth effectively, its business, operating results and
financial condition will be adversely affected. See "Business -- Business
Strategy" and "Management -- Executive Officers and Directors."
DEVELOPMENT AND CONSTRUCTION RISKS
The Company's growth strategy is dependent, in part, on its ability to
develop and construct a significant number of additional residences. Currently,
the Company has 19 residences under construction and 28 residences under
development. The Company expects to open 21 of these residences during 1996.
Development projects generally are subject to various risks, including zoning,
permitting, health care licensing and construction delays, that may result in
construction cost overruns and longer development periods and, accordingly,
higher than anticipated start-up losses. Project management is subject to a
number of contingencies over which the Company will have little or no control
and which might adversely affect project costs and completion time. Such
contingencies include shortages of, or the inability to obtain, labor or
materials, the inability of the general contractor or subcontractors to perform
under their contracts, strikes, adverse weather conditions and changes in
applicable laws or regulations or in the method of applying such laws and
regulations. As a result of these various factors, there can be no assurance
that the Company will not experience construction delays, that it will be
successful in developing and constructing currently planned or additional
residences or that any developed residence will be economically successful. If
the Company's planned development is delayed, the Company's business, operating
results and financial condition could be adversely affected. See
"Business -- Business Strategy" and "-- Properties."
RISKS ASSOCIATED WITH ACQUISITIONS
The Company has acquired residences in the past and intends to continue to
seek acquisition opportunities in the future. However, the Company has not
identified any such opportunities and no assurances can be made that the Company
will be successful in identifying any future acquisition opportunities or
completing any identified acquisitions. The acquisition of residences involves a
number of risks. Existing residences available for acquisition frequently serve
or target different market segments than those presently served by the Company.
It may be necessary in such cases to reposition and renovate acquired residences
or turn over the existing resident population to achieve a resident acuity and
income profile which is consistent with the Company's current operations. In
addition, the Company may also determine that staff and operating management
personnel changes are necessary to successfully integrate such residences into
the Company's existing operations. No assurances can be made that management
will be successful in repositioning any acquired residences or in effecting any
necessary operational or structural changes and improvements on a timely basis.
Any failure by the Company to make necessary operational or structural changes
or to successfully reposition acquired residences may adversely impact the
Company's business, operating results and financial condition. In undertaking
acquisitions of residences, the Company also may be adversely impacted by
unforeseen liabilities attributable to the prior operators of such residences,
against whom the Company may have little or no recourse. See
"Business -- Business Strategy."
DIFFICULTIES ASSOCIATED WITH INTEGRATING THE OPERATIONS OF CROSSINGS AND
HEARTLAND
Since December 1995, the Company has completed two significant transactions
pursuant to which the Company added a total of 35 additional residences. In May
1996, the Company merged with Crossings, which operated 15 residences with an
aggregate capacity of approximately 1,420 residents. In addition, in January
1996 the Company completed the acquisition of Heartland, which operated 20
assisted living residences. On a pro forma basis, after giving effect to the
1996 Transactions, the Company would have reported operating revenue of $38.2
million and a loss before extraordinary items of $5.8 million in 1995 as
compared to operating revenue of $10.5 million and a net loss before
extraordinary items of $1.7 million on a historical basis.
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The Company believes that it can successfully integrate and manage the
operations of Crossings and Heartland, as well as achieve certain economies of
scale. However, because of the inherent uncertainties associated with efforts to
integrate and manage the operations of the three companies, there can be no
assurance that the Company will be successful in such integration and
management, that any cost savings or operating synergies will be realized, or
that there will not be offsetting increases in other expenses or other charges
to earnings resulting from the combined operations. The Company expects to
establish a reserve for severance and other non-recurring charges expected to be
incurred in connection with the merger and integration of Crossings' operations.
While the Company has no current plans, it may also elect to dispose of certain
of its residences and may as a result incur further non-recurring expenses.
DISCRETIONARY USE OF PROCEEDS
The Company will have broad discretion in using the net proceeds received
by the Company from the Offering. While $15.3 million of the net proceeds
received by the Company will be used for debt retirement, the Company expects to
use a substantial portion of the $28.3 million of remaining net proceeds ($30.7
million if the over-allotment option is fully exercised) to develop and
construct additional residences. While the Company currently has 19 residences
under construction and 28 residences under development, the Company will have
broad discretion in modifying its current construction and development plan,
selecting and developing future sites, acquiring additional residences and
otherwise using the net proceeds of the Offering. See "Use of Proceeds" and
"Business -- Properties."
NEED FOR ADDITIONAL FINANCING; RISK OF RISING INTEREST RATES
To achieve the Company's growth strategy, the Company will need to obtain
sufficient financing to fund its development, construction and acquisition
activities. The estimated cost to complete and lease up the 47 residences under
construction or development during the next 18 months is approximately $150
million, which substantially exceeds the estimated net proceeds of the Offering.
Accordingly, the Company's future growth will depend on its ability to obtain
additional financing on acceptable terms. The Company is currently negotiating
additional financing commitments which it believes, together with the net
proceeds from the Offering and existing financing commitments, will be
sufficient to fund its development and acquisition programs for at least the
next 18 months. The Company will from time to time seek additional funding
through public or private financing, including equity or debt financing. If
additional funds are raised by issuing equity securities, the Company's
stockholders may experience further dilution. See "Dilution." In addition, the
Company will require sufficient financial resources to meet its operating and
working capital needs. The Company expects negative cash flow to continue for at
least the next 12 to 18 months as it continues to develop and construct assisted
living residences. There can be no assurance that any newly constructed
residences will achieve a stabilized occupancy rate and attain a resident mix
that meet the Company's expectations or generate sufficient positive cash flow
to cover operating and financing costs associated with such residences. There
can be no assurance that the Company will be successful in securing additional
financing or that adequate funding will be available and, if available, will be
on terms that are acceptable to the Company. A lack of funds may require the
Company to delay or eliminate all or some of its development projects and
acquisition plans. In addition, the Company may require additional financing to
enable it to acquire additional residences, to respond to changing economic
conditions, to expand the Company's development program or to account for
changes in assumptions related to its development program.
On a pro forma basis, approximately $8.0 million, or 20%, of the Company's
total indebtedness as of March 31, 1996 was subject to floating interest rates.
Although a majority of the Company's debt and lease payment obligations are not
subject to floating interest rates, indebtedness that the Company may incur in
the future may bear interest at a floating rate. In addition, future fixed rate
indebtedness and lease obligations will be based on interest rates prevailing at
the time such arrangements are obtained. Therefore, increases in prevailing
interest rates could increase the Company's interest or lease payment
obligations and could have an adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
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<PAGE> 13
SUBSTANTIAL DEBT AND OPERATING LEASE PAYMENT OBLIGATIONS
As of March 31, 1996, on a pro forma basis to give effect to the 1996
Transactions and as adjusted to give effect to the application of the net
proceeds of the Offering, the Company's long-term debt would have been $22.1
million. On a pro forma basis to give effect to the 1996 Transactions, the
Company would have had lease expense for the year ended December 31, 1995 of
$8.9 million. Long-term debt and annual operating lease payment obligations will
increase significantly as the Company pursues its growth strategy. In addition,
the Company anticipates that future development of residences may be financed
with construction loans and, therefore, there is a risk that, upon completion of
construction, permanent financing for newly developed residences may not be
available or may be available only on terms that are unfavorable or unacceptable
to the Company. There can be no assurance that the Company will generate
sufficient cash flow to meet its obligations. Any payment or other default with
respect to such obligations could cause the lender to foreclose upon the
residences securing the indebtedness or, in the case of an operating lease,
could terminate the lease, with a consequent loss of income and asset value to
the Company. Moreover, because of cross-default and cross-collateralization
provisions in certain of the Company's mortgages, debt instruments and leases, a
default by the Company on one of its payment obligations could result in
acceleration of other obligations and adversely affect a significant number of
the Company's other residences. See "-- Need for Additional Financing; Risk of
Rising Interest Rates," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Business Strategy."
DEPENDENCE ON, AND OTHER ACTIVITIES OF, SENIOR MANAGEMENT
The Company depends, and will continue to depend, upon the services of
William F. Lasky, the Company's President and Chief Executive Officer, William
G. Petty, Jr., the Company's Chairman of the Board, and the Company's other
executive officers. Mr. Lasky is subject to the terms of an employment agreement
with the Company which terminates in 1997 and generally prohibits Mr. Lasky from
competing with the Company within specified geographic areas for a period of 18
months if his employment is terminated. The Company intends to purchase "keyman"
life insurance on Mr. Lasky in the amount of $2.0 million. Mr. Petty is a party
to a services agreement pursuant to which he has agreed to provide management,
financial and strategic planning services to the Company through April 1998.
However, Mr. Petty is not bound by any noncompetition agreement. Mr. Petty is a
principal of Beecken, Petty & Company, L.L.C., a company formed to serve as
general partner of a health care investment fund to be formed in 1996 to make
privately negotiated equity or equity-related investments in growth companies in
the health care service industry (the "Fund"). Upon formation of the Fund
(expected in the summer of 1996), it is expected that Mr. Petty will devote a
substantial portion of his business time and energy to the business and affairs
of the Fund. Certain, but not all, of the Company's other executive officers are
parties to employment agreements with the Company containing noncompete
provisions. However, none of such employment agreements (and none of the
noncompete provisions contained therein) provide the Company with assurances
that such executive officers will remain with the Company. The loss of the
services of any such executive officers could have a material adverse effect on
the Company's financial condition or results of operations. See "Management."
POTENTIAL CONFLICTS OF INTEREST OF CERTAIN EXECUTIVE OFFICERS AND DIRECTORS
Mr. Lasky, Douglas A. Hennig, the Company's Senior Vice President, and
Richard W. Boehlke, the Company's Vice Chairman, each owns interests in assisted
living residences operated by the Company pursuant to management agreements or,
in the case of Mr. Boehlke, pursuant to a long-term lease. On a pro forma basis
giving effect to the 1996 Transactions, revenues attributable to these
residences represented less than 5.0% of operating revenue for the year ended
December 31, 1995. Payments of management fees to the Company by an affiliate of
Mr. Lasky aggregated $252,000 and $290,000 for 1995 and 1994, respectively.
Annual lease payments to a partnership controlled by Mr. Boehlke are expected to
aggregate approximately $652,000 during 1996 (all of which is expected to be
used by such partnership to service existing debt on the leased residence).
During 1996, the Company also expects to receive management fees of
approximately
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<PAGE> 14
$25,000 from a partnership in which Mr. Hennig has a 25% general partner
interest. These agreements are on terms which the Company believes are fair and
are substantially similar to those that the Company could have obtained from
unaffiliated third parties. In addition, in the case of the management
agreements, the Company has the right to terminate such agreements, in its sole
discretion, at least on an annual basis. However, such ownership interests of
Messrs. Lasky, Hennig and Boehlke may create actual or potential conflicts of
interest on the part of these officers. In the case of related party
transactions, it is the Company's policy to enter into such arrangements on
terms, which in the opinion of the Company, are substantially similar to those
that could otherwise be obtained from unrelated third parties, and to require
that any such transactions be approved by a majority of the disinterested
members of the Company's Board of Directors. See "Management -- Executive
Officers and Directors" and "Certain Relationships and Related Transactions."
In addition, Mr. Petty also serves as the Vice Chairman of GranCare, a
publicly-owned operator of skilled nursing facilities and institutional
pharmacies, which also operates four assisted living residences. The Company
understands that GranCare may develop or acquire additional assisted living
facilities in the future which may compete directly with the Company's
residences. GranCare currently owns 19.9% of the outstanding shares of Common
Stock, all of which shares are expected to be sold in the Offering. Gene E.
Burleson, a director of the Company, is Chairman of the Board and Chief
Executive Officer of GranCare. Ronald G. Kenny, a director of the Company, is
also a director of GranCare. In addition, Messrs. Burleson, Petty and Kenny and
their affiliates are shareholders of GranCare. These relationships with, and
ownership interests in, GranCare may create actual or potential conflicts of
interests. See "Management -- Executive Officers and Directors," "Principal and
Selling Stockholders" and "Certain Relationships and Related Transactions."
SUBSTANTIAL PORTION OF THE OFFERING TO BENEFIT AFFILIATES OF THE COMPANY
The Selling Stockholders, which include GranCare, Capital Consultants, Inc.
("CCI") and Heartland Development Corporation ("HDC") will receive approximately
$44.5 million (assuming an initial public offering price of $17.00 per share,
after deducting underwriting discounts and commissions) for the shares of Common
Stock to be sold by them in the Offering. If the over-allotment option is fully
exercised CCI will receive an additional $331,000 and Care Living Centers, Inc.
("CLC") and certain members of Alternative Living Investors, L.L.C. ("ALI") will
receive an aggregate amount of $11.5 million. The Company will not receive any
of the proceeds from the sale of shares of Common Stock by the Selling
Stockholders. In addition, approximately $8.7 million of the net proceeds to the
Company of the Offering will be used to retire a bridge loan provided to the
Company by RDV Capital Management L.P. in connection with the Heartland
acquisition. Jerry Tubergen, a director of the Company, serves as President of
RDV Corporation, the general partner of RDV Capital Management L.P. See "Use of
Proceeds," "Principal and Selling Stockholders" and "Certain Relationships and
Related Transactions."
GEOGRAPHIC CONCENTRATION
On a pro forma basis, giving effect to the 1996 Transactions, operations in
Wisconsin, Oregon and Colorado would have accounted for approximately 58.5% of
total operating revenue for the three months ended March 31, 1996. The Company's
business prospects are significantly affected by general economic factors
affecting such areas and the laws and regulatory environment of such states. In
addition, the Company's growth strategy involves the development and acquisition
of residences within a concentrated area in each geographic region into which it
expands. Therefore, even if the Company is able to expand into other geographic
regions, its prospects may become significantly affected by general economic
factors affecting such local areas and by applicable local laws and regulatory
environments in such regions. See "Business -- Properties" and
"Business -- Government Regulation."
RESIDENCE MANAGEMENT, STAFFING AND LABOR COSTS
The Company competes with other providers of long-term care with respect to
attracting and retaining qualified and skilled personnel. The Company is
dependent upon its ability to attract and retain management personnel
responsible for the day-to-day operations of each of the Company's residences.
Any inability of the Company to attract or retain qualified residence management
personnel could have a material adverse effect
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<PAGE> 15
on the Company's financial condition or results of operations. In addition, a
possible shortage of nurses or trained personnel may require the Company to
enhance its wage and benefits package in order to compete in the hiring and
retention of such personnel. The Company will also be dependent upon the
available labor pool of semi-skilled and unskilled employees in each of the
markets in which it operates. No assurance can be given that the Company's labor
costs will not increase, or that, if they do increase, they can be matched by
corresponding increases in rates charged to residents. Any significant failure
by the Company to attract and retain qualified management and staff personnel,
to control its labor costs or to pass on any increased labor costs to residents
through rate increases would have a material adverse effect on the Company's
business, operating results and financial condition. See
"Business -- Competition."
COMPETITION
The long-term care industry is highly competitive and, given the relatively
low barriers to entry and continuing health care cost containment pressures, the
Company expects that the assisted living segment of such industry will become
increasingly competitive in the future. The Company competes with other
companies providing assisted living services as well as numerous other companies
providing similar service and care alternatives, such as home health care
agencies, congregate care facilities, retirement communities and skilled nursing
facilities. While the Company believes there is a need for additional assisted
living residences in the markets where the Company is constructing or developing
residences, the Company expects that as assisted living residences receive
increased attention and the number of states which include assisted living
services in their Medicaid programs increases, competition will increase from
new market entrants, many of whom may have substantially greater financial
resources than the Company. No assurance can be given that increased competition
will not adversely affect the Company's ability to attract or retain residents
or maintain its existing rate structures. Moreover, in implementing its growth
strategy, the Company expects to face competition for development and
acquisition opportunities from local developers and regional and national
assisted living companies. Some of the Company's present and potential
competitors have, or may have access to, greater financial resources than those
of the Company. Consequently, there can be no assurance that the Company will
not encounter increased competition in the future which could limit its ability
to attract and retain residents, to maintain or increase resident service fees
or to expand its business and could have a material adverse effect on the
Company's financial condition, results of operations and prospects. See
"Business -- Competition."
JOINT VENTURES AND RELATED MANDATORY PURCHASE OBLIGATIONS
The Company has entered into several joint ventures with regional real
estate development partners for the construction, development and ownership of
assisted living residences in targeted geographic areas. Of the 47 residences
which are either under construction or development, 20 of such residences are
being constructed or developed under joint venture agreements. There can be no
assurance that the Company's joint venture partners will be successful in
identifying sites for future residences, securing necessary permits and licenses
for the construction of new residences and supervising the construction of new
residences on time and within budget. In addition, the Company has agreed not to
own or operate competing assisted living residences within specified geographic
areas adjacent to residences developed through joint ventures. While the Company
typically receives a fee for managing residences developed through joint
ventures, the Company shares with the other joint venture partners certain
decision-making authority as well as any profits or losses realized from the
operation or sale of such residences. The Company will be obligated under its
joint venture arrangements to purchase the equity interests of its joint venture
partners upon the election of such joint venture partners at a price based on
the appraised value of the residence owned by the applicable joint venture.
These purchase rights generally become exercisable during the first six months
to two years following the opening of the residence owned by such joint venture.
As a result of these provisions, the Company might become obligated to acquire
additional interests in residences developed through joint ventures on terms or
at times that would otherwise not be acceptable to the Company, including times
during which the Company may not have adequate liquidity to fund such
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Joint Ventures and Strategic
Alliances."
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GOVERNMENT REGULATION
Health care is an area of extensive and frequent regulatory change. The
assisted living industry is relatively new, and, accordingly, the manner and
extent to which it is regulated at the Federal and state levels is evolving.
Changes in the laws or new interpretations of existing laws may have a
significant impact on the Company's methods and costs of doing business. The
Company is, and will be, subject to varying degrees of regulation and licensing
by health or social service agencies and other regulatory authorities in the
various states and localities where it operates or intends to operate.
The Company's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses in rapidly changing regulatory environments. Any failure to satisfy
applicable regulations or to procure or maintain a required license could have a
material adverse effect on the Company's financial condition, results of
operations and prospects. The Company's operations could also be adversely
affected by, among other things, regulatory developments such as revisions in
building code requirements for assisted living residences, mandatory increases
in the scope and quality of care to be offered to residents and revisions in
licensing and certification standards. There can be no assurance that Federal,
state or local laws or regulations will not be imposed or expanded which
adversely impact the Company's business, financial condition, results of
operations or prospects. The Company's residence operations are also subject to
health and other state and local government regulations.
Pursuant to recently adopted Wisconsin legislation, effective as of July 1,
1996 only certain independent apartment model assisted living facilities may be
designated as an "assisted living facility" in the State of Wisconsin. Most of
the Company's residences located in Wisconsin would not meet the definitional
requirements of this statute. As administrative guidelines for this legislation
have not yet been finalized, its scope and application are still uncertain. If
the Company is ultimately compelled to discontinue any reference to the generic
term "assisted living" in its sales and marketing materials for its Wisconsin
residences, such compliance could have a material adverse effect on the
Company's business, results of operation or financial condition. See
"Business -- Government Regulation."
LIABILITY AND INSURANCE
The provision of personal and health care services entails an inherent risk
of liability. In recent years, participants in the long-term care industry have
become subject to an increasing number of lawsuits alleging malpractice or
related legal theories, many of which involve large claims and result in the
incurrence of significant defense costs. In addition, compared to more
institutional long-term care facilities, assisted living residences (especially
dementia care residences) of the type operated by the Company offer residents a
greater degree of independence in their daily lives. This increased level of
independence, however, may subject the resident and the Company to certain risks
that would be reduced in more institutionalized settings. The Company currently
maintains liability insurance intended to cover such claims which it believes is
adequate based on the nature of the risks, its historical experience and
industry standards. There can be no assurance, however, that claims in excess of
the Company's insurance or claims not covered by the Company's insurance, such
as claims for punitive damages, will not arise. A successful claim against the
Company not covered by, or in excess of, the Company's insurance could have a
material adverse effect upon the Company's financial condition and results of
operations. Claims against the Company, regardless of their merit or eventual
outcome, may also have a material adverse effect upon the Company's ability to
attract or retain residents or expand its business and may require management to
devote substantial time to matters unrelated to the Company's operations. In
addition, the Company's insurance policies must be renewed annually. There can
be no assurance that the Company will be able to obtain liability insurance in
the future or that, if such insurance is available, it will be available on
acceptable economic terms. See "Business -- Insurance."
DEPENDENCE ON ATTRACTING SENIORS WITH SUFFICIENT RESOURCES TO PAY
The Company currently relies, and for the foreseeable future expects to
rely, primarily on the ability of its residents to pay for the Company's
services from their own and their families' financial resources. Generally, only
elderly adults with income or assets meeting or exceeding the comparable median
in the region where the
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<PAGE> 17
Company's assisted living residences are located can afford the Company's fees
for its residences. Inflation or other circumstances which adversely affect the
ability of residents and potential residents to pay for assisted living services
could have an adverse effect on the Company. In the event that the Company
encounters difficulty in attracting seniors with adequate resources to pay for
the Company's services, the Company would be adversely affected.
ENVIRONMENTAL LIABILITY RISKS ASSOCIATED WITH REAL PROPERTY
Under various Federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and clean
up costs incurred by such parties in connection with the contamination. Such
laws typically impose clean up responsibility and liability without regard to
whether the owner knew of or caused the presence of the contaminants, and
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate such property, may adversely affect the owner's
ability to sell or lease such property or to borrow using such property as
collateral. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. Persons who arrange for the disposal or
treatment of hazardous or toxic substances also may be liable for the costs of
removal or remediation of such substances at the disposal or treatment facility,
whether or not such facility is owned or operated by such person. Finally, the
owner of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from a
site.
The Company has conducted environmental assessments of all of its operating
residences and has conducted, or is in the process of conducting, environmental
assessments of all of its undeveloped sites and sites currently under
construction. These assessments have not revealed, and the Company is not
otherwise aware of, any environmental liability that it believes would have a
material adverse effect on the Company's business, assets or results of
operations. There can be no assurance, however, that environmental assessments
would detect all environmental contamination which may give rise to material
environmental liabilities. The Company believes that its residences are in
compliance in all material respects with all Federal, state and local laws,
ordinances and regulations regarding hazardous or toxic substances or petroleum
products. The Company has not been notified by any governmental authority, and
is not otherwise aware, of any material non-compliance, liability or claim
relating to hazardous or toxic substances or petroleum products in connection
with any of the residences it currently operates.
CONTROL BY OFFICERS AND DIRECTORS
Upon completion of the Offering, the Company's officers and directors and
entities with which they are affiliated will continue to beneficially own
approximately 23.7% of the outstanding shares of Common Stock. Accordingly,
following the Offering, such individuals will have the ability, by voting their
shares in concert, to significantly influence (i) the election of the Company's
Board of Directors and, thus, the direction and future operations of the
Company, and (ii) the outcome of all other matters submitted to the Company's
stockholders, including mergers, consolidations, and the sale of all or
substantially all of the Company's assets. In addition, the 1995 Plan authorizes
the issuance of options to purchase up to 1,425,000 shares of Common Stock to
employees and directors of the Company. As of June 30, 1996, the Company's
officers and directors held options to acquire 750,006 shares of Common Stock,
which options are subject to certain vesting requirements. The issuance of
additional shares of Common Stock pursuant to the exercise of stock options
granted to management under the 1995 Plan would increase the number of shares
held by the Company's executive officers and directors in the future. See
"Management -- Executive Compensation" and "Principal and Selling Stockholders."
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ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation authorizes the issuance
of 5 million shares of preferred stock and 30 million shares of Common Stock.
After giving effect to the Offering, the Company will have 17.3 million shares
of authorized but unissued shares of Common Stock. The Company's Board of
Directors has the power to issue any or all of these additional shares without
stockholder approval, and the preferred shares can be issued with such rights,
preferences and limitations as may be determined by the Board. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of any holders of preferred stock that may be issued in the future.
The Company presently has no commitments or contracts to issue any additional
shares of Common Stock (other than pursuant to outstanding stock options) or any
shares of preferred stock. Authorized and unissued preferred stock and Common
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could delay, discourage, hinder or
preclude an unsolicited acquisition of the Company, could make it less likely
that stockholders receive a premium for their shares as a result of any such
attempt and could adversely affect the market price of and the voting and other
rights of the holders of outstanding shares of Common Stock. As a Delaware
corporation, the Company is subject to Section 203 of the Delaware General
Corporation Law which, in general, prevents an "interested stockholder" (defined
generally as a person owning 15% or more of the corporation's outstanding voting
stock) from engaging in a "business combination" (as defined in Section 203) for
three years following the date such person became an interested stockholder
unless certain conditions are satisfied. See "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market following
the Offering, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock. The shares of Common
Stock outstanding prior to the Offering will be eligible for sale in the public
market at various times in the future. Upon completion of the Offering, the
Company will have 12,710,849 shares of Common Stock outstanding. Of these
shares, the 6,000,000 shares sold in the Offering will be freely tradeable
without restriction or limitation under the Securities Act of 1933, as amended
(the "Securities Act"), except for shares purchased by "affiliates" of the
Company, as such term is defined in Rule 144 promulgated under the Securities
Act. The remaining 6,710,849 shares are "restricted securities" within the
meaning of Rule 144. The Company, all of its directors and officers and all
holders of 5% or more of the shares of Common Stock after the Offering have
agreed with the Underwriters not to sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the date of this Prospectus without
the prior written consent of NatWest Securities Limited, other than, in the case
of the Company, grants of stock options under the 1995 Plan and the issuance of
stock upon the exercise of outstanding stock options. NatWest Securities Limited
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. Beginning 90 days after
the date of this Prospectus, 456,763 restricted shares will first become
eligible for sale in the public market pursuant to Rule 144 promulgated under
the Securities Act, subject to the volume and resale restrictions of such rule.
All of these shares will be subject to lock-up agreements with the Underwriters.
See "Principal and Selling Stockholders" and "Shares Eligible for Future Sale."
NO PRIOR PUBLIC TRADING MARKET
Prior to the Offering, there has been no public trading market for the
Common Stock. The public offering price for the Common Stock will be determined
by negotiations among the Company and the Underwriters based upon several
factors and will not necessarily bear any relationship to the Company's assets,
book value, results of operations, net worth, or any other generally accepted
criteria of value, and should not be considered as indicative of the actual
value of the Company. Therefore, the market price of the Common Stock may fall
below the public offering price of the Common Stock at any time following the
Offering. See "Underwriting."
While the Company intends to apply to list the Common Stock on the American
Stock Exchange, there can be no assurance that an active trading market will
develop. Further, if a market does develop, it may be limited, and there can be
no assurance that it will be sustained. To the extent that an active trading
market
15
<PAGE> 19
does develop, factors such as quarterly variations in the Company's financial
results, announcements by the Company or others, general market conditions or
certain regulatory pronouncements may cause the market price of the Common Stock
to fluctuate substantially. There can be no assurance that the Common Stock can
be resold at or above the initial public offering price.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Common Stock offered hereby will incur immediate dilution
of $11.33 per share in the net tangible book value of their investment, assuming
an initial public offering price of $17.00 per share. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $48.8 million, assuming an initial public offering price of $17.00
per share and after deducting the estimated underwriting discounts and
commissions and the estimated expenses of the Offering payable by the Company.
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders. See "Principal and Selling Stockholders." The
Company intends to use the net proceeds to it from the Offering (i) to repay
bridge financing incurred in connection with the Heartland acquisition, which
represented aggregate principal obligations and accrued interest through March
31, 1996 of $8.7 million and $163,000, respectively (the "Heartland Bridge
Financing"); (ii) to repay promissory notes (and interest thereon) issued in
connection with the recent acquisition by the Company of the remaining equity
interests not owned by the Company in its Michigan residences ("ALS-Midwest"),
which notes represent aggregate principal obligations of $4.3 million (the
"ALS-Midwest Notes"); (iii) to repay an aggregate of $2.2 million of
construction loans on certain ALS-Midwest residences (the "ALS-Midwest
Construction Loans"); (iv) to acquire the remaining 40% interest of a joint
venture partner in three residences in the aggregate amount of approximately
$3.2 million; (v) to finance the development and construction of currently
planned residences; and (vi) for general corporate purposes, including working
capital.
The Heartland Bridge Financing, which represents aggregate principal
obligations of $8.7 million, is comprised of a "Tranche A Loan" and a "Tranche B
Loan," both of which were made in January 1996 and both of which are due in
January 1998. The Tranche A Loan, representing a principal obligation of $2.9
million, bears interest at the rate of 9% per annum for the first six months of
the loan, 10.5% per annum for the second six months of the loan and at an annual
interest rate thereafter which escalates on a quarterly basis by 2% per annum
per quarter. The Tranche B Loan, representing a $5.8 million principal
obligation, bears interest at the rate of 9% for the first year of the loan with
an annual interest rate for the last year of the loan term which escalates on a
quarterly basis by 2% per annum quarter. The proceeds from the Heartland Bridge
Financing were used to acquire all of the common stock of Heartland and to
retire certain indebtedness of Heartland. See "History and
Organization -- Acquisition of Heartland Retirement Services, Inc." and "Certain
Relationships and Related Transactions."
The ALS-Midwest Notes, which represents aggregate principal obligations of
$4.3 million, are comprised of $1.4 million in promissory notes bearing interest
at the rate of 8% and maturing in January 1997 and of $2.9 million in promissory
notes bearing interest at the rate of 9% and maturing in September 1996. See
"History and Organization -- Acquisition of Remaining Equity Interest in
ALS-Midwest."
The ALS-Midwest Construction Loans at March 31, 1996 are comprised of
promissory notes in the principal amount of $5.7 million bearing interest at
rates between 10.95% and prime plus 0.50% and maturing at various dates between
January 1997 and December 2014, of which $2.2 million will be repaid with
proceeds from the Offering.
The Company has reached an agreement in principle with one of its joint
venture partners to acquire the remaining 40% equity interest of this joint
venture partner in three residences. See "Business -- Joint Ventures and
Strategic Alliances -- Joint Venture with Continuing Care Concepts, Inc." If
this transaction is
16
<PAGE> 20
consummated, the Company intends to use approximately $3.2 million of the net
proceeds to purchase these equity interests. If this transaction is not
consummated, then the Company intends to use this amount to finance the
development and construction of assisted living residences.
The Company expects to use approximately $28.3 million of the net proceeds
primarily to finance the development and construction of assisted living
residences, including completion of the 19 residences currently under
construction and the 28 residences under development. The Company may also use
the net proceeds to finance further development and construction or, if
appropriate opportunities arise, the acquisition of existing assisted living
operations. While the Company intends to seek, consider and review possible
acquisitions of assisted living residences and assisted living operators from
time to time, the Company is not currently in negotiations with respect to any
such acquisitions other than the possible acquisition of its joint venture
partners' equity interest in certain of the residences operated by the Company.
See "Business -- Joint Ventures and Strategic Alliances -- Joint Venture with
Continuing Care Concepts, Inc."
In June 1996, the Company borrowed $8.5 million, $3.5 million of which was
used to refinance a portion of the ALS-Midwest Construction Loans and the
remainder of which will be used for working capital purposes. This loan is due
and payable on October 1, 1996 and bears interest at the rate of 10% per annum.
The Company currently intends to refinance the entire principal amount of this
loan upon its maturity. If, however, the Company is unable to refinance this
loan on terms acceptable to the Company, then the Company may use approximately
$8.5 million of the net proceeds to repay such loan.
The Company also anticipates using the remaining net proceeds for general
corporate purposes, including working capital. To the extent that the net
proceeds from the Offering are not immediately used for the foregoing purposes,
the Company intends to invest such net proceeds in investment grade, short-term,
interest-bearing securities. See "Risk Factors -- History of, and Anticipated,
Operating Losses," "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources,"
"Business -- Business Strategy," "Business -- Properties Under Construction and
Development" and "Business -- Joint Ventures and Strategic Alliances.'
DIVIDEND POLICY
The Company has never paid or declared cash dividends and currently intends
to retain any future earnings for the operation and expansion of its business.
Any determination to pay cash dividends in the future will be at the discretion
of the Board of Directors and will be dependent on the Company's financial
condition, results of operations, contractual restrictions, capital
requirements, business prospects and such other factors as the Board of
Directors deems relevant.
17
<PAGE> 21
DILUTION
At March 31, 1996, the pro forma net tangible book value of the Company
after giving effect to the (a) the May 24, 1996 private placement of shares of
Common Stock (the "Recent Equity Transactions"); (b) the May 24, 1996
acquisition of the remaining general and limited partnership interests not owned
by the Company in various partnerships comprising the operations of ALS-Midwest
for a combination of cash, notes and shares of Common Stock (the "ALS-Midwest
Restructuring"); and (c) the May 24, 1996 merger with Crossings pursuant to
which all outstanding capital stock of Crossings was exchanged for shares of
Common Stock as if they had been effective on March 31, 1996 (the "Crossings
Merger"), but prior to the Offering, would have been approximately $23.3
million, or $2.44 per share. Pro forma net tangible book value per share of
Common Stock is determined by dividing the number of shares of Common Stock
outstanding after giving effect to the above transactions into the pro forma net
tangible book value of the Company (total pro forma tangible assets less total
pro forma liabilities) but without giving effect to the possible exercise of
stock options which have been or will be granted by the Company prior to the
consummation of the Offering under its stock option plans. After giving effect
to the Offering at an assumed initial public offering price of $17.00 per share,
the pro forma net tangible book value at such date would have been $72.1 million
or $5.67 per share, representing an immediate increase in pro forma net tangible
book value of $3.23 per share to existing stockholders. Accordingly, purchasers
of the Common Stock in the Offering would sustain an immediate dilution of
$11.33 per share.
The following table illustrates such per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price................................ $17.00
Historical net tangible book value as of March 31, 1996............ $ 2.47
Decrease per share attributable to the pro forma effects of the
Recent Equity Transactions, the ALS-Midwest Restructuring and
the Crossing Merger............................................. (0.03)
------
Pro forma net tangible book value as of March 31, 1996............. 2.44
Increase in pro forma net tangible book value attributable to the
Offering(1)..................................................... 3.23
Pro forma net tangible book value after the Offering................. 5.67
------
Dilution to new investors in the Offering............................ $11.33
======
</TABLE>
- ---------------
(1) After deducting underwriting discounts and commissions and estimated
expenses of the Offering payable by the Company.
The following table summarizes, on a pro forma basis as of March 31, 1996,
after giving effect to the Recent Equity Transactions, the ALS-Midwest
Restructuring and the Crossings Merger and the Offering, the differences between
the holders of Common Stock prior to the Offering, as a group, and the new
investors in the Common Stock offered hereby, with respect to the number of
shares purchased, the total consideration paid and the average price paid per
share, based upon an assumed initial public offering price of $17.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)........ 9,523,349 74.9% $37,524,000 40.9% $ 3.94
New investors................... 3,187,500 25.1 54,187,500 59.1 17.00
---------- ------- ----------- -------
Total................. 12,710,849 100.0% $91,711,500 100.0%
========= ===== ========== =====
</TABLE>
- ---------------
(1) Sales of shares of Common Stock by the Selling Stockholders in the Offering
will reduce the number of shares held by existing stockholders to 6,710,849
or 52.8% of the total number of shares outstanding after the Offering, and
will increase the number of shares to be purchased by new investors to
6,000,000 or 47.2% of the total number of shares outstanding after the
Offering. If the Underwriter's over-allotment option is exercised in full,
the number of shares of Common Stock held by existing stockholders would be
further reduced to 46.3% of the total number of shares to be outstanding
after the Offering and the number of shares of Common Stock held by new
investors would be increased to 53.7% of the total number of shares to be
outstanding after the Offering.
(2) Excludes 789,149 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock outstanding as of June 30, 1996 at a
weighted average exercise price of $6.08 per share, including options
granted under the 1995 Plan. See "Capitalization" and "Management."
18
<PAGE> 22
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1996 (i) on an actual basis; (ii) as adjusted to give pro
forma effect to (a) the Recent Equity Transactions; (b) the ALS-Midwest
Restructuring; and (c) the Crossings Merger, as if such transactions had
occurred on March 31, 1996; and (iii) as adjusted to give pro forma effect to
such transactions as if they had been effective on March 31, 1996 and to the
Offering (assuming an initial public offering price of $17.00 per share) and the
application of the net proceeds therefrom. This table should be read in
conjunction with "Pro Forma Financial Information," "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes
thereto appearing elsewhere in this Prospectus. See "Index to Consolidated
Financial Statements."
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term indebtedness:
Current installments of long-term debt................... $ 105 $ 157 $ 157
Notes payable (1)........................................ -- 9,365 3,500
------- --------- --------------
Total short-term indebtedness............................ 105 9,522 3,657
======= ======== ===========
Long-term debt, less current installments.................. $30,632 $30,747 $ 22,075
Other long-term liabilities................................ 268 10,583(2) 10,583(2)
Minority interest.......................................... 637 637 637
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized, none outstanding.......................... -- -- --
Common stock, $0.01 par value; 30,000,000 shares
authorized; 6,913,483, 9,523,349 and 12,710,849 shares
outstanding actual, pro forma and pro forma as
adjusted, respectively(3)............................. 69 95 127
Additional paid-in capital............................... 23,674 36,429 85,191
Accumulated deficit...................................... (4,393) (4,393) (4,393)
------- --------- --------------
Total stockholders' equity....................... 19,350 32,131 80,925
------- --------- --------------
Total capitalization............................. $50,887 $74,098 $114,220
======= ======== ===========
</TABLE>
- ---------------
(1) Excludes $8.5 million of short-term secured debt incurred in June 1996, $3.5
million of which was used to refinance existing short-term notes payable and
the remainder of which is expected to be used to finance the development and
construction of residences and for general corporate purposes.
(2) Includes $10.2 million of sale/leaseback obligation relating to two
residences operated by Crossings. Crossings entered into sale/ leaseback
transactions for these two residences pursuant to which the buyer acquired
the building and personal property subject to the mortgage indebtedness, but
Crossings remains obligated under such mortgage indebtedness.
(3) Excludes 789,149 shares of Common Stock issuable upon the exercise of
options to purchase Common Stock outstanding as of June 30, 1996 at a
weighted average exercise price of $6.08 per share, including options
granted under the 1995 Plan. See "Management -- Executive Compensation."
19
<PAGE> 23
PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed combined financial
statements set forth the pro forma effects of the following recently completed
acquisitions and transactions of the Company: (i) the January 1996 acquisition
by the Company (effective as of January 1, 1996) of all outstanding shares of
common stock of Heartland for cash and shares of Common Stock (the "Heartland
Acquisition"); (ii) the January 1996 sale/ leaseback of the Company's Bradenton
and Sarasota residences (the "Florida Sale/leaseback"); (iii) the Recent Equity
Transactions; (iv) the ALS-Midwest Restructuring; and (v) the Crossings Merger.
The column captioned "The Company Pro Forma As Adjusted" reflects each of the
aforementioned transactions, as applicable, as well as the Offering and the
application of the estimated net proceeds to the Company therefrom. See "Use of
Proceeds" and "History and Organization."
The following unaudited pro forma condensed combined balance sheet of the
Company as of March 31, 1996 reflects the pro forma effects of: (i) the Recent
Equity Transactions (ii) the ALS-Midwest Restructuring; and (iii) the Crossings
Merger, as if such transactions had occurred as of March 31, 1996.
The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1995 reflects the pro forma effects of: (i) the
Heartland Acquisition; (ii) the Florida Sale/leaseback; (iii) the Recent Equity
Transactions; (iv) the ALS-Midwest Restructuring; and (v) the Crossings Merger
as if such transactions had occurred on January 1, 1995. The unaudited pro forma
condensed combined statement of operations for the three months ended March 31,
1996 reflects the pro forma effects of: (i) the Recent Equity Transactions; (ii)
the ALS-Midwest Restructuring; and (iii) the Crossings Merger, as if such
transactions had occurred on January 1, 1996. Extraordinary charges or credits
that result directly from the Offering are not included in the pro forma
condensed combined statements of operations.
The following unaudited pro forma condensed combined financial information
has been prepared by the Company based on the audited financial statements and
the related notes thereto of the Company, Heartland, Crossings and ALS-Midwest
for the year ended December 31, 1995 and the unaudited financial statements of
the Company, Crossings and ALS-Midwest for the three months ended March 31, 1996
included elsewhere in this Prospectus, giving effect to these transactions and
the assumptions and adjustments described in the accompanying notes. The
following unaudited pro forma condensed combined financial information is not
necessarily indicative of the actual results that would have been achieved if
these transactions had actually been completed as of the dates indicated, or
which may be realized in the future. The unaudited pro forma condensed combined
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements of the Company, Heartland, Crossings and ALS-Midwest
and the related notes thereto included elsewhere in this Prospectus. See "Index
to Consolidated Financial Statements."
20
<PAGE> 24
ALTERNATIVE LIVING SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
RECENT ALS-MIDWEST CROSSINGS
THE EQUITY PRO FORMA PRO FORMA
COMPANY TRANSACTIONS(A) ALS-MIDWEST ADJUSTMENTS(B) CROSSINGS(C) ADJUSTMENTS(D)
------- --------------- ----------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $ 6,816 $ 2,000 $ 845 $ (1,000) $ 1,788 $ --
Short-term investments................... 50 -- -- -- -- --
Resident receivables, net................ 236 -- 309 -- 257 --
Other current assets..................... 424 -- 93 -- 691 --
------- ------- ----------- -------------- ------------ --------------
Total current assets.................. 7,526 2,000 1,247 (1,000) 2,736 --
Property, plant and equipment, net....... 35,030 -- 15,189 2,954 807 --
Long-term investments.................... 1,168 -- -- -- -- --
Investments in and advances to
unconsolidated affiliates.............. 6,754 -- -- (5,121) -- --
Other assets............................. 1,091 -- 408 -- 12,586 --
Goodwill................................. 2,255 -- -- -- 6,597
------- ------- ----------- -------------- ------------ --------------
Total assets.......................... $53,824 $ 2,000 $16,844 $ (3,167) $ 16,129 $ 6,597
======== ============= =========== ============= ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term
debt................................. $ 105 $ -- $ -- $ -- $ 52 $ --
Accounts payable....................... 389 -- 2,215 -- 805 --
Accrued expenses and other............. 1,360 -- 597 -- 1,478 680
Notes payable.......................... -- -- 5,660 $ 2,900 -- --
805
Advances from and notes payable to
related entities..................... -- -- 3,959 (3,959) -- --
------- ------- ----------- -------------- ------------ --------------
Total current liabilities............. 1,854 -- 12,431 (254) 2,335 680
Long-term debt, less current
installments........................... 30,632 -- -- -- 115 --
Deferred gain on sale.................... 1,083 -- -- -- 14,632 (14,632)
Other long-term liabilities.............. 268 -- -- -- 10,315 --
Minority interest........................ 637 -- 2,623 (2,623) -- --
Common stock and additional paid-in
capital................................ 23,743 2,000 2,679 (2,679) 12,832 (12,832)
1,500 9,281
Accumulated deficit...................... (4,393) -- (889) 889 (24,100) 24,100
------- ------- ----------- -------------- ------------ --------------
Total stockholders' equity
(deficit)............................ 19,350 2,000 1,790 (290) (11,268) 20,549
------- ------- ----------- -------------- ------------ --------------
Total liabilities and stockholders'
equity (deficit)..................... $53,824 $ 2,000 $16,844 $ (3,167) $ 16,129 $ 6,597
======== ============= =========== ============= ========== =============
<CAPTION>
THE THE COMPANY
COMPANY OFFERING PRO FORMA
PRO FORMA ADJUSTMENTS(E) AS ADJUSTED
--------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $10,449 $ 34,094 $ 44,543
Short-term investments................... 50 -- 50
Resident receivables, net................ 802 -- 802
Other current assets..................... 1,208 -- 1,208
--------- -------------- -----------
Total current assets.................. 12,509 34,094 46,603
Property, plant and equipment, net....... 53,980 -- 53,980
Long-term investments.................... 1,168 -- 1,168
Investments in and advances to
unconsolidated affiliates.............. 1,633 -- 1,633
Other assets............................. 14,085 -- 14,085
Goodwill................................. 8,852 -- 8,852
--------- -------------- -----------
Total assets.......................... $92,227 $ 34,094 $$126,321
======== ============= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term
debt................................. $ 157 $ -- $ 157
Accounts payable....................... 3,409 -- 3,409
Accrued expenses and other............. 4,115 (163) 3,952
Notes payable.......................... 9,365 (2,160) 3,500
(2,900)
(805)
Advances from and notes payable to
related entities..................... -- -- --
--------- -------------- -----------
Total current liabilities............. 17,046 (6,028) 11,018
Long-term debt, less current
installments........................... 30,747 (8,672) 22,075
Deferred gain on sale.................... 1,083 -- 1,083
Other long-term liabilities.............. 10,583 -- 10,583
Minority interest........................ 637 -- 637
Common stock and additional paid-in
capital................................ 36,524 48,794 85,318
Accumulated deficit...................... (4,393) -- (4,393)
--------- -------------- -----------
Total stockholders' equity
(deficit)............................ 32,131 48,794 80,925
--------- -------------- -----------
Total liabilities and stockholders'
equity (deficit)..................... $92,227 $ 34,094 $ 126,321
======== ============= =========
</TABLE>
21
<PAGE> 25
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
- ---------------
A) To record cash proceeds of $2,000,000 from the issuance of 430,281
shares of Common Stock in two private equity transactions in May 1996.
See "Business -- Joint Ventures and Strategic Alliances -- Proposed
Joint Venture with Pioneer Development Company" and
"Management -- Executive Compensation -- Employment and Services
Agreements -- Services Agreement with Petty, Kneen & Company."
B) To record the acquisition of the remaining general and limited partner
interests in ALS-Midwest not owned by the Company (the "Former
ALS-Midwest Owners") for a total purchase price of $6,205,000 consisting
of $1,000,000 in cash, the issuance of $3,705,000 of debt and 172,536
shares of Common Stock valued at $1,500,000. The purchase price was
allocated to the net assets acquired in accordance with generally
accepted accounting principles. Purchase accounting adjustments include:
(i) an increase in property, plant and equipment of $2,954,000; (ii) the
elimination of previous equity investments in affiliates and advances to
affiliates of $5,121,000; (iii) recording ALS-Midwest Notes payable to
the Former ALS-Midwest Owners of $2,900,000 and $805,000 (such balances
exclude advances made by the Former ALS-Midwest Owners subsequent to
March 31, 1996 of $600,000); (iv) the elimination of advances from
affiliates of $3,959,000; (v) the elimination of minority interest of
$2,623,000; and (vi) the elimination of ALS-Midwest's equity prior to
the acquisition including common stock of $2,679,000 and accumulated
deficit of $889,000. No goodwill resulted from this acquisition. As a
result of these transactions, ALS-Midwest became a wholly-owned
subsidiary of the Company. See "Use of Proceeds."
C) Reflects the unaudited pro forma condensed combined balance sheet of
Crossings as of March 31, 1996 after giving effect to the May 1996
conversion of Crossings' mandatorily redeemable preferred stock of
$6,000,000 into shares of common stock of Crossings as if such
transaction had occurred on March 31, 1996.
D) To record the Crossings Merger which closed on May 24, 1996 pursuant to
which all capital stock of Crossings was converted into 2,007,049 shares
of Common Stock valued at $9,281,000. The purchase price was allocated
to the net assets acquired in accordance with generally accepted
accounting principles. Purchase accounting adjustments include: (i) the
recognition of goodwill of $6,597,000 which will be amortized over 40
years; (ii) the recognition of an accrued transaction fee of $680,000;
(iii) the elimination of deferred gain relating to various Crossings
sale/leaseback transactions of $14,632,000; and (iv) the elimination of
Crossings' equity prior to the merger including common stock of
$12,832,000 and accumulated deficit of $24,100,000.
E) To record the effects of the sale of 3,187,500 shares of Common Stock by
the Company and the receipt of the estimated net proceeds of
$48,794,000, assuming an initial public offering price of $17.00 per
share and after deducting estimated underwriting discounts and
commissions of $3,793,000 and estimated offering expenses of $1,600,000.
Of the total net proceeds, $14,700,000 will be used to repay debt and
accrued interest which included as of March 31, 1996: (i) the Heartland
Bridge Financing of an aggregate principal obligation of $8,672,000 and
accrued interest of $163,000; (ii) $2,160,000 principal amount of the
ALS-Midwest Construction Loans; and (iii) the ALS-Midwest Notes of
$2,900,000 and $805,000 (such balances exclude advances made by the
former ALS-Midwest owners subsequent to March 31, 1996 of $600,000). The
remainder of the net proceeds will be used to finance the development
and construction of residences, to finance the development, construction
or acquisition of additional residences, and for general corporate
purposes, including working capital. See "Use of Proceeds."
22
<PAGE> 26
ALTERNATIVE LIVING SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
HEARTLAND FLORIDA ALS-MIDWEST CROSSINGS
THE PRO FORMA SALE/ ALS- PRO FORMA CROSSINGS PRO FORMA
COMPANY HEARTLAND ADJUSTMENTS LEASEBACK(K) MIDWEST ADJUSTMENTS PRO FORMA(O) ADJUSTMENTS(P)
------- --------- ----------- ------------ ------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Resident service fees.... $9,684 $ 1,141 $ -- $ -- $2,505 $ -- $ 23,463 $ --
Other.................... 780 282 -- -- 298 -- -- --
------- --------- ----------- ----- ------- ----------- ------------ ------
Operating revenue...... 10,464 1,423 -- -- 2,803 -- 23,463 --
Operating expenses:
Residence operations..... 7,206 1,675 -- 2,765 -- 13,353 --
Lease expense............ 890 -- -- 120 -- 7,239 687
(18)
General and
administrative......... 2,600 861 -- 320 -- 2,188 --
Depreciation and
amortization........... 814 109 103(H) (36) 380 76(L) 93 165
39(H)
------- --------- ----------- ----- ------- ----------- ------------ ------
Total operating
expenses.............. 11,510 2,645 142 66 3,465 76 22,873 852
------- --------- ----------- ----- ------- ----------- ------------ ------
Operating income (loss).... (1,046) (1,222) (142) (66) (662) (76) 590 (852)
Other income (expense),
net:
Interest expense......... (1,047) (227) (867)(I) (543) (261)(M) (22)
91(I) (64)(M)
Interest income.......... 234 8 -- -- 57 (50)(M) 154 --
Gain on sale of land..... 439 -- -- -- -- -- -- --
Equity in income (losses)
of unconsolidated
affiliates............. (438) (47) -- -- -- 438(N) -- --
Other expenses........... -- -- -- -- -- (257) --
Minority interest........ 112 13 -- -- 424 (424)(N) -- --
Income tax benefit....... -- 586 (586)(J) -- -- -- --
------ --------- ----------- ----- ------ ----------- ------------ ------
Total other income
(expense), net....... (699) 333 (1,362) -- (62) (361) (125) --
------ --------- ----------- ----- ------ ----------- ------------ ------
Income (loss) before
extraordinary items...... $(1,74) $ (889) $(1,504) $(66) $ (724) $(437) $ 465 $ (852)
====== ======== ========== =========== ======= =========== =========== ============
Loss before extraordinary
items per share.......... $(0.30)
-------
Weighted average shares
outstanding.............. 5,863(F)(G)
-------
<CAPTION>
THE THE COMPANY
COMPANY OFFERING PRO FORMA
PRO FORMA ADJUSTMENTS(Q) AS ADJUSTED
----------- -------------- -----------
<S> <C> <C> <C>
Revenue:
Resident service fees.... $36,793 $ -- $36,793
Other.................... 1,360 -- 1,360
----------- ------ -----------
Operating revenue...... 38,153 -- 38,153
Operating expenses:
Residence operations..... 24,999 -- 24,999
Lease expense............ 8,918 -- 8,918
General and
administrative......... 5,969 -- 5,969
Depreciation and
amortization........... 1,743 -- 1,743
----------- ------ -----------
Total operating
expenses.............. 41,629 -- 41,629
----------- ------ -----------
Operating income (loss).... (3,476) -- (3,476)
Other income (expense),
net:
Interest expense......... (2,940) 867 (1,532)
216
261
64
Interest income.......... 403 -- 403
Gain on sale of land..... 439 -- 439
Equity in income (losses)
of unconsolidated
affiliates............. (47) -- (47)
Other expenses........... (257) -- (257)
Minority interest........ 125 -- 125
Income tax benefit....... -- -- --
----------- ------ -----------
Total other income
(expense), net....... (2,277) 1,408 (869)
----------- ------ -----------
Income (loss) before
extraordinary items...... $(5,753) 1,408 $(4,345)
=========== ============= ===========
Loss before extraordinary
items per share.......... $ (0.69) $ (0.38)
----------- -----------
Weighted average shares
outstanding.............. 8,304 11,374(R)
----------- -----------
</TABLE>
23
<PAGE> 27
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
F)The weighted average shares outstanding includes the effect of the Recent
Equity Transactions which resulted in the issuance of 430,281 shares of
Common Stock.
G)For purposes of calculating loss before extraordinary items per share,
Common Stock issued and Common Stock options granted subsequent to May
1995 at per share amounts less than the assumed initial public offering
price of $17.00 per share have been reflected as outstanding for the
period presented. Accordingly, weighted average shares outstanding were
increased by 1,146,928 shares for the effect of such Common Stock and
Common Stock options.
H)To record additional depreciation and amortization relating to the
Heartland Acquisition of $103,000 attributable to the increase in the
carrying value of property, plant and equipment (depreciated over the
estimated average remaining useful life of 30 years) and the amortization
of goodwill of $39,000 (amortized over 40 years).
I)To record interest expense for the Heartland Bridge Financing of $867,000
relating to the Heartland Acquisition (average interest rate of 10%) and
the elimination of interest expense of $91,000 related to the repayment
of debt at the time of acquisition.
J)To eliminate the income tax benefit of $586,000 which had been previously
recognized pursuant to a tax sharing arrangement between Heartland and
its former parent.
K)To record the effects of the Florida Sale/leaseback transactions,
including: (i) lease expense of $120,000; (ii) accretion of deferred gain
of $18,000; and (iii) the elimination of depreciation of $36,000. The
aggregate annual lease expense for the two residences, which commenced
operations in October and December 1995, respectively, is $720,000.
L)To record additional depreciation and amortization relating to the
ALS-Midwest Restructuring of $76,000 attributable to the increase in the
carrying value of property, plant and equipment (depreciated over the
estimated average remaining useful life of 30 years).
M)To record interest expense for ALS-Midwest of $261,000 (interest rate of
9%) and $64,000 (interest rate of 8%), respectively, relating to the
ALS-Midwest Notes and elimination of interest income of $50,000 resulting
from reduced cash balances (assumed interest rate of 5%).
N)To eliminate the Company's equity in losses of unconsolidated affiliates
of $438,000 relating to ALS-Midwest and minority interest in earnings of
$424,000 related to ALS-Midwest. Pursuant to the ALS-Midwest
Restructuring, ALS-Midwest became a wholly-owned subsidiary of the
Company.
O)The following unaudited pro forma condensed combined statement of
operations for Crossings for the year ended December 31, 1995 gives
effect to: (i) the December 1995 sale/leaseback transactions with a real
estate investment trust ("REIT") with respect to 12 residences (the "REIT
Sale/leaseback"); (ii) the December 1995 operating lease entered into
with a related party with respect to the Union Park residence located in
Tacoma, Washington ("Union Park"), and (iii) the January 1996
sale/leaseback transaction involving The Palms residence located in Loma
Linda, California (the "Palms Sale/leaseback"), assuming all such
transactions had occurred as of January 1, 1995.
24
<PAGE> 28
The unaudited pro forma condensed combined statements of operations of
Crossings are not necessarily indicative of actual results that would
have been achieved had the above transactions had been consummated as of
January 1, 1995 or that might be realized in the future. See "History and
Organization -- The Crossings Merger -- Organization and Recent
Restructuring of Crossings."
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
---------------------------------------
PRO FORMA CROSSINGS
CROSSINGS ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Net revenues.......................................................... $21,726 $ 1,737(aa) $23,463
--------- ----------- ---------
Expenses:
Residence operations................................................ 12,444 909(aa) 13,353
Lease expense....................................................... 1,148 652(aa) 7,239
640(ab)
(15)(ab)
5,437(ac)
(623)(ac)
General and administrative.......................................... 2,188 -- 2,188
Depreciation and amortization....................................... 1,814 (192)(ab) 93
(1,529)(ac)
--------- ----------- ---------
Total operating expenses...................................... 17,594 5,279 22,873
--------- ----------- ---------
Income from operations................................................ 4,132 (3,542) 590
Interest expense.................................................... (5,962) 679(ab) (22)
5,261(ac)
Interest income..................................................... 154 -- 154
Other expense....................................................... (257) -- (257)
--------- ----------- ---------
Other income (expense), net................................... (6,065) 5,940 (125)
--------- ----------- ---------
Income (loss) before extraordinary items and minority
interest.................................................... $(1,933) $ 2,398 $ 465
======= ========== ========
</TABLE>
-----------------------
(aa) To record the historical operations of the Union Park residence
prior to Crossings' acquisition of a leasehold interest in such
residence on December 21, 1995 as if such transaction had been
in effect on January 1, 1995 including (i) revenues of
$1,737,000; (ii) residence operating expenses of $909,000; and
(iii) lease expense of $652,000 resulting therefrom.
(ab) To record the effects of the Palms Sale/leaseback transaction
as if such transaction had been in effect on January 1, 1995
including: (i) lease expense of $640,000; (ii) the accretion of
a deferred gain of $15,000 (based upon the accretion of the
deferred gain of $1.7 million in accordance with payments on
the underlying mortgage assumed by the lessor); (iii) the
elimination of depreciation of $192,000; and (iv) and the
elimination of interest expense of $679,000 (interest rate of
9.75%) relating to the debt repaid at the time of the
transaction.
(ac) To record the effects of the REIT Sale/leaseback transaction as
if such transaction had been in effect on January 1, 1995
including: (i) lease expense of $5,437,000; (ii) the accretion
of deferred gain of $623,000 (based upon the accretion of
deferred gains totalling $11.1 million over the initial lease
periods ranging from 17 to 19 years); (iii) the elimination of
depreciation of $1,529,000; and (iv) the elimination of
interest of $5,261,000 (interest rate of 10%) relating to the
debt repaid at the time of the transaction.
P)To record the effects of the Crossings Merger, including the elimination
of annual deferred gain accretion of $687,000 (based upon the accretion
of deferred gains over the initial lease periods ranging primarily from
17 to 19 years) and the recognition of goodwill amortization of $165,000
(amortized over 40 years).
Q)To record the reduction in interest expense resulting from the
application by the Company of the estimated net proceeds from the
Offering to repay indebtedness. The related reduction in interest
includes: (i) $867,000 (average interest rate of 10%) relating to the
Heartland Bridge Financing; (ii) $216,000 (average interest rate of 10%)
relating to the ALS-Midwest Construction Loans; and (iii) $261,000
(interest rate of 9%) and $64,000 (interest rate of 8%), respectively,
relating to the ALS-Midwest Notes.
R)The weighted average number of shares of Common Stock outstanding does
not include 117,647 shares, the net proceeds from the issuance and sale
of which have been designated for general corporate purposes.
25
<PAGE> 29
ALTERNATIVE LIVING SERVICES,INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ALS-MIDWEST CROSSINGS THE
THE PRO FORMA PRO FORMA COMPANY
COMPANY ALS-MIDWEST ADJUSTMENTS CROSSINGS ADJUSTMENTS(X) PRO FORMA
------- ----------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Resident service fees................. $ 4,033 $ 1,142 $ -- $ 5,942 $ -- $11,117
Other................................. 292 200 -- -- -- 492
------- ----------- ----- --------- ------ ---------
Operating revenue................... 4,325 1,342 -- 5,942 -- 11,609
Operating expenses:
Residences operations................. 3,241 869 -- 3,477 -- 7,587
Lease expense......................... 488 51 -- 1,715 137 2,391
General and administrative............ 1,583 114 -- 704 -- 2,401
Depreciation and amortization......... 365 120 24(U) 23 41 573
------- ----------- ----- --------- ------ ---------
Total operating expenses............ 5,677 1,154 24 5,919 178 12,952
------- ----------- ----- --------- ------ ---------
Operating income (loss)................. (1,352) 188 (24) 23 (178) (1,343)
Other income (expense), net:
Interest expense...................... (530) (239) (65)(V) (13) -- (863)
(16)(V)
Interest income....................... 139 3 (13)(V) 42 -- 171
Loss on sale of land.................. (21) -- -- -- -- (21)
Equity in losses (income) of
unconsolidated affiliates........... (85) -- 57(W) -- -- (28)
Other income.......................... -- -- -- 9 -- 9
Minority interest..................... 45 11 (11)(W) -- -- 45
------- ----------- ----- --------- ------ ---------
Total other income (expense), net... (452) (225) (48) 38 -- (687)
------- ----------- ----- --------- ------ ---------
Income (loss) before extraordinary
items................................. $(1,804) $ (37) $ (72) $ 61 $ (178) $(2,030)
======== =========== =========== ======= ============= ========
Loss before extraordinary item per
share................................. $ (0.22) $ (0.20)
======== ========
Weighted average shares outstanding..... 8,060(S)(T) 10,240
======== ========
<CAPTION>
THE COMPANY
OFFERING PRO FORMA
ADJUSTMENTS(Y) AS ADJUSTED
-------------- -----------
<S> <C><C> <C>
Revenue:
Resident service fees................. $ -- $11,117
Other................................. -- 492
----- -----------
Operating revenue................... -- 11,609
Operating expenses:
Residences operations................. -- 7,587
Lease expense......................... -- 2,391
General and administrative............ -- 2,401
Depreciation and amortization......... -- 573
----- -----------
Total operating expenses............ -- 12,952
----- -----------
Operating income (loss)................. -- (1,343)
Other income (expense), net:
Interest expense...................... 217 (511)
54
65
16
Interest income....................... -- 171
Loss on sale of land.................. -- (21)
Equity in losses (income) of
unconsolidated affiliates........... -- (28)
Other income.......................... -- 9
Minority interest..................... -- 45
----- -----------
Total other income (expense), net... 352 (335)
----- -----------
Income (loss) before extraordinary
items................................. $352 $(1,678)
============= =========
Loss before extraordinary item per
share................................. $ (0.13)
=========
Weighted average shares outstanding..... 13,310(Z)
=========
</TABLE>
26
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
S) The weighted average shares outstanding includes the effect of the Recent
Equity Transactions which resulted in the issuance of 430,281 shares of
Common Stock.
T) For purposes of calculating loss before extraordinary items per share,
Common Stock issued and Common Stock options granted subsequent to May 1995
at per share amounts less than the assumed initial public offering price of
$17.00 per share have been reflected as outstanding for the period
presented. Accordingly, weighted average shares outstanding was increased
by 1,146,928 shares for the effect of such Common Stock and Common Stock
options.
U) To record additional depreciation and amortization of $24,000 attributable
to the increase in the carrying value of property, plant and equipment as a
result of the ALS-Midwest Restructuring (depreciated over the estimated
average remaining useful life of 30 years).
V) To record interest expense for ALS-Midwest of $65,000 (interest rate of 9%)
and $16,000 (interest rate of 8%), respectively, relating to the
ALS-Midwest Notes and elimination of interest income of $13,000 (assumed
interest rate of 5%) resulting from reduced cash balances.
W) To eliminate the Company's equity in losses of unconsolidated affiliates of
$57,000 related to ALS-Midwest and minority interest of $11,000 related to
ALS-Midwest. Pursuant to the ALS-Midwest Restructuring, ALS-Midwest became
a wholly-owned subsidiary of the Company.
X) To record the effects of the Crossings Merger, including the elimination of
deferred gain accretion of $137,000 (based upon the accretion of deferred
gains over the initial lease periods ranging primarily from 17 to 19 years)
and the recognition of goodwill amortization of $41,000 (amortized over 40
years).
Y) To record the reduction in interest expense resulting from the application
by the Company of the estimated net proceeds from the Offering to repay
indebtedness. The related reduction in interest includes: (i) $217,000
(interest rate of 10%) relating to the Heartland Bridge Financing; (ii)
$54,000 (average interest rate of 10%) relating to the ALS-Midwest
Construction Loans; and (iii) $65,000 (interest rate of 9%) and $16,000
(interest rate of 8%), respectively, relating to the ALS-Midwest Notes. See
"Use of Proceeds."
Z) The weighted average number of shares of Common Stock outstanding does not
include 117,647 shares, the net proceeds from the issuance and sales of
which have been designated for general corporate purposes.
27
<PAGE> 31
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for the three years ended December 31, 1993, 1994 and 1995 are derived from
the Company's audited consolidated financial statements appearing elsewhere in
this Prospectus and should be read in conjunction with those financial
statements and related notes appearing elsewhere in this Prospectus. The
selected consolidated historical financial data presented below for the years
ended December 31, 1991 and 1992 are derived from the unaudited consolidated
financial statements of the Company's Predecessor for those years. The selected
consolidated historical financial data for the three months ended March 31, 1995
and 1996 are derived from the unaudited consolidated financial statements of the
Company. The pro forma data are unaudited. The selected consolidated financial
data presented below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements and pro forma financial information and related notes included
elsewhere in this Prospectus. See "Pro Forma Financial Information" and "Index
to Consolidated Financial Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
------------------------------------------------------------------- ---------------------------
PREDECESSOR THE COMPANY THE COMPANY
--------------------------- -------------------------- PRO FORMA ---------------- PRO FORMA
1991(1) 1992(1) 1993(1) 1993(1) 1994 1995 1995(2) 1995 1996(3) 1996(4)
------- ------- ------- ------- ------ ------- --------- ------ ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resident service fees........ $ 602 $2,537 $2,636 $ 130 $4,506 $ 9,684 $36,793 $1,983 $ 4,033 $11,117
Other revenue................ -- 7 5 17 451 780 1,360 98 292 492
------- ------- ------- ------- ------ ------- --------- ------ ------- ---------
Operating revenue...... 602 2,544 2,641 147 4,957 10,464 38,153 2,081 4,325 11,609
------- ------- ------- ------- ------ ------- --------- ------ ------- ---------
Operating expenses:
Residence operations......... 556 1,596 1,672 87 2,934 7,207 24,999 1,348 3,241 7,587
Lease expense................ 165 547 563 19 697 890 8,918 426 488 2,391
General and administrative... 262 421 423 41 1,458 2,599 5,969 582 1,583 2,401
Depreciation and
amortization............... 30 83 101 6 258 814 1,743 145 365 573
------- ------- ------- ------- ------ ------- --------- ------ ------- ---------
Total operating
expenses............. 1,013 2,647 2,759 153 5,347 11,510 41,629 2,501 5,677 12,952
------- ------- ------- ------- ------ ------- --------- ------ ------- ---------
Operating loss......... (411) (103) (118) (6) (390) (1,046) (3,476) (420) (1,352) (1,343)
Other income (expense):
Interest expense, net........ (1) (27) (48) (8) (301) (812) (2,537) (180) (391) (692)
Equity in income (losses) of
unconsolidated
affiliates................. -- -- -- -- (1) (438) (47) 39 (85) (28)
Minority interest in losses
of consolidated
subsidiaries............... -- -- -- -- 49 112 125 23 45 45
Other, net................... -- -- -- -- -- 438 182 -- (21) (12)
------ ------ ------ ------ ------ ------- --------- ------ ------- ---------
Total other expenses,
net.................. (1) (27) (48) (8) (253) (700) (2,277) (118) (452) (687)
------ ------ ------ ------ ------ ------- --------- ------ ------- ---------
Net loss before extraordinary
items...................... $ (412) $ (130) $ (166) $ (14) $ (643) $(1,746) $(5,753) $ (538) $(1,804) $(2,030)
====== ====== ====== ====== ====== ======= ======== ====== ======= ========
Net loss..................... $ (412) $ (130) $ (166) $ (14) $ (643) $(1,746) $ (538) $(1,804)
====== ====== ====== ====== ====== ======= ====== =======
Net loss before extraordinary
items per share............ -- $(0.22) $ (0.30) $ (0.69) $(0.18) $ (0.22) $(0.20)
====== ====== ======= ======== ====== ======= ========
Net loss per share........... -- $(0.22) $ (0.30) $(0.18) $ (0.22)
====== ====== ======= ====== =======
Weighted average shares
outstanding................ 2,959 2,959 5,863 8,304 2,959 8,060 10,240
====== ====== ======= ======== ====== ======= ========
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------
PREDECESSOR COMPANY AT MARCH 31, 1996
------------- -------------------------- -------------------------
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(3)(4)
----- ----- ------ ------- ------- ------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 2 $ -- $ 196 $ 311 $ 2,948 $ 6,816 $ 10,449
Working capital (deficit)........................... (152) (369) (338) (1,212) 1,207 5,672 (4,537)
Total assets........................................ 525 759 2,543 14,424 39,357 53,824 92,227
Long-term debt, less current installments........... -- 134 57 6,356 17,101 30,632 30,747
Stockholders' equity................................ 300 349 325 4,559 19,343 19,350 32,131
</TABLE>
- ---------------
(1) The Company was organized in December 1993. Statement of operations data for
periods prior to December 14, 1993 reflect the results of operations of the
Predecessor. Statement of operations data for the Company for 1993 are for
the period from December 14, 1993 (inception) through December 31, 1993. Per
share amounts for the Predecessor, for periods prior to the inception of the
Company, are not presented as they would not provide comparable or
meaningful information. See "History and Organization -- The Company and its
Predecessor."
(2) Gives effect to the 1996 Transactions as if such transactions had occurred
on January 1, 1995 with respect to statement of operations data for the year
ended December 31, 1995.
(3) The results of the Company for the three months ended March 31, 1996 include
the operations of Heartland, which was acquired effective as of January 1,
1996. See "History and Organization -- Acquisition of Heartland Retirement
Services, Inc."
(4) Gives effect to the Recent Equity Transactions, the ALS-Midwest
Restructuring and the Crossings Merger as if such transactions had occurred
on January 1, 1996 with respect to statement of operations data for the
quarter ended March 31, 1996 and as of March 31, 1996 with respect to
balance sheet data. See "Pro Forma Financial Information" and "Use of
Proceeds."
29
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company currently operates 57 assisted living residences with an
aggregate capacity of approximately 2,500 residents. Of these total residences,
the Company owns 17, leases 23, holds interests in eight and manages an
additional nine on behalf of third parties. In addition, the Company is
currently constructing or developing 47 residences, 21 of which are scheduled to
open during 1996. The Company's rapid growth since 1993 has had a significant
impact on the Company's results of operations and accounts for most of the
changes in results between the first three months of 1995 and 1996 and the years
ended 1993, 1994 and 1995. As of December 31, 1993, 1994 and 1995, and March 31,
1996, the Company operated 12, 13, 19 and 42 residences, respectively.
Since its organization in December 1993, the Company has achieved
significant growth in operating revenue resulting from its aggressive
development program and several strategic acquisitions, but to date has not
realized operating income or net income. For the year ended December 31, 1995,
the Company generated operating revenue of $10.5 million and incurred an
operating loss of $1.0 million and a net loss of $1.7 million. For the three
months ended March 31, 1996, the Company generated operating revenue of $4.3
million and incurred an operating loss of $1.4 million and a net loss of $1.8
million. On a pro forma basis, after giving effect to the 1996 Transactions as
if such transactions had occurred on January 1, 1995, the Company would have
generated operating revenue of $38.2 million and incurred an operating loss of
$3.5 million and a loss before extraordinary items of $5.8 million for 1995. On
a pro forma basis, after giving effect to the Recent Equity Transactions, the
ALS-Midwest Restructuring and the Crossings Merger as if such transactions had
occurred on January 1, 1996, the Company would have generated operating revenue
of $11.6 million and incurred an operating loss of $1.3 million and a loss
before extraordinary items of $2.0 million for the first quarter of 1996.
The Company intends to continue to pursue its growth strategy by developing
and constructing additional assisted living residences and, as appropriate
opportunities arise, acquiring assisted living operations. Newly opened assisted
living residences typically operate at a loss during the first six to 12 months
of operation, primarily due to the incurrence of certain fixed and variable
expenses in advance of the achievement of targeted rent and service fees from
the lease-up of such residences (referred to as lease-up expenses). In addition,
the development and construction of residences involve the commitment of
substantial capital over a typical six to 12 month construction period, the
consequence of which may be an adverse impact on the Company's liquidity. In the
case of acquired residences, resident turnover and increased marketing
expenditures which may be required to reposition such residences, together with
the possible disruption of operations resulting from the implementation of
renovations, may adversely impact the financial performance of such residences
for a period of time after acquisition. As a result, the Company anticipates
that it will incur additional operating and net losses for at least the next 12
to 18 months of operations as the operating expenses associated with developing,
renovating and operating residences and supporting the corporate infrastructure
necessary to manage the Company's growth strategy will be only partially offset
by operating profits generated by stabilized residences. See "-- Liquidity and
Capital Resources," "Risk Factors -- Development and Construction Risks" and
"Risk Factors -- Need for Additional Financing; Risk of Rising Interest Rates."
For purposes of this discussion, amounts for the year ended December 31,
1993 represent the sum of the results of operations of the Predecessor for the
period from January 1, 1993 through December 13, 1993 and the results of
operations of the Company for the period from December 14, 1993 through December
31, 1993. The following discussion and analysis should be read in conjunction
with the information under "Pro Forma Financial Information," "Selected
Consolidated Financial Data" and the consolidated financial statements and
related notes thereto, which appear elsewhere in this Prospectus.
30
<PAGE> 34
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995.
Operating Revenue. Resident service fees for the three months ended March
31, 1996 were $4.0 million, representing an increase of $2.0 million, or 103%,
from $2.0 million for the comparable 1995 period, due to the increased number of
residences operated during the 1996 period. Of this increase, $900,000 resulted
from the addition of the Heartland residences acquired in January 1996, $390,000
resulted from the acquisition of one residence in April 1995 and $310,000
resulted from the opening of two residences during the last quarter of 1995 and
one residence during the first quarter of 1996. Other revenue, which consists of
management and development fees from unconsolidated joint venture entities,
increased to $292,000 in 1996 from $98,000 for the comparable 1995 period
primarily as a result of fees received from the five ALS-Midwest residences. As
a result of the ALS-Midwest Restructuring, the Company acquired all of the
remaining interests not already held by the Company in these five residences.
Consequently, in subsequent periods, the operations of ALS-Midwest will be
consolidated with those of the Company.
Residence Operations. Residence operating expenses for the three months
ended March 31, 1996 were $3.2 million, representing a $1.9 million, or 141%,
increase from $1.3 million for the comparable 1995 period, due to the increased
number of residences operated during the 1996 period. Of this increase, $880,000
resulted from the addition of the Heartland residences, $380,000 from the
acquisition of one residence in April 1995 and $445,000 resulted from the
opening of two residences during the last quarter of 1995 and one residence
during the first quarter of 1996.
Lease Expense. Lease expense for the three months ended March 31, 1996 was
$488,000, representing an increase of $61,000, or 14.4%, from $426,000 for the
comparable period in 1995. Such increase is primarily attributable to two leases
related to the Heartland residences and the Florida Sale/leaseback in January
1996.
General and Administrative. General and administrative expenses for the
three months ended March 31, 1996 were $1.6 million, representing an increase of
$1.0 million, or 172%, from $583,000 for the comparable period in 1995. The
increase in expenses was partially attributable to salaries, related payroll
taxes and employee benefits relating to additional corporate personnel retained
to support the Company's actual and anticipated growth strategy, increased
accounting costs, corporate office space rental and other expenses related to
the Company's growth strategy and increased marketing expenses associated with
new residences. The Company expects that its general and administrative expenses
will decrease as a percentage of operating revenue as the Company grows and
achieves certain economies of scale.
Depreciation and Amortization. Depreciation and amortization for the three
months ended March 31, 1996 was $365,000, representing an increase of $220,000,
or 151%, from $145,000 for the comparable period in 1995. This increase resulted
primarily from the addition of the Heartland residences, the acquisition of one
residence in April 1995 and a new residence opened during 1996.
Interest Expense. Interest expense for the three months ended March 31,
1996 was $530,000, representing an increase of $349,000, or 193%, from $181,000
for the comparable period in 1995. This increase in interest expense was
primarily due to the incurrence of indebtedness in the amount of $4.2 million
related to the acquisition of one residence in April 1995.
Equity in Losses (Income) of Unconsolidated Affiliates. Equity in losses
of unconsolidated affiliates was $85,000 for the three months ended March 31,
1996, representing an increase of $124,000, or 318%, from equity in income of
unconsolidated affiliates of $39,000 for the comparable period in 1995. These
losses were primarily attributable to the Company's investment in ALS-Midwest.
As a result of the ALS-Midwest Restructuring, the Company will cease to record
an equity in net losses with regard to ALS-Midwest but will continue to record
an equity in losses (income) from other unconsolidated affiliates.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the three months ended March
31, 1996 was $45,000, representing an increase of $22,000, or 99%, from $22,000
for the comparable period in 1995. The increase was attributable to the share of
start-up losses allocated to the minority interest in one residence, which
opened in January 1996.
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Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Operating Revenue. Resident service fees for the year ended December 31,
1995 were $9.7 million, representing an increase of $5.2 million, or 115%, from
$4.5 million for 1994, due to the increased number of residences operated during
1995. Of this increase, $3.5 million resulted from the full year of operation of
two residences, including one which was opened in March 1994 and one which was
acquired in November 1994, and $1.2 million from the acquisition of one
residence in April 1995. In addition, the expansion of one residence and the
opening in the fourth quarter of 1995 of two residences contributed to the
increase. The remaining increase of $330,000 in operating revenue resulted from
an increase in other revenue.
Residence Operations. Residence operating expenses for the year ended
December 31, 1995 were $7.2 million representing an increase of $4.3 million, or
146%, from $2.9 million for 1994, due to the incurrence of lease-up expenses
related to residences acquired and opened in 1995. Specifically, $2.7 million of
such increase resulted from a full year of operations of two residences, one of
which was acquired in September 1994 and the other of which was opened in March
1994 and $1.0 million resulted from the residence acquired in April 1995.
Lease Expense. Lease expense for the year ended December 31, 1995 was
$890,000, representing an increase of $192,000, or 28%, from $697,000 for 1994.
Such increase is primarily attributable to the full year of lease expense in
1995 for the residence that opened in March 1994 and the increase in lease
expense associated with the residence expansion discussed above.
General and Administrative. General and administrative expenses for year
ended December 31, 1995 were $2.6 million, representing an increase of $1.1
million, or 78%, from $1.5 million for 1994. The increase in expenses was
partially attributable to salaries, related payroll taxes and employee benefits
relating to additional corporate personnel retained to support the Company's
actual and anticipated growth strategy, increased accounting costs, increased
marketing expenses associated with new residences, increased rent due to the
expansion of existing corporate office space and other expenses related to the
Company's growth strategy, and increased marketing expenses associated with new
residences.
Depreciation and Amortization. Depreciation and amortization for the year
ended December 31, 1995 was $815,000, representing an increase of $556,000, or
215%, from $258,000 for 1994. This increase resulted primarily from the full
year of operations of the residence that opened in September 1994 and the
residence acquired in April 1995.
Interest Expense. Interest expense for 1995 was $1.0 million, representing
an increase of $725,000, or 225%, from $322,000 for 1994. The increased interest
expense was primarily the result of a full year of interest expense associated
with indebtedness of $1.1 million on the residence that opened in March 1994 and
the incurrence of indebtedness in the amount of $4.2 million related to the
acquisition of one residence in April 1995.
Gain on Sale of Land. Two parcels of land adjacent to one of the Company's
residences were sold in the last quarter of 1995 resulting in a gain of
$439,000. Since the Company has not engaged in other land sales, a similar gain
does not appear in other periods in the financial statements.
Equity in Losses of Unconsolidated Affiliates. Equity in net losses from
investments in unconsolidated affiliates was $438,000 for 1995. These losses
were attributable to the start-up losses incurred by several of the ALS-Midwest
residences during the year. The Company did not have any significant investments
in unconsolidated affiliates in 1994.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the year ended December 31,
1995 was $112,000, representing an increase of $64,000, or 131%, from $49,000
for the comparable 1994 period. The increase was attributable to the losses
allocated to the minority interest in two residences and the costs associated
with identifying development opportunities in the Eastern United States.
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Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Operating Revenue. Resident service fees for the year ended December 31,
1994 were $4.5 million, representing an increase of $1.7 million, or 63% from
$2.8 million for 1993 due to the opening of one residence and the acquisition of
another. Other revenues increased to $451,000 in 1994 from $22,000 for 1993
primarily as a result of management contracts entered into in December 1993 for
the management of seven residences (six of which are still managed by the
Company) previously operated by the Predecessor.
Residence Operations. Residence operating expenses for the year ended
December 31, 1994 were $2.9 million, representing an increase of $1.2 million,
or 69%, from $1.8 million for 1993 due to the acquisition of one residence and
the opening of another residence.
Lease Expense. Lease expense for 1994 was $697,000, representing an
increase of $115,000, or 20%, from $582,000, for 1993. This increase is
primarily attributable to the opening of one residence in March 1994.
General and Administrative. General and administrative expenses for 1994
were $1.5 million, representing an increase of $994,000, or 214%, from $464,000
for 1993. The increase is related to the expansion of the Company's corporate
staff and related office expenses to accommodate the Company's growth strategy.
Depreciation and Amortization. Depreciation and amortization for 1994 was
$258,000, representing an increase of $151,000, or 142%, compared to $107,000
for 1993. Such increase was attributable to the acquisition of one residence in
September 1994 and the furniture, fixtures and equipment associated with the
opening of one residence in March 1994.
Interest Expense. Interest expense for the year ended 1994 was $322,000,
representing an increase of $266,000 from $56,000 for 1993. This increase is
attributable to the incurrence of $6.3 million of additional indebtedness in
connection with the acquisition of one residence in September 1994.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries was $49,000 for 1994. These
losses were attributable to the losses allocated to the minority partners'
interest in one residence. The Company did not have minority partners in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations, its aggressive
development program and acquisitions through a combination of various forms of
real estate financing, capital contributions from joint venture partners, loans
from Evergreen and net proceeds from private placements of shares of Common
Stock.
The Company has operated from time to time with significant working capital
deficits primarily as a consequence of the financing of its residence
development and acquisitions and, to a lesser extent, the operating losses its
assisted living residences have sustained. At December 31, 1995, the Company's
working capital was $1.2 million compared to a working capital deficit of $1.2
million at December 31, 1994. Working capital at March 31, 1996 was $5.7
million, an increase of $4.5 million from December 31, 1995, primarily as a
result of the Florida Sale/leaseback. On a pro forma basis giving effect to the
Recent Equity Transactions, the ALS-Midwest Restructuring and the Crossings
Merger, the Company would have had a working capital deficit of $4.5 million at
March 31, 1996, primarily attributable to the additional short-term debt
incurred in connection with the ALS-Midwest Restructuring, which debt will be
repaid with a portion of the net proceeds from the Offering. See "Use of
Proceeds." Net cash used by operating activities totaled $357,000, $1.1 million
and $1.2 million for the years ended 1994 and 1995 and the three months ended
March 31, 1996, respectively. Net cash used in investing activities totaled $3.4
million, $17.1 million and $3.0 million for the years ended 1994 and 1995 and
the three months ended March 31, 1996, respectively. Substantially all these
expenditures were used for development and acquisition of residences. Net cash
provided by financing activities totaled $3.9 million, $20.9 million and $2.1
million for the years ended 1994 and 1995 and the three months ended March 31,
1996, respectively.
As of March 31, 1996, on a pro forma basis giving effect to the Recent
Equity Transactions, the ALS-Midwest Restructuring and the Crossings Merger and
as adjusted to give effect to the application of the net proceeds of the
Offering to the Company, the Company's long-term debt would have been $22.1
million. On a
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pro forma basis giving effect to the 1996 Transactions, the Company had lease
expense for the year ended December 31, 1995 of $8.9 million. Long-term debt and
annual lease expense will increase significantly as the Company pursues its
growth strategy.
To achieve its growth objectives, the Company will need to obtain
sufficient financing to fund its development, construction and acquisition
activities. The estimated cost to complete and lease up the 47 residences under
construction or development during the next 18 months is approximately $150
million, which substantially exceeds the estimated net proceeds of the Offering.
Accordingly, the Company's future growth will depend on its ability to obtain
additional financing on acceptable terms. The Company is currently negotiating
additional financing commitments which it believes, together with the net
proceeds from the Offering and existing financing commitments, will be
sufficient to fund its development and acquisition programs for at least the
next 18 months. The Company will from time to time seek additional funding
through public or private financing, including equity or debt financing. In
addition, the Company will require sufficient financial resources to meet its
operating and working capital needs. The Company expects negative cash flow to
continue for at least the next 12 to 18 months as it continues to develop and
construct assisted living residences. There can be no assurance that any newly
constructed residences will achieve a stabilized occupancy rate and attain a
resident mix that meet the Company's expectations or generate sufficient
positive cash flow to cover operating and financing costs associated with such
residences. There can be no assurance that the Company will be successful in
securing additional financing or that adequate funding will be available and, if
available, will be on terms that are acceptable to the Company. A lack of funds
may require the Company to delay or eliminate all or some of its development
projects and acquisition plans. In addition, the Company may require additional
financing to enable it to acquire additional residences, to respond to changing
economic conditions, to expand the Company's development program or to account
for changes in assumptions related to its development program.
In addition, within the next 18 months, the Company will become subject to
mandatory purchase options with respect to equity interests held by joint
venture partners in certain of the Company's residences. At such times the
Company may also elect to exercise its rights to purchase such interests for the
same consideration. Based on a number of assumptions, including assumptions as
to the number of residences to be developed with joint venture partners, the
timing of such development, the time at which such options will be exercised and
the fair market value of such residences at the date such purchase options are
exercised, the Company estimates that it may require approximately $7.0 million
to satisfy these purchase obligations. The Company also has certain similar
purchase options with respect to such equity interests which the Company intends
to exercise only at such times as it has the financial resources available
(internally or through debt or equity financing) to fund the exercise of any
such options. See "Business -- Joint Ventures and Strategic Alliances."
In May 1995, the Company completed the private placement of 4,302,994
shares of the Company's Common Stock for $20 million. The net proceeds of
approximately $19.0 million from this financing were used to (i) repurchase
380,636 shares of Common Stock and prepay a promissory note held by a co-founder
of the Predecessor for $2.5 million and $40,640, respectively; (ii) repay
advances to the Company made by Evergreen together with interest due thereon in
the amount of approximately $4.1 million; (iii) develop, construct and acquire
assisted living residences; and (iv) fund general corporate purposes, including
the corporate infrastructure necessary to manage the Company's future
operations.
On January 26, 1996 (effective January 1, 1996) the Company acquired all of
the outstanding capital stock of Heartland for a total consideration of
approximately $5.5 million and the issuance of 261,424 shares of Common Stock.
In connection with the Heartland Acquisition, the Company borrowed approximately
$8.7 million pursuant to the Heartland Bridge Financing provided by RDV Capital
Management L.P., a Delaware limited partnership affiliated with one of the
Company's directors. See "Certain Relationships and Related Transactions." Under
the terms to the Heartland Bridge Financing, the Company borrowed (i) $2.9
million pursuant to a two year note, which accrues interest at the annual rate
of 9.0% for the first six months, 10.5% for the second six months and thereafter
the annual interest rate increases by an additional 2% for each three month
period until the final maturity on January 25, 1998; and (ii) $5.8 million
pursuant to a two year note, which accrues interest at an annual rate of 9.0%
per annum for the first twelve months, increasing thereafter by an additional 2%
for each three month period until final maturity on January 25, 1998.
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The loan is secured by the pledge by the Company of the outstanding shares of
common stock of Heartland. The Company will use a portion of the net proceeds
received by it from the Offering to repay this loan.
In May 1996, the Company guaranteed two loans to two of the ALS-Midwest
partnerships in the aggregate amount of $9.4 million, the proceeds of which are
being used to fund the construction of the Company's residences currently under
construction in Northville and Utica, Michigan. The loans bear interest at a
rate equal to the prime rate plus 1.0% and are payable with respect to interest
only until the maturity date, April 1, 1999.
On May 24, 1996, the Company raised approximately $2.0 million of cash
through the sale of (i) 322,706 shares of Common Stock to a company affiliated
with Pioneer Development Company, the Company's proposed joint venture partner
in New York, Massachusetts, Connecticut and Rhode Island; and (ii) 107,575
shares of Common Stock to Petty, Kneen & Company, a company controlled by
William G. Petty, Jr., the Company's Chairman of the Board, and John W. Kneen,
the Company's Chief Financial Officer. See "Business -- Joint Ventures and
Strategic Alliances -- Proposed Joint Venture with Pioneer Development Company"
and "Management -- Executive Compensation -- Consulting, Employment and Services
Agreements -- Consulting Agreement with Petty, Kneen & Company."
On May 24, 1996, the Company and Crossings consummated the Crossings Merger
pursuant to which Crossings was merged with and into ALS and all of the shares
of Crossings capital stock outstanding prior to the Crossings Merger were
converted into 2,007,049 shares of Common Stock valued at $9.3 million. See
"History and Organization -- Crossing Merger."
On May 24, 1996, the Company acquired the limited partnership interests not
already owned by it in ALS-Midwest for aggregate consideration of 115,024 shares
of Common Stock valued at $1.0 million and promissory notes in the aggregate
principal amount of $2.9 million. These promissory notes are due and payable on
January 31, 1997 and bear interest at the rate of 8% per annum. See "Use of
Proceeds." The Company also acquired 100% of the outstanding stock of the
corporate general partner of ALS-Midwest ("ALS-Midwest, Inc.") pursuant to a
merger transaction whereby the shareholders of ALS-Midwest Inc. other than the
Company received, in exchange for their shares of ALS-Midwest Inc., $300,000 in
cash and 57,512 shares of the Common Stock valued at $500,000. Contemporaneously
with the merger, the Company refunded advances made to the ALS-Midwest
Partnerships by affiliates of the Damone Group, Inc. ("Damone") by a cash
payment of $700,000 and delivery of a promissory note in the amount of $1.4
million. This promissory note is due and payable on September 21, 1996 and bears
interest at the rate of 9% per annum. See "Use of Proceeds and "History and
Organization -- Acquisition of Remaining Interests in ALS-Midwest."
In June 1996, the Company borrowed $8.5 million, $3.5 million of which was
used to refinance existing indebtedness and the remainder of which will be used
for working capital purposes. This loan is due and payable on October 1, 1996
and bears interest at a rate of 10% per annum. The Company currently intends to
refinance the entire principal amount of this loan at maturity. If, however, the
Company is unable to refinance this loan on acceptable terms the Company expects
to use approximately $8.5 million of the net proceeds to repay such loan.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996 and the effect was
not material to the Company's operations or financial position taken as a whole.
Under Statement 121, property and equipment of the Company are reviewed for
impairment whenever events or circumstances indicate that the asset's
undiscounted expected cash flows are not sufficient to recover its carrying
amount.
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The Company measures an impairment loss by comparing the fair value of the asset
to its carrying amount. Fair value of an asset is calculated as the present
value of expected future cash flows.
In October 1995, the FASB issued Statement No. 123, Accounting for
Stock-Based Compensation, which provides an alternative to APB Opinion No. 25,
Accounting for Stock Issued to Employees, in accounting for stock-based
compensation issued to employees. The Statement allows for a fair value-based
method of accounting for employee stock options and similar equity instruments.
However, for companies that continue to account for stock-based compensation
arrangements under Opinion No. 25, Statement 123 requires disclosure of the pro
forma effect on net income and earnings per share of its fair value-based
accounting for those arrangements. The Company adopted Statement 123 in the
first quarter of 1996 and has elected to continue to account for stock-based
compensation arrangements under APB Opinion No. 25.
IMPACT OF INFLATION
To date, inflation has not had a significant impact on the Company.
Inflation could, however, affect the Company's future revenues and results of
operations due to the Company's dependence on its senior resident population,
most of whom rely on relatively fixed incomes to pay for the Company's services.
As a result, the Company may not be able to increase resident service fees to
account fully for increased operating expenses. In structuring its fees, the
Company attempts to anticipate inflation levels, but there can be no assurance
that the Company will be able to anticipate fully or otherwise respond to any
future inflationary pressures.
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BUSINESS
OVERVIEW
The Company is a leading national assisted living company operating 57
residences with an aggregate capacity of approximately 2,500 residents. Of these
total residences, the Company owns 17, leases 23, holds equity interests in and
operates eight and manages an additional nine. The Company provides a full range
of assisted living services in its residences for the frail elderly and
free-standing specialty care residences for individuals with Alzheimer's disease
and other dementias. The Company and its Predecessor have operated assisted
living residences since 1981 including specialty dementia care residences since
1985.
The Company provides a broad continuum of personal care (such as assistance
with bathing, toileting, dressing, eating and ambulation), support services
(such as housekeeping, laundry and transportation) and health care (such as
medication administration and health monitoring) to its residents. In addition,
the Company offers a wide range of specialized services, including behavior
management and environmental adaptation programs, to residents who suffer from
Alzheimer's disease and other dementias. All of these services are provided on a
24-hour basis in "home-like" settings which emphasize privacy, individual choice
and independence. The Company operates four distinct assisted living product
lines (Clare Bridge, Wynwood, Crossings and WovenHearts), each serving a
particular segment of the private pay elderly population. Each assisted living
product line is designed to permit residents to age in place by meeting their
personal and health care needs across a range of pricing options. See
"-- Assisted Living Product Lines."
Since 1993, the Company has experienced significant growth through its
aggressive development program and several strategic acquisitions. During this
period the Company has developed or acquired 48 residences with an aggregate
capacity of approximately 2,400 residents. The Company intends to continue its
development strategy and is currently constructing 19 residences and is
developing an additional 28 residences. Of these residences, 21 are scheduled to
open during 1996. The Company also intends to continue to pursue strategic
acquisitions of assisted living operations. In keeping with its acquisition
strategy, in May 1996, the Company acquired Crossings, an assisted living
company which operated 15 residences with a capacity of approximately 1,420
residents throughout the Western United States. This strategic merger provides
the Company with access to several new geographic markets and complements its
existing assisted living product lines with the addition of apartment-style
assisted living residences. In January 1996, the Company acquired Heartland, an
assisted living company which operated 20 WovenHearts residences throughout
Wisconsin. As a result of this transaction, the Company has broadened its
assisted living product lines to serve frail elderly individuals in moderate
income markets and rural communities.
The Company's management team has extensive operational and strategic
experience in the health care industry. The Company's President and Chief
Executive Officer, William F. Lasky, founded the Predecessor and has been
actively involved in the assisted living industry for over 15 years. Mr. Lasky
currently serves as Chairman of ALFAA, the nation's largest dedicated assisted
living trade organization. The Company's Chairman, William G. Petty, Jr., has
held senior management positions and has managed strategic investments in
companies in the long-term care, assisted living and senior living industries.
Mr. Petty served as the Chairman, Chief Executive Officer and President of
Evergreen, a NYSE-listed operator of long-term care facilities, from June 1993
until July 1995, when Evergreen merged with GranCare, for which he now serves as
Vice Chairman. See "Management."
The assisted living industry is a rapidly growing segment within the long
term care industry. The Company's target market, which consists of seniors age
75 and older, is one of the fastest growing segments of the United States
population. According to the United States Census Bureau, this age group is
expected to grow by 33.5% between 1990 and 2000. The Company believes that the
market for assisted living services, including dementia care services, will
continue to grow due to (i) the aging of the U.S. population, (ii) rising public
and private cost containment pressures, (iii) declining availability of
traditional nursing home beds given nursing home operators' increasing focus on
higher acuity patients, (iv) quality of life advantages of assisted living
residences over traditional skilled nursing homes and (v) the decreasing
availability of family care as an option for elderly family members. The Company
believes that it is well positioned to capitalize on
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these trends given its growth and operating strategies and its extensive
experience in the assisted living industry.
BUSINESS STRATEGY
The Company believes that significant growth opportunities exist to provide
personal and health care services to the rapidly growing elderly population. The
Company intends to aggressively expand its operations through the development
and construction, and the selective acquisition, of additional residences. The
Company also intends to seek to improve the operating performance of its
residences through the continued enhancement of its operations.
Growth Strategy. The Company's growth strategy emphasizes growth through
the development and construction of assisting living residences and through
strategic acquisitions of assisted living operations.
Development Strategy. The Company intends to continue to expand its
operations primarily through the development and construction of assisted
living residences in selected markets. The Company has an integrated
internal development approach pursuant to which the Company's management
and other personnel (including designers and architects, market analysts
and construction managers) locate sites for, develop and open its
residences. Personnel experienced in site selection conduct extensive
market and site-specific feasibility studies prior to the Company's
committing significant financial resources to new projects. The Company
believes it can rapidly expand its operations into new markets and
strengthen its presence within its existing markets utilizing its four
residence models.
Since 1981, the Company has developed and constructed 30 residences
(including residences developed by Crossings and Heartland) and is in the
process of developing or constructing 47 additional residences, 21 of which
are expected to open during 1996. Construction time for new development
generally ranges from seven to 12 months for its Wynwood, Clare Bridge and
Crossings residences and ranges from four to six months for its WovenHearts
residences. Once opened, new residences generally achieve a stabilized
level of occupancy of 95% or higher over periods ranging from 10 to 14
months and six to nine months for these types of residences, respectively.
To facilitate its development strategy, the Company has formed
strategic alliances with established regional real estate development
partners which have enabled the Company to develop and construct additional
residences while reducing the investment of, and associated risk to, the
Company. The Company's development partners generally provide construction
management experience, existing relationships with local contractors,
suppliers and municipal authorities, knowledge of local and state building
codes and zoning laws and assistance with site location for new residences.
The Company contributes operational and industry expertise, has operational
management responsibility for residences owned by joint ventures and, in
most cases, has the right and obligation to acquire the equity interests of
the other joint venture partners at predetermined times. Through March 31,
1996, nine of the Company's residences had been developed pursuant to joint
ventures. Pursuant to the ALS-Midwest Restructuring, the Company acquired
its joint venture partners' equity interests in five of these residences.
The Company intends to continue to evaluate opportunities to acquire
similar interests in the future. See "Business -- Joint Ventures and
Strategic Alliances" and "History and Organization."
Acquisition Strategy. The Company has acquired, and intends to
continue to selectively acquire, assisted living operations. The Company
may acquire one or more residences as a means to enter new markets and may
also seek to acquire residences within its existing regions to gain further
market share and leverage its existing operating infrastructure. In
reviewing acquisition opportunities, the Company considers, among other
things, the competitive climate, the current reputation of the residence(s)
or the operator, the quality of the management, the need to reposition the
residence(s) in the marketplace and costs associated therewith, the
construction quality and any need for renovations to the residence(s) and
the opportunity to improve or enhance operating results.
In keeping with the Company's acquisition strategy, in May 1996 the
Company acquired Crossings, which operated 15 assisted living residences,
and in January 1996 the Company acquired Heartland, which operated 20
WovenHearts residences. The addition of Heartland and Crossings has
increased
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substantially the Company's operations and has provided ALS with additional
development and management expertise to further support its growth
strategy. See "History and Organization."
In support of its growth strategy, the Company maintains an in-house team
of researchers and analysts dedicated to performing market studies in connection
with identifying development and acquisition opportunities. In collaboration
with regional development partners, the Company selects target development
markets based on a number of factors, including demographic profiles of both
potential residents and their adult children, existing competitors and known new
entrants, estimated market demand and zoning prospects. The Company's
development department uses demographic information and demand estimation models
to identify optimal areas within each target market. Potential sites are then
evaluated by the Company's site evaluation committee. Sites are approved or
rejected based on established criteria relating to land cost and conditions,
visibility, accessibility, immediate adjacencies, community perception and
zoning prospects. Full market feasibility studies, including site evaluations of
all potential competitors and extensive interviews of key community sources, are
subsequently conducted on all approved sites. A similar investigative process is
employed when evaluating potential acquisitions within an identified target
market. The Company's residences are currently located in Wisconsin, Oregon,
Michigan, Colorado, Florida, Washington, Pennsylvania, California and Idaho, and
the Company is in the process of constructing or developing residences in
Arizona, Minnesota, New Jersey, North Carolina, South Carolina and New York.
The Company seeks to cluster its full range of assisted living product
lines to further strengthen its presence within existing markets as well as to
effectively penetrate new markets. The Company generally enters larger
metropolitan markets with its Wynwood, Clare Bridge or Crossings product line.
Once established, the Company may supplement its market presence by developing
WovenHearts residences throughout smaller adjacent markets. The Company will
also use its WovenHearts product line to enter into smaller residential markets,
including rural communities, that would otherwise not support its larger upper-
income residential models. This strategy enables the Company to penetrate its
principal markets, provides it access to smaller markets and enables it to
achieve certain regional economies of scale.
Operating Strategy. The Company's operating strategy is to achieve and
sustain a strong competitive position within its chosen markets as well as to
continue to enhance the performance of its operations. The Company believes that
its multiple product lines afford it a significant competitive advantage as they
enable the Company to offer an evolving continuum of care and services,
including specialty care services, and offer such care and services across a
range of pricing options, thereby serving both the upper and moderate income
segments of the elderly population. The Company will also seek to enhance its
current operations by (i) maintaining and improving occupancy rates at its
residences; (ii) opportunistically increasing resident service fees; and (iii)
improving operating efficiencies.
Offer Evolving Continuum of Care and Services. The Company seeks to
continually expand its range of personal and health care and support
services to meet the evolving needs of its residents. The Company's
Wynwood, Crossings and WovenHearts product lines are designed to meet the
needs of frail elderly individuals who require regular assistance with
activities of daily living and have other special care needs. The Company's
Clare Bridge product line is specifically designed to serve the needs of
individuals with Alzheimer's disease and other dementias through the
provision of a variety of specialty care services. The Company intends to
evaluate opportunities to provide additional services, such as home health,
pharmacy and restorative services, to its residents.
Offer Services Across a Range of Pricing Options. By offering a
variety of pricing options, the Company believes it is able to capture a
larger segment of the elderly population. The Company's Wynwood, Clare
Bridge and Crossings product lines are designed to serve frail elderly
residents who can afford access to a broad range of personal and health
care and support services. The Company's WovenHearts product line, on the
other hand, is designed to cater to moderate income elderly who need access
to care but may have more limited financial resources.
Maintain and Improve Occupancy Rates. The Company will also seek to
maintain and improve occupancy rates by continuing to (i) attract new
residents through marketing programs directed towards family decision
makers, namely adult children, and potential residents and (ii) actively
seek referrals
39
<PAGE> 43
from hospitals, rehabilitation hospitals, physicians' clinics, home health
care agencies and other acute and sub-acute health care providers in the
markets served by the Company.
Selectively Increase Service Pricing Levels. The Company will
continue to review opportunities to increase resident service fees within
its existing markets, while maintaining competitive market positions. In
keeping with this strategy, the Company will continue to offer both premium
priced and moderately priced assisted living services and generally target
private pay residents. The Company's private pay residents are typically
seniors who can afford to pay for services from their own and their
families' financial resources. Such resources may include social security,
savings, proceeds from the sale of their residence, contributions from
family members and insurance proceeds from long-term insurance care
policies.
Improve Operating Efficiencies. The Company will seek to improve
operating results of its residences by continuing to actively monitor and
manage operating costs. In addition, the Company believes that
concentrating residences within selected geographic regions enables the
Company to achieve operating efficiencies through economies of scale and
reduced corporate overhead and provides for more effective management
supervision and financial controls.
ASSISTED LIVING PRODUCT LINES
The Company operates four distinct assisted living product lines (Clare
Bridge, Wynwood, Crossings, and WovenHearts) designed to meet the increasing
personal and health care needs of the private pay elderly population. Product
lines are defined as consisting of various housing models offering a
predetermined selection of services within a defined price range. Together,
these product lines encompass a full range of assisted living services ranging
from basic support services to specialized care for residents with Alzheimer's
disease and other dementias. Each of the Company's product lines targets a
distinct segment of the elderly population through site selection, building
design, staffing, service and care plans, as well as pricing structures based on
the needs and characteristics of each targeted segment. All of the Company's
residences incorporate its philosophy of preserving residents' privacy,
encouraging individual choice and fostering independence in a "home-like"
setting.
Clare Bridge. These specially designed, free-standing residences
serve the programmatic needs of individuals with Alzheimer's disease and
other dementias. Clare Bridge residents typically require higher levels of
care and services as a result of their progressive decline in cognitive
abilities including impaired memory, thinking and behavior. These residents
require increased supervision because they are typically highly confused,
wander prone and incontinent. Ranging in size from 16,000 to 28,000 square
feet, these single-story residences accommodate 24 to 52 residents and are
primarily located in metropolitan and suburban markets. The Company seeks
to create a "home-like" setting that addresses the resident's cognitive
limitations using internal neighborhoods consisting of rooms which are
scaled to the size typically found in an upper-income, single family home
with the same level of furniture, fixtures and carpeting. Key features
specific to the needs of Clare Bridge residents generally include indoor
wandering paths, a simulated "town-square" area, secure outdoor spaces with
raised gardening beds, directional aids to assist in "wayfinding" such as
signs, color-coded neighborhoods and memory boxes with the resident's
photograph outside of their unit, and specially designed furniture suitable
for incontinent residents. The required level of care in Clare Bridge
residences is typically higher than in the Company's other residences due
to the increased level of supervision and assistance required by residents
with dementias. As a result, these residences have a staffing pattern which
includes a full-time nurse and a care giver to resident ratio of 1 to 6.
Due to the generally high level of care required by residents, a
single-tier pricing structure is used. The Company generally charges
monthly rates per resident ranging from $2,800 for a shared room to $3,300
for a private room.
Wynwood. These multi-story residences are designed to serve primarily
upper-income frail elderly individuals in metropolitan and suburban
markets. Wynwood residents are generally 75 years of age or older, require
assistance with at least two of the five basic activities of daily living
(so-called ADLs (i.e., bathing, toileting, dressing, eating and
ambulation)) and need services due primarily to physical limitations rather
than cognitive impairment. The Wynwood residences typically range in size
from 35,000 to 45,000 square feet and accommodate 50 to 72 residents. To
achieve a more residential
40
<PAGE> 44
environment in these larger buildings, each wing or "neighborhood" in the
residence contains design elements scaled to a single-family home and
includes a living room, dining room, patio or enclosed porch, laundry room
and personal care area, as well as a care giver work station. Residents are
offered a choice of private or shared, fully-furnished accommodations with
ongoing health assessments by a nurse, 24-hour assistance with ADLs, three
meals a day plus snacks, organized social activities, housekeeping and
personal laundry service. The Company maintains a minimum care giver to
resident ratio of 1 to 10 at each of these residences and increases
staffing levels to a ratio as high as 1 to 6 to accommodate the care needs
of the resident population. All residents are assessed at admission to
determine the level of care and service required and placed in one of four
levels ranging from basic care to three different levels of advanced care.
The Company customarily charges monthly rates per resident ranging from
$1,800 to $2,400 for a shared room and from $2,500 to $3,100 for a private
room.
Crossings. These apartment-style residences serve the needs of elderly
individuals who may require support services and personal care and are
generally located in metropolitan markets. Apartment-style residences are
favored in certain markets in the United States, particularly throughout
Western states and are required in certain states to meet licensing
requirements. The Company believes this product line enables it to capture
a broader segment of the assisted living market. These multi-story
residences range in size from 45,000 to 65,000 square feet and accommodate
60 to 80 residents, who choose among studio, one-bedroom and two-bedroom
apartments. These apartments typically include a bedroom, a kitchenette, a
full bathroom and a living/dining area and range in size from 280 to 700
square feet. Common space is dispersed throughout the buildings and
includes a central dining room, a library, various activity rooms, laundry
rooms and a beauty shop. The Company maintains care staff to resident
ratios ranging from 1 to 12 to 1 to 16, depending upon the care needs of
the residents. Crossings residences generally offer a three-tier pricing
structure ranging from a basic care package to more advanced care levels.
The Company customarily charges monthly rates per resident ranging from
$1,500 to $3,300. Additional fees ranging from $100 to $450 per month may
be charged for more advanced care levels, including its RISE and ESP
ancillary support programs. See "-- Assisted Living Care and Service
Programs".
WovenHearts. These residences are designed to meet the needs of
elderly individuals who have primarily physical limitations or who may be
experiencing the early stages of Alzheimer's disease. These smaller
residences serve moderate-income frail elderly individuals and are
typically located in small towns or rural markets. WovenHearts residences
range in size from 7,000 to 12,000 square feet, accommodate 20 residents
and are being expanded to accommodate 26 residents. These single-story
residences resemble, and can generally be constructed on a site suitable
for, a single family home. These residences have multiple common areas that
are easily accessible from any resident room and include a living room, a
den, an entertainment room, several personal care areas as well as a large
kitchen area which opens into an adjoining dining room. This design allows
residents to participate in familiar daily activities (such as assisting
with meals, laundry and housekeeping) which promote maintenance of their
functional abilities. Most of the resident units are private and fully
furnished, though shared accommodations are also available. The Company
generally maintains a minimum care giver to resident ratio of 1 to 8 at its
WovenHearts residences. In addition, the Company is able to offer high
quality and cost-effective care and service in a smaller residential
setting by using a centralized professional staff (i.e., registered nurses
and marketing specialists) that performs functions for several WovenHeart
residences. The combination of lower construction and staffing costs
enables the Company to offer affordable care and services to the moderate
income elderly population. The WovenHeart residences currently have a
single-tier pricing structure consisting of a monthly rate ranging from
$1,800 to $2,500. In the future, the Company intends to adapt its
WovenHearts model, services and staffing levels to accommodate the needs of
residents with later stages of Alzheimer's disease.
ASSISTED LIVING CARE AND SERVICE PROGRAMS
The Company offers a full range of assisted living care and services based
upon individual resident needs. Prior to admission, all residents are assessed
by the Company's professional staff to determine the appropriate residence model
and level of care and services required by such residents. Subsequently,
individual care plans are developed by residence staff in conjunction with the
residents, their families and their physicians. These
41
<PAGE> 45
plans are periodically reviewed, typically at six month intervals, or when a
change in medical or cognitive status occurs. Each of the Company's assisted
living product lines is designed to accommodate residents as they age in place
and require increasing levels of care. To oversee the delivery of care and
services, the Company maintains a licensed nurse on staff at each of its
residences. The Company believes that this level of attention to the health care
needs of its residents enables them to remain in the Company's residences, in
many cases, for the rest of their lives. In addition, the Company is also able
to transfer residents to and from its various residence models, where
appropriate, depending upon the evolving care needs of such residents. The
Company has implemented different care and service plans for each of its product
lines. At its Wynwood and Crossings models, for instance, residents are placed
in one of several care levels depending upon their individual needs. At its
Clare Bridge and WovenHearts residences, the Company uses a single care
structure. However, the Company is in the process of implementing at its
WovenHearts residences a multi-tier care plan similar to the plans offered at
its Wynwood residences. The Company's care levels include a basic care program,
several advanced care programs as well as additional ancillary service programs
as further described below.
Basic Care. At this level, residents are provided with a variety of
services, including 24 hour assistance with ADLs, ongoing health
assessments by a professional nurse, three meals per day and snacks,
coordination of special diets planned by a registered dietitian, assistance
with coordination of physician care, physical therapy and other medical
services, social and recreational activities, housekeeping and personal
laundry services.
Advanced Care. The Company also offers higher levels of personal and
health care services to residents who require more frequent or intensive
physical assistance or increased care and supervision due to cognitive
impairments. The Company offers three advanced care levels which provide
residents with increasing levels of care and services dependent on the
residents' changing needs. Rates charged for these services are added to
the rate charged for basic care. The Company generally charges an
additional $300 to $750 per month depending upon the level and frequency of
care required and staffing needs. Residents in the highest care level are
typically very physically frail or experiencing early stages of Alzheimer's
disease or other dementia. Physically frail residents may require complex
medication management, assistance with most or all ADLs, two-person
transfer from a wheelchair or incontinence care. Residents with cognitive
impairment may require frequent staff interaction and intervention due to
confusion.
Alzheimer's Care. The Company believes it is one of the leading
providers of care to residents with cognitive impairments including
Alzheimer's and other dementias, in its free-standing Clare Bridge
residences. The Company's programs provide the attention, care and services
needed to help cognitively impaired residents maintain a higher quality of
life. Specialized services include assistance with ADLs, behavior
management and a life-skills based activities program, the goal of which is
to provide a normalized environment that supports residents' remaining
functional abilities. Whenever possible, residents participate in all
facets of daily life at the residence, such as assisting with meals,
laundry and housekeeping.
RISE (Restoring Independence, Strength and Energy). Crossings
residences offer RISE, a one-on-one exercise program designed to help
residents regain their independence and become healthier, and stronger by
improving flexibility, balance, strength and endurance. The program is
targeted to residents with health concerns related to Parkinson's disease,
strokes, osteoarthritis, osteoporosis, congestive heart disease, hip
fractures and other limitations in ambulation and mobility. Monthly rates
for the program range from $90 to $400 depending on the frequency and
duration of sessions.
ESP (Extended Support Program). ESP, also offered at Crossings
residences, is a program designed to provide additional structure and
personal attention to residents with early stages of dementia. Regularly
scheduled group recreational activities and social events help residents
build self-esteem and decrease anxiety related to confusion and
disorientation. The ESP program has been successful in retaining residents
who, due to their dementia, might otherwise need to relocate to a more
supportive environment. The monthly program rates range from $325 to $450.
42
<PAGE> 46
Supportive Services. These services, which are currently offered at
Crossings residences, are designed for residents who typically do not need
routine assistance with ADLs and who are able to handle the administration
of their own medications. These services typically include three meals per
day, housekeeping, personal laundry service, transportation and social and
recreational programming.
Access to Specialized Medical Services. The Company assists its
residents with the coordination of access to medical services from third
parties including home health care, rehabilitation therapy, pharmacy
services and hospice care. These providers are often reimbursed directly by
the resident or a third party payor, such as Medicare. In the future, the
Company may elect to provide these services directly using its own skilled
employees or through a joint venture agreement with a skilled provider.
Residents requiring greater levels of supervision or more specialized
programming due to Alzheimer's disease or other dementias may be recommended for
transfer to one of the Company's Clare Bridge residences. In the event that a
resident's acuity level reaches a level such that the Company is unable to meet
the resident's needs, the Company maintains relationships with local hospitals
and skilled nursing facilities to facilitate resident transfers.
43
<PAGE> 47
RESIDENCES
The table below sets forth certain information with respect to the
Company's residences which are operated by the Company. The Company owns,
leases, holds equity interest in or manages, on behalf of third parties, these
residences. The Company considers its properties to be in good operating
condition and suitable for the purposes for which they are being used.
OPERATING RESIDENCES
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996
DATE --------------------
OWNERSHIP RESIDENT OPENED/ RATE PER OCCUPANCY
RESIDENCE MODEL LOCATION CARE LEVEL (% OWNED) CAPACITY ACQUIRED UNIT(1) RATE(2)
- --------------------------- ------------------ ----------------- --------------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNED/LEASED
WISCONSIN
Clare Bridge............. Brookfield Dementia Care Leased 24 Nov-91 $3,307 100%
Clare Bridge............. Middleton Dementia Care Owned 24 Mar-91 3,305 98
Wynwood.................. Madison Frail Elderly Leased 50 Feb-92 2,492 100
Wynwood.................. Brookfield Frail Elderly Leased 60 Mar-94 2,752 99
WovenHearts.............. Clintonville Frail Elderly Owned 19 Jul-95 1,017 87
WovenHearts.............. Edgerton Frail Elderly Owned 16 Oct-95 1,519 71
WovenHearts.............. Janesville Frail Elderly Owned 16 Oct-95 2,581 91
WovenHearts.............. Jefferson Dementia Care Owned 16 Oct-95 2,084 71
WovenHearts.............. Kaukauna Frail Elderly Owned 16 Jul-95 1,619 91
WovenHearts.............. Manitowoc Frail Elderly Owned 20 Dec-95 1,803 31
WovenHearts.............. Neenah Frail Elderly Owned 20 Apr-96 2,100 --
WovenHearts.............. New London Frail Elderly Owned 20 Jul-95 1,406 67
WovenHearts.............. New Richmond Frail Elderly Owned(19.0) 15 Mar-96 2,000 --
WovenHearts.............. Onalaska Frail Elderly Owned 20 Jun-95 1,760 68
WovenHearts.............. Rice Lake Frail Elderly Owned 20 Oct-95 1,800 50
WovenHearts.............. Shawano Frail Elderly Owned 15 Jul-95 1,228 100
WovenHearts.............. Platteville Frail Elderly Owned(72.7) 20 Nov-95 1,454 45
WovenHearts(3)........... Cambridge Frail Elderly Owned(50.0) 15 Jan-96 1,563 27
WovenHearts.............. Jefferson Dementia Care Leased 16 Jan-96 1,726 100
WovenHearts.............. Sun Prairie Frail Elderly Leased 20 Oct-95 1,660 93
WovenHearts.............. Menomonie Frail Elderly Owned(19.0) 20 Mar-95 1,736 64
WovenHearts.............. Plymouth Frail Elderly Owned(19.0) 15 Jun-94 2,155 89
WovenHearts.............. Wisc. Rapids Frail Elderly Owned(19.0) 20 May-95 2,004 92
---------
497
---------
OREGON
Crossings................ Albany Support Services Leased 74 Aug-90 1,132 89
Crossings................ Albany Support Services Leased 63 Jun-89 1,443 100
Crossings................ Forest Grove Support Services/
Frail Elderly Leased 88 Sep-90 1,354 94
---------
225
---------
Crossings................ McMinnville Support Services/
Frail Elderly Leased 87 May-91 1,512 97
Crossings................ Tualatin Frail Elderly Leased 112 Feb-89 2,163 88
Crossings................ Gresham Frail Elderly Leased 78 Jan-90 1,781 96
Crossings................ Medford Frail Elderly Leased 76 Jan-91 1,707 76
---------
353
---------
MICHIGAN
Clare Bridge............. Ann Arbor Dementia Care Owned 36 Jun-95 3,009 97
Clare Bridge............. Farmington Hills Dementia Care Owned 28 Jul-94 3,258 85
Clare Bridge............. Farmington Hills Dementia Care Owned 32 Oct-95 3,409 63
Clare Bridge............. Lansing Dementia Care Leased 36 Jan-96 2,972 55
Clare Bridge............. Utica Dementia Care Owned 36 Jan-95 3,086 94
---------
168
---------
COLORADO
Crossings................ Boulder Support Services Leased 82 Aug-88 1,600 97
Crossings................ Aurora Support Services Leased 159 Apr-91 1,132 90
Crossings................ Aurora Frail Elderly Leased 60 Apr-91 1,556 80
Crossings................ Boulder Frail Elderly Leased 76 Jun-94 2,290 99
---------
377
---------
</TABLE>
44
<PAGE> 48
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996
DATE --------------------
OWNERSHIP RESIDENT OPENED/ RATE PER OCCUPANCY
RESIDENCE MODEL LOCATION CARE LEVEL (% OWNED) CAPACITY ACQUIRED UNIT(1) RATE(2)
- --------------------------- ------------------ ----------------- --------------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
FLORIDA
Clare Bridge............. Bradenton Dementia Care Leased 36 Oct-95 $3,179 44%
Clare Bridge............. Sarasota Dementia Care Leased 38 Dec-95 3,237 38
Wynwood.................. Sarasota Frail Elderly Owned 86 Apr-95 2,005 75
---------
160
---------
WASHINGTON
Crossings................ Richland Support Services/
Frail Elderly Leased 128 Jul-88 1,392 84
Crossings................ Tacoma Support Services Leased 119 Jun-87 1,315 94
---------
247
---------
PENNSYLVANIA(4)
Clare Bridge............. Lower Makefield Dementia Care Owned(60.0) 48 Feb-96 2,697 38
Wynwood(5)............... Richboro Frail Elderly/
Dementia Owned(60.0) 110 Nov-94 2,825 90
---------
158
---------
CALIFORNIA
Crossings................ Loma Linda Support Services/
Frail Elderly Leased 140 Jun-91 1,513 76
---------
IDAHO
Crossings................ Boise Frail Elderly Leased 80 Jul-92 2,002 93
---------
MANAGED
WISCONSIN
WovenHearts(6)........... Sussex Frail Elderly Managed 19 -- 1,591 94
WovenHearts(7)........... Lodi Frail Elderly Managed 15 -- 1,696 79
WovenHearts(6)(8)........ Brown Deer Frail Elderly Managed 15 -- 1,966 93
Elm Grove House.......... Elm Grove Dementia Care Managed 8 -- 2,750 100
Finch House.............. Greendale Dementia Care Managed 8 -- 2,741 95
North Shore House........ Fox Point Dementia Care Managed 8 -- 2,750 100
Oak Ridge House.......... Wauwatosa Dementia Care Managed 8 -- 2,542 83
Parkway House............ Milwaukee Dementia Care Managed 8 -- 2,258 98
Ridgefield House......... Madison Dementia Care Managed 8 -- 3,150 100
---------
97
---------
Total.............. 2,502
========
</TABLE>
- ---------------
(1) Average monthly rate per resident at each residence is calculated by
dividing the residence's total monthly resident service fee revenue by the
average number of occupied beds for the month.
(2) Average monthly occupancy rate for each Clare Bridge, Wynwood and
WovenHearts residence and for each of the managed residences is calculated
by dividing the total number of resident occupied days by the total number
of available bed days of the residence. Average monthly occupancy rates for
each Crossings residence is calculated as the sum of occupied beds at the
end of each week for any one month period divided by the number of weeks in
that month.
(3) ALS shares management responsibility for this residence with its joint
venture partner, Memorial Community Hospital Association, Inc. of Edgerton,
Wisconsin.
(4) The Pennsylvania residences are owned by joint venture entities of which ALS
is the 60% equity owner. See "Business -- Joint Ventures and Strategic
Alliances -- Joint Venture with Continuing Care Concepts, Inc."
(5) ALS's 60% interest in this residence was acquired in September 1994. See
"Business -- Joint Ventures and Strategic Alliances -- Joint Venture with
Continuing Care Concepts, Inc."
(6) This residence is owned by a franchisee. The Company, however, receives a
management fee equal to 6.0% of the annual gross revenues of this residence.
(7) The Company holds a 2.5% equity interest in, and has a right of first
refusal to purchase, this residence.
(8) The Company holds a 0.5% equity interest in, and has a right of first
refusal to purchase, this residence.
The Company occupies executive offices located in Brookfield, Wisconsin
under a lease expiring in 2000. The Company also leases office space in Tacoma,
Washington and Madison, Wisconsin.
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<PAGE> 49
The Company is in various stages of constructing 19 residences and is
developing 28 residences. Set forth below is certain information with respect to
residences in construction and residence sites in development.
RESIDENCES UNDER CONSTRUCTION/DEVELOPMENT
<TABLE>
<CAPTION>
RESIDENT OPENING
RESIDENCE MODEL LOCATION(1) CARE LEVEL CAPACITY DATE STATUS(2)
- ---------------------------- -------------------- ----------------- --------- ------- ------------
<S> <C> <C> <C> <C> <C>
MINNESOTA
WovenHearts............... Owatonna Frail Elderly 20 4Q 1996 Construction
WovenHearts............... Austin Frail Elderly 20 4Q 1996 Construction
WovenHearts............... Winona Frail Elderly 20 4Q 1996 Construction
WovenHearts............... Columbia Heights Frail Elderly 20 4Q 1996 Development
WovenHearts............... Sauk Rapids Frail Elderly 20 4Q 1996 Development
WovenHearts............... Willmar Frail Elderly 20 4Q 1996 Development
WovenHearts............... Faribault Frail Elderly 20 1Q 1997 Development
WovenHearts............... West St. Paul Frail Elderly 20 2Q 1997 Development
WovenHearts............... Inver Grove Heights Frail Elderly 20 2Q 1997 Development
WovenHearts............... Mankato Frail Elderly 20 3Q 1996 Construction
---------
200
---------
WISCONSIN
WovenHearts............... Whitewater Frail Elderly 20 3Q 1996 Construction
WovenHearts............... Baraboo Frail Elderly 20 3Q 1996 Construction
WovenHearts............... Janesville Frail Elderly 20 3Q 1996 Construction
WovenHearts............... Fond du Lac Frail Elderly 20 4Q 1996 Construction
WovenHearts............... Oshkosh Frail Elderly 20 4Q 1996 Construction
WovenHearts............... River Falls Frail Elderly 20 4Q 1996 Construction
WovenHearts............... Eau Clair Frail Elderly 20 4Q 1996 Development
WovenHearts............... LaCrosse Frail Elderly 20 4Q 1996 Development
---------
160
---------
NORTH CAROLINA
Wynwood................... Chapel Hill Frail Elderly 70 4Q 1996 Construction
Clare Bridge.............. Cary Dementia Care 50 1Q 1997 Construction
Clare Bridge.............. Greensboro Dementia Care 38 2Q 1997 Development
Clare Bridge.............. Winston-Salem Dementia Care 38 2Q 1997 Development
Clare Bridge.............. Charlotte Dementia Care 50 3Q 1997 Development
Wynwood................... Charlotte Frail Elderly 72 3Q 1997 Development
Wynwood................... Greensboro Frail Elderly 72 4Q 1997 Development
---------
390
---------
PENNSYLVANIA
Clare Bridge.............. Montgomery Dementia Care 48 3Q 1996 Construction
WovenHearts............... Penn Hills Frail Elderly 26 2Q 1997 Development
Clare Bridge.............. East Hempfield Dementia Care 38 3Q 1997 Development
Clare Bridge.............. Pittsburgh Dementia Care 52 3Q 1997 Development
Clare Bridge.............. York Dementia Care 38 3Q 1997 Development
---------
202
---------
MICHIGAN
Wynwood................... Northville Frail Elderly 72 4Q 1996 Construction
Wynwood................... Utica Frail Elderly 72 1Q 1997 Construction
Wynwood................... Lansing Frail Elderly 72 4Q 1997 Development
---------
216
---------
NEW YORK
Clare Bridge.............. Williamsville Dementia care 52 2Q 1997 Development
Clare Bridge.............. Niskayuna Dementia Care 52 2Q 1997 Development
Clare Bridge.............. Perinton Dementia Care 52 3Q 1997 Development
---------
156
---------
FLORIDA
Clare Bridge.............. Tampa Dementia Care 38 3Q 1996 Construction
Clare Bridge.............. Ft. Meyers Dementia Care 38 4Q 1996 Construction
---------
76
---------
NEW JERSEY
Clare Bridge.............. Westhampton Dementia Care 50 1Q 1997 Construction
Clare Bridge.............. Hamilton Dementia Care 50 2Q 1997 Development
---------
100
---------
</TABLE>
46
<PAGE> 50
<TABLE>
<CAPTION>
RESIDENT OPENING
RESIDENCE MODEL LOCATION(1) CARE LEVEL CAPACITY DATE STATUS(2)
- ---------------------------- -------------------- ----------------- --------- ------- ------------
<S> <C> <C> <C> <C> <C>
WASHINGTON
Crossings................. Tacoma Frail Elderly 70 2Q 1997 Development
Crossings................. Yakima Frail Elderly 70 2Q 1997 Development
---------
140
---------
IDAHO
Crossings................. Boise Support services 78 4Q 1996 Construction
---------
ARIZONA
Clare Bridge.............. Tempe Dementia Care 50 2Q 1997 Development
---------
COLORADO
Crossings................. Colorado Springs Frail Elderly 70 2Q 1997 Development
---------
OREGON
Crossings................. Albany Frail Elderly 70 2Q 1997 Development
---------
SOUTH CAROLINA
Clare Bridge.............. Columbia Dementia Care 50 2Q 1997 Development
---------
Total............... 1,958
========
</TABLE>
- ---------------
(1) Each of the residences located in Michigan, North Carolina, New Jersey, New
York and Pennsylvania may be owned directly by joint venture entities in
which the Company will own varying percentages of equity interests. See
"Business -- Joint Ventures and Strategic Alliances."
(2) "Construction" means that construction activities have occurred (ground
breaking) and are ongoing. "Development" means that the site is under
"control" (pursuant to purchase agreements or options or otherwise) and
development activities with respect to the site have commenced and are
ongoing (such as site permitting, preparation of surveys and architectural
plans, and negotiation of construction contracts).
The Company has also targeted the States of Delaware and Connecticut for
new development and is considering expanding its operations into Illinois. To
that end, the Company has undertaken market feasibility studies for selected
markets within each of those states.
OPERATIONS
The Company centralizes many of its administrative functions to enable its
residence employees to focus their efforts on resident care. The Company
maintains centralized accounting, finance and other operational functions at its
national corporate office in Brookfield, Wisconsin. Employees at the Company's
national corporate office are responsible for (i) establishing Company-wide
policies and procedures relating to, among other things, resident care and
operation, (ii) facilitating billing and collection, accounts payable, finance,
accounting and payroll, (iii) developing employee training materials and
programs and (iv) providing overall strategic direction to the Company. In
addition, all development, construction and acquisition activities, including
feasibility and market studies, residence design, and development and
construction management, are conducted from the Company's national office. The
Company seeks to control operating expenses for each of its residences through
monthly budgeting, standardized management reporting and centralized purchasing.
Residence expenditures are monitored and approved by the Company's regional
directors who are held accountable for achieving budgeted results for each
residence within their respective territory. All of the Company's residences are
divided into geographic regions in order to efficiently allocate the Company's
professional managerial resources. This regional focus permits the Company to
realize certain financial and management economies of scale while reducing much
of the administrative burden typically placed on residence staff. The Company
currently has eight regions, each of which are under the supervision of a
regional director.
The Residence Director supervises the other members of the residence's
management team (consisting of a Health Care Coordinator, Community Service
Representative, Life Enrichment Coordinator, Resident Assistant Supervisor and
Kitchen Manager) and is responsible for monitoring day-to-day operations and
47
<PAGE> 51
resident services. Company policy requires the Residence Director to be present
in the residence during normal business hours and the Health Care Coordinator to
be on-call 24 hours a day.
The Company has adopted the "care giver" model which differs significantly
from traditional long-term care models. In traditional long-term care settings,
the delivery of care and services is divided into numerous departments typically
consisting of nursing, housekeeping activities and food services all provided by
separate individuals. The Company's resident assistants are responsible for the
personal care, medication administration (when permitted by state law),
housekeeping, laundry, meal service and social activities of the residents. As a
result, the Company believes its staff can deliver comparable levels of care in
a more personalized, efficient and economic manner than that offered in most
long-term care settings. The Company believes that its care giver model enables
its staff to develop a personal approach and, in many instances, become a
significant part of residents' lives.
The Company has attracted, and continues to seek, highly dedicated,
experienced personnel. The Company has created formal training programs
accompanied by review and evaluation procedures to help ensure quality care for
its residents. The Company believes that education, training, and development
enhance the effectiveness of its employees. All employees are required to
complete the Company's training program, which includes a core curriculum
comprised of personal care basics, Alzheimer's disease processes, behavior
management, health care management, life skills programming, first aid, fire
safety, nutrition, infection control, hospitality, customer service, and death
and dying. In addition to classroom training, the Company's residences provide
new employees with on the job training, utilizing experienced staff as trainers
and mentors.
For staff who desire to advance into residence management, a program that
provides additional training in management techniques and budget management is
available. The Company has developed an "Associate in Training" program that
places a residence director trainee in an existing residence to attain "hands
on" experience under the direct supervision of a current Residence Director.
This program is intended to ensure that a sufficient number of Company-trained
professionals will be available to manage newly developed and acquired
residences.
QUALITY ASSURANCE
The Company's quality assurance program is intended to further its goal of
achieving a high degree of resident and family satisfaction with the care and
services it provides. The Company coordinates the implementation of its quality
assurance program at each of its residences through its national and regional
offices. Periodic and annual surveys of residents and their family members are
used to appraise and monitor their level of satisfaction with the Company's
services. The Company also provides a toll-free number so that residents, their
families and professionals may conveniently convey their comments and
observations. In addition, residence inspections are conducted periodically by
regional staff. The scope of these inspections cover the appearance of the
exterior of the buildings and grounds, the appearance and cleanliness of the
interior, the professionalism and friendliness of staff, the quality of resident
care and care documentation, the quality of resident social events and planned
activities, the presentation of meals and appearance of dining areas, the
appearance of residents and overall compliance with government regulations. To
further evaluate customer service, the Company engages a third party service to
periodically "mystery shop" the Company's residences. This independent service
analyzes the Company's performance from the perspective of a customer without
the inherent biases of a Company employee. This service assists the Company in
continually monitoring and improving the level of services offered to its
residents to further ensure maximum customer satisfaction.
MARKETING
The Company's marketing and sales efforts are undertaken on the national,
regional and local levels. This effort is intended to create awareness of the
Company and its services among prospective residents, their families, other key
decision makers and professional referral sources. A national office marketing
staff develops overall strategies to promote the Company's product lines
throughout its markets and assesses continuously the success of its efforts by
monitoring the generation and tracking of leads carried out by the Company's
sales
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staff. Each regional office also has a marketing specialist, and most residences
have on staff a Community Services Representative, both of whom are dedicated to
sales and marketing activities.
Prior to opening new residences, the Company commences an aggressive
marketing campaign by opening a sales office in close proximity to residences
nearing completion. During this launch campaign, the Company's personnel
actively contact local referral sources, which generally account for a majority
of resident referrals. In addition, the Company typically engages in more
traditional types of marketing activities, such as direct mailings and print
advertising, signs and yellow pages advertising. These marketing activities and
media advertisements are directed to the adult children of prospective residents
because they comprise the primary decision makers for placing a frail elderly
relative in an assisted living setting. The Company's "clustering" strategy also
enables the Company to leverage its pre-opening and on-going marketing efforts
in a given area.
The Company's marketing personnel also provide insight into local and
regional demand for assisted living services. The regional and local marketing
staff may be more attuned to local demand for certain services not offered by
the Company. As a result, the Company regularly involves its marketing personnel
in evaluating its development activities and services.
ADVISORY BOARD
The Company has formed an Advisory Board comprised of professionals with
specialized expertise in the delivery of assisted living services. The Advisory
Board meets regularly to review the Company's resident care policies and
procedures and makes recommendations with respect thereto to the Company's
management. The Advisory Board, however, has no authority to act on behalf of
the Company. Each advisory director receives $1,000 for each meeting attended
and is reimbursed for expenses incurred in connection therewith. The Company
estimates that each advisory director devotes approximately 40 hours per year on
the Company's affairs. The current members of the Advisory Board are:
<TABLE>
<CAPTION>
NAME POSITION
- ----------------------------------- ------------------------------------------------
<S> <C>
Kathleen Buckwalter, Ph.D.......... Professor and Associate Director, Office of
Nursing Research Development and Utilization,
University of Iowa
Donna Cohen, Ph.D.................. Chairman, Department of Aging and Mental Health,
University of South Florida
Carly R. Hellen, OTR/L............. Director of Nursing Home Services of Rush
Alzheimer's Disease Center, Rush-Presbyterian-
St. Luke's Medical Center, Chicago, Illinois
Thomas Kirk........................ Vice President, Patient Family and Education
Services, National Alzheimer's Association,
Chicago, Illinois
Cynthia Leibrock, MA, ASID,
IFDA............................. Principal, Easy Access Barrier Free Design,
Aurora, Colorado
Nancy Mace, MA..................... Consultant and author of "The 36-Hour Day,"
Walnut, California
Cynthia Schmeichel, Ph.D........... Executive Director of the Chartwell Foundation,
Chicago, Illinois
</TABLE>
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JOINT VENTURES AND STRATEGIC ALLIANCES
In further support of its development strategy, the Company has formed
strategic alliances and joint ventures with established real estate development
partners. These alliances and joint ventures have enabled the Company to develop
and construct additional residences while reducing the investment of, and
associated risk to, the Company.
Joint Venture with Continuing Care Concepts, Inc. In 1994, the Company
established a joint venture with Continuing Care Concepts, Inc. ("CCC") to
develop, own and operate assisted living residences in targeted market areas
throughout Pennsylvania, Delaware and New Jersey (the "ALS-East Territory"). CCC
is a corporation owned and controlled by DeLuca Enterprises, Inc., an Eastern
Pennsylvania-based commercial real estate development and construction company.
In September 1994, the Company commenced its relationship with CCC through the
acquisition of a 60% interest in a partnership that owns the Wynwood residence
located in Richboro, Pennsylvania. CCC retained the remaining 40% of this
partnership. Pursuant to the acquisition agreement entered into by the Company
and CCC in connection with this transaction (the "ALS-East Agreement"), during
the five-year period commencing in September 1994, the Company and CCC have
agreed to develop and construct additional assisted living residences throughout
the ALS-East Territory, with the Company and CCC having a 60% and 40% equity
interests and capital obligations, respectively. Pursuant to this arrangement,
the Company has agreed to contribute a total of $5.2 million of equity to
develop ALS-East residences, $1.0 million of which had been funded as of March
31, 1996. The Company is entitled to receive a priority distribution from the
ALS-East residences in the aggregate amount of $1,680,000 ("Priority
Distribution"), and thereafter the Company and CCC are entitled to receive their
respective share of any incremental distribution. If construction is not
commenced on at least eight new ALS-East residences by September 1998, the above
priority amount will be modified so as to provide the Company with a 27%
internal rate of return on capital contributed to ALS-East residences.
During the five year development term, the Company and CCC have agreed to
develop residences within the ALS-East Territory exclusively with each other,
and have agreed not to independently engage in other competitive activities in
such territory, subject to certain limited exceptions. CCC and its affiliates
have agreed to provide development and construction management services to
ALS-East development projects and the Company has agreed to manage the ALS-East
residences, all pursuant to agreed upon arrangements. Under the ALS-East
Agreement, the approval of both the Company and CCC is generally required for
matters relating to the development, construction, operation and management of
ALS-East residences. In addition to the Richboro residence, the Company and CCC
have constructed and are operating a Clare Bridge residence in Lower Makefield,
Pennsylvania, are constructing Clare Bridge residences in Montgomery,
Pennsylvania and Westhampton, New Jersey and are developing four additional
Clare Bridge residences and one WovenHearts residence in the ALS-East Territory.
Upon the first to occur of (i) September 20, 1998 or (ii) the issuance of
an occupancy permit for eight ALS-East residences, the Company shall have the
option to purchase CCC's interest in all ALS-East entities at an amount based on
a fair market value determination, subject to a minimum purchase price.
The Company and CCC have reached a non-binding agreement in principle
regarding the purchase by the Company of the 40% equity interest held by CCC in
three ALS-East residences as well as the restructuring of the on-going ALS-East
joint venture relationship (the "Pending ALS-East Modification"). Specifically,
pursuant to the Pending ALS-East Modification the Company would acquire CCC's
40% interest in the two operating ALS-East residences (Richboro and Lower
Makefield, Pennsylvania) as well as CCC's 40% interest in the Clare Bridge
residence currently in construction in Montgomery, Pennsylvania for an aggregate
purchase price of $3.2 million. Simultaneously with such purchase, pursuant to
the Pending ALS-East Modification the joint venture arrangement between the
Company and CCC with respect to all other ALS-East residences, including those
currently in construction or development, would be substantially modified such
that: (i) the term of the joint venture would be extended through December 1999;
(ii) CCC's equity opportunity with respect to future ALS-East residences would
be in the form of a right of first refusal to provide 20% (as opposed to 40%) of
the equity for future residences located in the ALS-East Territory; (iii) ALS
would no longer have the Priority Distribution but losses from the operation of
jointly owned ALS-East residences would be disproportionately allocated to CCC
to the extent of its capital account; and
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(iv) with respect to each jointly-owned ALS-East residence, upon the six month
anniversary of the opening of such residence, CCC shall have a right to require
the Company to purchase CCC's interest in such residence (put option) and the
Company shall have an option to acquire (call option) CCC's interest in such
residence at a purchase price based upon the appraised fair market value of the
residence. Pursuant to the Pending ALS-East Modification, the Company would use
CCC or its affiliates as its exclusive general contractor in the ALS-East
Territory through December 1999 and the Company would continue to manage jointly
owned ALS-East residences pursuant to agreed upon arrangements.
Although the Company and CCC have reached an agreement in principle with
respect to the Pending ALS-East Modification and are currently negotiating the
terms of a definitive agreement, neither party will have any binding obligation
with respect thereto until such definitive agreement is executed and delivered.
No assurance can be given that the Company and CCC will in fact execute a
definitive agreement with respect to the Pending ALS-East Modification. The
Pending ALS-East Modification would be contingent upon the consummation of the
Offering and a portion of the net proceeds available to the Company from the
Offering would be used to fund the Company's purchase obligations with respect
thereto. See "Use of Proceeds."
Joint Venture with Days Development Company. The Company has established a
joint venture (the "ALS-Carolina J.V.") with Days Development Company, L.C., a
Roanoke, Virginia based commercial real estate development and construction
company ("Days"), to develop, own and operate assisted living residences in
targeted market areas throughout North and South Carolina (the "ALS-Carolina
Territory").
Pursuant to the ALS-Carolina J.V., Days and the Company have agreed to
capitalize and form separate project entities during a five year development
term which commenced in November 1995 to develop, construct, open and operate
residences in the ALS-Carolina Territory, with the Company and Days owning and
funding a 51% and 49% equity interest, respectively, in such project entities.
During the development term, the Company and Days will develop residences
exclusively with each other within the ALS-Carolina Territory, and have agreed
not to independently engage in other competitive activities in such markets,
subject to certain limited exceptions. Days is providing development and
construction management services to the ALS-Carolina J.V. and the Company will
manage the ALS-Carolina residences, all pursuant to agreed upon arrangements.
The Company and Days are currently constructing a Wynwood residence in Chapel
Hill, North Carolina and a Clare Bridge residence in Cary, North Carolina and
developing three Clare Bridge residences and two Wynwood residences in the
ALS-Carolina Territory.
Days and the Company will share decision making with respect to the
development of ALS-Carolina residences. Decision making with respect to the
operation of ALS-Carolina residences is generally determined by majority vote,
and, consequently, the Company may make such decisions without Days' consent by
virtue of its majority equity interest. However, certain major business
decisions require joint approval of the Company and Days, such as any merger,
dissolution or reorganization of any project entity owning an ALS-Carolina
residence, any sale of an equity interest in any such project entity to persons
other than to the Company and Days, any distributions to the Company and Days
other than as contemplated and the election and appointment of officers of such
project entities. The Company has agreed to be solely responsible for any
guarantees required to secure permanent loan financing on an ALS-Carolina
residence after such residence first achieves 75% occupancy.
With respect to each ALS-Carolina residence, upon the second anniversary of
the opening of the residence, Days shall have the right to require the Company
to purchase (put option), and the Company shall have the option to acquire (call
option), Days's ownership interest in such residence. The purchase price payable
upon exercise of the put or call option is based on the appraised fair market
value of the residence at the time such option is exercised and is payable in
cash and/or shares of Common Stock.
The Company and Days are currently engaged in discussions regarding the
purchase by the Company of the equity interest held by Days in the Chapel Hill,
North Carolina residence as well as the restructuring of the ongoing joint
venture relationship in a manner similar to the Pending ALS-East Modification.
These discussions, however, are preliminary, no agreement in principle has yet
been reached and neither party has any binding obligation with respect thereto.
No assurance can be given that the Company will arrive at a satisfactory
understanding with Days with respect to the purchase of its interest in the
Chapel Hill residence or with respect to modifying the terms of the ALS-Carolina
J.V.
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Proposed Joint Venture with Pioneer Development Company. The Company has
entered into a non-binding Memorandum of Understanding (the "Memorandum") with
Pioneer Development Company, a Syracuse, New York based commercial real estate
development and construction company ("Pioneer"), which contemplates that the
Company and Pioneer will enter into a joint venture relationship to develop, own
and operate assisted living residences in targeted market areas throughout New
York, Massachusetts, Connecticut and Rhode Island (the "ALS-Northeast
Territory"). Although the Company and Pioneer are seeking to finalize the terms
of definitive agreements with respect to the joint venture contemplated by the
Memorandum (referred to herein as the "ALS-Northeast J.V."), no assurances can
be given that the Company and Pioneer will successfully complete these
negotiations and enter into definitive joint venture agreements.
The Memorandum contemplates that Pioneer and the Company will capitalize
and form separate project entities during a five-year development term to
develop, construct, open and operate residences in the ALS-Northeast Territory,
with the Company and Pioneer owning and funding a 51% and 49% equity interest,
respectively, in such project entities. During such development term, the
Company and Pioneer will develop residences exclusively with each other within
the ALS-Northeast Territory in the manner contemplated by the Memorandum, and
will agree not to independently engage in other competitive activities in such
markets, subject to certain limited exceptions. Pioneer will provide development
and construction management services to the ALS-Northeast J.V. and ALS will
manage the ALS-Northeast residences, all pursuant to agreed upon arrangements.
With respect to each ALS-Northeast residence, upon the first to occur of
(i) such residence achieving a 75% occupancy or (ii) the second anniversary of
the opening of such residence, Pioneer shall have the right to require the
Company to purchase Pioneer's interest in the residence (put option) and the
Company shall have an option to acquire (call option) Pioneer's interest in such
ALS-Northeast residence. The purchase price payable upon exercise of the put and
call options shall be based on the appraised fair market value of the residence
and shall be payable in cash and/or shares of Common Stock. In addition, the
Company has agreed to be solely responsible for any guarantees required to
secure financing on an ALS-Northeast residence commencing at the time such
residence first achieves 75% occupancy. Pioneer and the Company will share
decision making with respect to the development and operation of each
ALS-Northeast residence until such time as the put option for such residence
shall first become exercisable, at which time the Company, by virtue of its
majority equity interest, will have the right to make most major decisions
without Pioneer's consent.
In contemplation of the ALS-Northeast J.V. described in the Memorandum, in
May 1996 the Company issued to Assisted Living Equity Investors, an affiliate of
Pioneer, 322,706 shares of Common Stock at a price per share of $4.65 (the
"Pioneer Shares"). The Pioneer Shares may be rescinded by the Company, at its
election, if definitive agreements for ALS-Northeast are not executed by the
parties on or before July 9, 1996, at a rescission price equal to the purchase
price for the Pioneer Shares. The Company also has the right to rescind certain
of the Pioneer Shares at the price paid by Pioneer for such shares if approved
building sites for less than four new ALS-Northeast residences have been
acquired or applicable permits have not been obtained for the construction of
ALS-Northeast residences in 1996. The Pioneer Shares are, accordingly,
nontransferable so long as these rescission options are in effect.
Fee Development Relationship with The Damone Group. In connection with the
Michigan Restructuring, the Company and The Damone Group, Inc. ("Damone"), a
Troy, Michigan based commercial real estate development and construction firm
that developed and constructed the Company's Michigan residences and certain of
the Company's Florida residences, have agreed to an exclusive fee development
and construction arrangement with respect to future residences to be developed
and constructed by the Company in Michigan and Florida during the 36 month
period commencing in May 1996. Pursuant to this arrangement, Damone will provide
development and construction management services to the Company pursuant to
agreed upon terms; provided, however, the Company has the right to retain other
developers to provide construction services if Damone's guaranteed maximum price
bid for construction of a new residence exceeds 105% of the guaranteed maximum
price bid of such other developer.
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The Company has also granted to Damone a right to invest in the next two
Wynwood or Clare Bridge residences developed and constructed by the Company in
Michigan. Under this investment right, Damone is entitled to acquire an interest
in the limited partnerships to be formed to own such residences, which limited
partnership interest may represent up to a 49% equity interest in each of such
residences, subject, however, to the prior right of Margolick Financial Group
Limited Partnership described below. If Damone elects to invest in any such
residence, the Company will have the right to acquire the Damone interest (call
option) in such residence, and Damone shall have the right to require the
Company to acquire Damone's interest (put option) in such residence to the
Company, commencing six months following the opening of such residence. The
purchase price payable by the Company under such put and call options is a
formula price based on the fair market value of the residence, except that
during the first ten months that the call option is exercisable, the appraised
value upon exercise of the call option shall be based on the residence's
projected stabilized occupancy.
The Company granted a similar right to invest in the next three Wynwood or
Clare Bridge residences to be developed and constructed by the Company in
Michigan to Margolick Financial Group Limited Partnership of Farmington Hills,
Michigan ("MFG"), which served as placement agent for the private placement of
limited partnership interests in the ALS-Midwest Partnerships. Specifically, MFG
has the right to provide 49% of the equity capital for the next five Wynwood or
Clare Bridge residences constructed by the Company in Michigan prior to December
1998. If MFG or its designees elect to make any such investment, the limited
partnership interest acquired by MFG or its designees will be subject to put and
call options substantially identical to those described above with respect to
the investment right granted to Damone. The Company has also agreed to pay MFG a
fee for all WovenHearts residences developed and constructed by the Company in
Michigan prior to December 1998 equal to one percent (1%) of the capital project
cost of the next fifteen (15) such residences and one-half of one percent
( 1/2%) of the capital project cost of any such residences in excess of fifteen.
The Company estimates that it will construct in excess of 15 WovenHearts
residences in Michigan during this time period, which would result in amounts in
excess of $150,000 being payable to MFG.
Fee Development Relationship with Western Communities Corporation. The
Company has entered into a Pre-Construction Coordination Agreement (the "WCC
Agreement") with Western Communities Corporation, a Tempe, Arizona-based
construction and development firm ("WCC"), pursuant to which WCC is responsible
for (i) locating suitable sites in communities in Arizona designated by the
Company ("Project Areas") for development of the Company's assisted living and
dementia care residences; (ii) assisting the Company in its site selection
process; and (iii) obtaining all required governmental approvals within
specified time periods. WCC is entitled to a project development fee of $50,000
per project site and to reimbursement of 110% of costs and expenses. If WCC does
not obtain the required approvals within the specified time, it must refund the
development fee (but not costs and expenses) for that project site to the
Company; however, the obligation to refund such fee is limited to the first four
Project Areas designated by the Company in each of 1996 and 1997. Upon
acquisition of a project site, the parties intend to enter into a mutually
satisfactory construction management agreement pursuant to which WCC will manage
the construction of the facility. The WCC Agreement provides that, during the
term of the WCC Agreement, the Company and WCC will not enter into a similar
agreement with any other person in Arizona and that WCC will not locate or
develop sites for assisted living or dementia care residences in Arizona without
first offering such sites to the Company.
A Clare Bridge residence in Tempe, Arizona is designated as the first
development project under the WCC Agreement. WCC has this site under contract
and the Company is obligated to reimburse WCC for certain costs incurred,
including substitution of earnest money. The Company is also obligated to
designate at least three additional Project Areas during the term of the WCC
Agreement, which is two years unless terminated earlier pursuant to the terms
thereof.
INDUSTRY BACKGROUND
The long-term care industry encompasses a continuum of housing and personal
and health care options that are provided primarily to the elderly population.
Assisted living residences offer a viable alternative to nursing homes for
elderly individuals requiring less intensive medical services, especially
individuals who may
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require assistance due to physical or cognitive impairments. As an elderly
person's need for assistance increases, care in an assisted living residence,
where assistance with personal care, support services and health care services
are available, is often preferable to, and less costly than, home-based or
traditional nursing home care. Generally, assisted living residents have higher
acuity levels than those of residents of congregate and retirement living
centers but lower than those of residents in skilled nursing facilities.
The Company believes there will continue to be significant growth
opportunities in the long-term care market for providing health care and other
services to the elderly, especially the market for assisted living residences.
Factors contributing to this growth potential include the following:
Demographic and Social Trends. The target market for the Company's
services are persons generally 75 years and older, one of the fastest
growing segments of the U.S. population. According to a 1993 industry
report published by ALFAA and Coopers & Lybrand, the average age of male
and female residents of assisted living residences is 83 and 85 years of
age, respectively. According to the U.S. Census Bureau, the portion of the
U.S. population age 75 and older is expected to increase by 33.5%, from
approximately 13.0 million in 1990 to over 17.4 million, by the year 2000
and the number of persons age 85 and older, as a segment of the U.S.
population, is expected to increase 43%, from approximately 3.0 million to
over 4.3 million, by the year 2000.
The number of persons afflicted with Alzheimer's disease is also
expected to grow in the coming years. According to data published by the
Alzheimer's Association, this group will grow from the current 4 million to
14 million, or 250%, by the year 2040. As Alzheimer's disease and other
dementias are more likely to occur as a person ages, the increasing life
expectancy of Americans is expected to result in a greater number of
persons afflicted with Alzheimer's disease and other dementias in future
years.
In addition, as the number of two-income households has increased over
the last decade and as the geographical separation of elderly family
members from their adult children increases with the geographic mobility of
the U.S. population, many families that traditionally would have provided
the type of care and services offered by the Company to elderly family
members will increasingly not be in a position to do so. The Company
believes that these demographic and social trends will result in increased
demand for assisted living services, including dementia care residences,
and have resulted in a substantial increase in the supply of assisted
living beds since 1980 to satisfy a portion of this demand.
Cost Containment Pressures. In response to rapidly rising health care
costs, government and private-pay sources have adopted cost-containment
measures that have encouraged reduced hospital lengths of stays. The
federal government has acted to curtail increases in health care costs
under Medicare by limiting acute care hospital reimbursement for specific
services to pre-establish fixed amounts. Private insurers have begun to
limit reimbursement for medical services in general to predetermined
"reasonable charges," while managed care organizations, such as health
maintenance organizations, are attempting to limit hospitalization costs by
negotiating discounted rates for hospital services and by monitoring and
reducing hospital use. In response, hospitals are discharging patients
earlier and referring elderly who may be too sick or frail to maintain
complete independence, to skilled nursing facilities where the cost of
providing care is lower than in a hospital. As a result, an increased
number of discharged hospital patients are seeking skilled nursing facility
care. At the same time, skilled nursing facility operators continue to
focus on improving occupancy and expanding services to subacute patients
requiring higher levels of skilled nursing care. Given these cost
containment pressures, the Company believes that the less institutional,
less costly assisted living residences will be well positioned to serve an
increasing segment of the long-term care market.
Limited Supply of Long-Term Care Beds. Most of the states in which
the Company currently operates have enacted certificate of need ("CON") or
similar legislation which restricts the supply of licensed nursing facility
beds. These laws generally limit the construction of nursing facilities,
and the addition of beds or services to existing nursing facilities, and
hence tend to limit the available supply of traditional nursing home beds.
In addition, some long-term care facilities have started to convert
traditional nursing home beds into sub-acute beds. The Company also
believes that high construction costs and limits on government
reimbursement for the full cost of construction and start-up expenses also
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will constrain the growth and supply of traditional nursing home facilities
and beds. The Company expects that this tightening supply of nursing beds
will tend to shift to assisted living care residences certain elderly who
previously would have resided in a traditional nursing home facility and
has resulted in a substantial increase in the supply of assisted living
beds since 1980 to satisfy a portion of the demand for assisted living
services.
Quality of Life Advantages of Assisted Living. The Company believes
that, as potential residents and their family members become increasingly
more aware of the assisted living alternative, they will be attracted to
the more residential setting of assisted living residences, which promote
residents' privacy, individual choice and independence and encourage the
involvement of the resident's family, neighbors and friends. The Company
believes that assisted living care, which is based on a residential model
for the care of the frail elderly and others, offers quality of life
advantages over the institutional, medically oriented nursing home model.
These trends may result in increased competition within the assisted living
industry and may contribute to the establishment of competitive alternatives for
elderly care. See "-- Competition."
GOVERNMENT REGULATION
Health care is an area of extensive and frequent regulatory change. The
assisted living industry is relatively new and, accordingly, the manner and
extent to which it is regulated at the Federal and state levels is evolving. See
"Risk Factors -- Government Regulation."
The Company's assisted living residences are subject to regulation and
licensing by state and local health and social service agencies and other
regulatory authorities. Although regulatory requirements vary from state to
state, these requirements generally address, among other things: personnel
education, training and records; staffing levels; facility services, including
administration and assistance with self-administration of medication, and
limited nursing services; physical residence specifications; furnishing of
residence units; food and housekeeping services; emergency evacuation plans; and
resident rights and responsibilities. New Jersey also requires each assisted
living residence to obtain a CON prior to its opening. The Company's residences
are also subject to various state or local building codes and other ordinances,
including safety codes. Management anticipates that the states which are
establishing regulatory frameworks for assisted living residences will require
licensing of assisted living residences and will establish varying requirements
with respect to such licensing.
The Company has obtained all required licenses for each of its residences
and expects that it will obtain all required licenses for each new residence.
Each of the Company's licenses must be renewed annually. The Company has also
obtained a CON for each residence under construction or development in New
Jersey.
Like other health care facilities, assisted living residences are subject
to periodic survey or inspection by governmental authorities. From time to time
in the ordinary course of business, the Company receives deficiency reports. The
Company reviews such reports and seeks to take appropriate corrective action.
Although most inspection deficiencies are resolved through a plan of correction,
the reviewing agency typically is authorized to take action against a licensed
facility where deficiencies are noted in the inspection process. Such action may
include imposition of fines, imposition of a provisional or conditional license
or suspension or revocation of a license or other sanctions. Any failure by the
Company to comply with applicable requirements could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company believes that its residences are in substantial compliance with all
applicable regulatory requirements. No actions are currently pending against any
of the Company's residences nor have any of the Company's residences been cited
in the past for any significant non-compliance with regulatory requirements.
Pursuant to recently adopted Wisconsin legislation creating a new category
of residential care facilities for the elderly for state funding purposes,
effective as of July 1, 1996 only those assisted living facilities which are
comprised of independent apartments having an individual lockable entrance, a
full kitchen, an individual full bath and separate sleeping and living areas,
among other requirements, may be designated as an "assisted living facility" in
the State of Wisconsin. The Company's residences located in Wisconsin as well
as, the
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Company believes, numerous other assisted living residences operating within the
state, would not meet the definitional requirements of this statute. As
administrative guidelines for this legislation have not yet been finalized, its
scope and application are still uncertain. Pending the finalization of
administrative guidelines and further classification by the applicable state
agencies, the Company, as well as other assisted living operators in Wisconsin,
are reviewing their administrative, legislative and judicial options in
responding to this legislation. The Company believes that many operators will
not discontinue their use of the generic trade description "assisted living
facility" in doing business in the State of Wisconsin until such time as the
scope and enforceability of the legislation as well as the consequences of
noncompliance are clarified. If the Company is ultimately compelled to
discontinue any reference to the generic term "assisted living" in its sales and
marketing materials for its Wisconsin residences, such compliance could have a
material adverse effect on the Company's business, results of operation or
financial condition.
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
health care items or services. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between health
care providers and sources of patient referral. Similar state laws vary from
state to state, are sometimes vague and seldom have been interpreted by courts
or regulatory agencies. Violation of these laws can result in loss of licensure,
civil and criminal penalties, and exclusion of health care providers or
suppliers from participation in (i.e., furnishing covered items or services to
beneficiaries of) the Medicare and Medicaid programs. Although the Company
receives only a small portion of its total revenues from certain Medicaid waiver
programs and is otherwise not a Medicare or Medicaid provider or supplier, it is
subject to these laws because (i) the state laws typically apply regardless of
whether Medicare or Medicaid payments are at issue and (ii) as required under
some state licensure laws, and for the convenience of its residents, some of the
Company's assisted living residences maintain contracts with certain health care
providers and practitioners, including pharmacies, visiting nurse organizations
and hospices, through which the health care providers made their health care
items or services (some of which may be covered by Medicare or Medicaid)
available to the Company's residents. There can be no assurance that such laws
will be interpreted in a manner consistent with the practices of the Company.
Management is not aware of any non-compliance by the Company with
applicable regulatory requirements that would have a material adverse effect on
the Company's financial condition or results of operations.
COMPETITION
The long-term care industry is highly competitive and, given the relatively
low barriers to entry and continuing health care cost containment pressures, the
Company expects that the assisted living segment of such industry will become
increasingly competitive in the future. The Company competes with other
providers of elderly residential care on the basis of the breadth and quality of
its services, the quality of its residences and, with respect to private pay
patients or residents, price. The Company also competes with other providers of
long-term care in the acquisition and development of additional residences. The
Company's current and potential competitors include national, regional and local
operators of long-term care residences, acute care hospitals and rehabilitation
hospitals, extended care centers, assisted/independent living centers,
retirement communities, home health agencies and similar institutions, many of
which have significantly greater financial and other resources than the Company.
In addition, the Company competes with a number of tax-exempt nonprofit
organizations which can finance capital expenditures on a tax-exempt basis or
receive charitable contributions unavailable to the Company and which are
generally exempt from income tax. While the Company's competitive position
varies from market to market, the Company believes that it competes favorably in
substantially all of the markets in which it operates based on key competitive
factors such as the breadth and quality of services offered, residence quality,
recruitment and retention of qualified health care personnel and reputation
among local referral sources. See "Risk Factors -- Competition."
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The Company also competes with other providers of long-term care with
respect to attracting and retaining qualified and skilled personnel. In recent
years the health care industry has experienced a shortage of qualified health
care professionals. While the Company has been able to retain the services of an
adequate number of professionals to staff its residences appropriately and
maintain its standards of quality care, there can be no assurance that continued
shortages will not affect the ability of the Company to maintain the desired
staffing levels. See "Risk Factors -- Residence Management, Staffing and Labor
Costs."
INSURANCE
The provision of personal and health care services entails an inherent risk
of liability. Compared to more institutional long-term care facilities, assisted
living residences (especially its dementia care residences) of the type operated
by the Company offer residents a greater degree of independence in their daily
lives. This increased level of independence, however, may subject the resident
and the Company to certain risks that would be reduced in more institutionalized
settings. The Company currently maintains liability insurance intended to cover
such claims which it believes is adequate based on the nature of the risks, its
historical experience and industry standards. See "Risk Factors -- Liability and
Insurance."
TRADEMARKS
Crossings and WovenHearts are registered service marks of the Company and
the Company claims service mark protection in the marks Wynwood, Hamilton
House(SM) and Clare Bridge.
EMPLOYEES
At March 31, 1996, the Company employed 808 full-time employees and 690
part-time employees. The Company believes it maintains good relationships with
its employees. None of the Company's employees are represented by a collective
bargaining group.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than ordinary
routine proceedings incidental to its business. The Company does not expect
these legal proceedings, either individually or in the aggregate, to have a
material adverse effect on the Company's business, results of operations or
liquidity.
HISTORY AND ORGANIZATION
THE COMPANY AND ITS PREDECESSORS
The Company was organized in December 1993, and was initially capitalized
by Evergreen and CLC. Evergreen, then a NYSE-listed operator of long-term care
facilities, merged with GranCare in July 1995. At the time of the Company's
organization, CLC was owned 25% by William F. Lasky, the Company's President and
Chief Executive Officer, and 75% by two other shareholders. Pursuant to the
terms of an acquisition agreement among Evergreen, CLC and Alternative Living
Services, a Wisconsin general partnership owned 50% by Mr. Lasky and 50% by two
other individuals (the "ALS Partnership"), the Company was initially capitalized
with (i) $2.7 million in cash contributed by Evergreen in exchange for a 51%
interest in the Company and (ii) certain assets and contractual rights owned by
CLC which were contributed in exchange for the remaining 49% interest in the
Company. Immediately prior to the consummation of the transaction (i) Assisted
Care, Inc. ("Assisted Care"), a corporation formed by the shareholders of CLC in
1989 to develop assisted living facilities outside of the State of Wisconsin,
was merged with and into CLC and (ii) the ALS Partnership conveyed certain of
its assets relating to its assisted living business to CLC.
The Company's executive offices are located at 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53003, and its telephone number is (414)
789-9565.
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1995 RECAPITALIZATION
In May 1995, the Company consummated a recapitalization transaction (the
"1995 Recapitalization") pursuant to which it sold 4,302,994 shares of Common
Stock to Alternative Living Investors, L.L.C. ("ALI"), a newly formed limited
liability investment company, for a total of $20 million and a portion of the
$19.0 million net proceeds from such sale were used (i) to repurchase shares of
the Company held by a former stockholder of CLC and (ii) to repay certain loans
and advances made to the Company by this former stockholder and Evergreen. See
"Certain Relationships and Related Transactions." ALI was formed as an
investment vehicle for several investors, the majority of whom was unaffiliated
with the Company, who participated in the 1995 Recapitalization, and ALI will be
liquidated following the Offering. Certain affiliates of the Company serve as
managers of, and hold member interests in, ALI. See "Principal and Selling
Stockholders."
ACQUISITION OF HEARTLAND RETIREMENT SERVICES, INC.
Effective on January 1, 1996, the Company acquired all of the outstanding
capital stock of Heartland in consideration of the payment to Heartland's
shareholders of $5.5 million and the issuance of 261,424 shares of Common Stock
or an aggregate consideration of $7.2 million (for accounting purposes). In
connection with the Heartland acquisition, the Company borrowed approximately
$8.7 million pursuant to the Heartland Bridge Financing. See "Use of Proceeds,"
"Management's Discussion and Analysis -- Liquidity and Capital Resources" and
"Certain Relationships and Related Transactions."
CROSSINGS MERGER
On May 24, 1996, the Company and Crossings consummated the Crossings Merger
pursuant to which the businesses and operations of ALS and Crossings were
combined. Pursuant to the Crossings Merger, on May 24, 1996 Crossings was merged
with and into ALS and all of the shares of Crossings capital stock outstanding
prior to the Crossings Merger were converted into an aggregate of 2,007,049
shares of ALS Common Stock or an aggregate consideration of $9.3 million (for
accounting purposes). Following the Crossings Merger, the ALS-Midwest
Restructuring and the Recent Equity Transactions, there are 9,523,349 shares of
Common Stock outstanding, of which approximately 21% are held by the former
stockholders of Crossings.
Upon consummation of the Crossings Merger, Crossings' three senior
executive officers were elected directors or executive officers of ALS.
Specifically, Richard W. Boehlke, formerly Crossings' President and Chief
Executive Officer, was elected to the Company's Board of Directors as its Vice
Chairman. D. Lee Field, formerly Crossings' Executive Vice President and Chief
Operating Officer, became a Senior Vice President of ALS, and David M. Boitano,
formerly Vice President and Chief Financial Officer of Crossings became a Vice
President of ALS. As a condition to the Crossings Merger, the Company entered
into employment or services agreements with each of Messrs. Boehlke, Field and
Boitano. Pursuant to the services agreement with Mr. Boehlke, the Company has
agreed to nominate Mr. Boehlke to serve as a member of the Board of Directors of
the Company during the three year term of the services agreement. See
"Management -- Executive Compensation -- Employment and Services Agreements."
Organization and Recent Restructuring of Crossings. Crossings was
organized in December 1995 in connection with a restructuring of the assisted
living business of Crossings International Corporation ("Old Crossings"), which
was organized in 1984. The Crossings restructuring, which was effected in
December 1995 and January 1996, involved (i) the roll-up into Old Crossings of
partnerships formerly controlled by Old Crossings and its affiliates, each of
which owned one residence operated by Old Crossings (collectively, "Crossings
Partnership Roll-Up"), (ii) the sale of twelve residences by Old Crossings to a
REIT and the simultaneous leaseback of such residences by Crossings and the
refinancing of an additional residence owned by an affiliated partnership of Old
Crossings and operated by Old Crossings (collectively, the "Crossings REIT
Transactions"), (iii) the issuance of Series A preferred stock of Old Crossings
to CCI, as agent for certain of its clients, in exchange for satisfaction of
indebtedness of Old Crossings, (iv) the exchange by the Old Crossings
shareholders of the common and Series A preferred stock of Old Crossings for
equal numbers
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of shares of common and Series A preferred stock of Crossings, (v) the issuance
of Crossings Series B preferred stock to CCI in exchange for cash and (vi) the
conveyance by Old Crossings to CCI of an owned residence and the simultaneous
lease of such residence by CCI to Old Crossings pursuant to a lease expiring
upon the first to occur of three years or the achievement of certain minimum
occupancy thresholds. Upon completion of the restructuring transactions, Old
Crossings became a wholly-owned subsidiary of Crossings, Crossings became the
lessee and operator of thirteen of the facilities formerly operated by Old
Crossings, and CCI became the holder of Crossings' Series A and Series B
preferred stock. Prior to the Crossings Merger, CCI, as the holder of the
Crossings Series A and Series B preferred stock, exchanged all of its shares of
Crossings preferred stock for shares of Crossings common stock at an exchange
ratio determined by CCI and Crossings.
Crossings Partnership Roll-up Transactions. On December 20, 1995, the
partners (including Messrs. Boehlke, Boitano and Field) of three partnerships
that owned Crossings' Courtyard, Atrium and Ridgepoint residences, all of which
were partially-owned by Old Crossings, conveyed their partnership interests to
Old Crossings and, as a result, Old Crossings held all of the partnership
interests of such partnerships. As a result of these transactions, Old Crossings
assumed the contingent liabilities for the respective partnerships' indebtedness
of each former partner, and made aggregate cash payments of $1.2 million,
$125,000 and $125,000 to Messrs. Boehlke, Field and Boitano, respectively. CCI
conveyed to Old Crossings an 80% partnership interest in the partnership that
owned Crossings' McMinnville, Oregon residence, in return for the assumption by
Old Crossings of CCI's contingent liability for the partnership's indebtedness
and 48,800 shares of Old Crossings Series A preferred stock.
Crossings REIT Transactions. Old Crossings sold twelve of its assisted
living and senior living residences to Nationwide Health Properties, Inc.
("NHP") for aggregate cash consideration of $45,319,273, and assumption of
$9,303,727 of indebtedness to the Oregon Housing Authority related to the
Albany, Forest Grove and McMinnville, Oregon residences. Old Crossings paid
certain costs and expenses from the cash proceeds from NHP in connection with
the sale of its residences. The residences were sold free and clear of all liens
and material encumbrances, except those securing the assumed indebtedness.
Crossings has entered into individual operating leases with NHP with respect to
each of the residences sold to NHP by Old Crossings. These operating leases
include initial terms of 17 to 19 years and three renewal terms of 10 years
each. The annual rental payments provide for an aggregate minimum rentals of
$5,438,000. Additional rental amounts, if any, are based on increases in
revenues of the leased residences. In addition, NHP made a mortgage loan in the
amount of $6,557,000 to 2010 Union Limited Partnership, a Washington limited
partnership ("2010 Union L.P."), to refinance the secured indebtedness of 2010
Union L.P. This mortgage loan bears interest at a rate of 9.95% per annum and is
due and payable on December 15, 2005 and is otherwise on terms substantially
similar to those of the NHP operating leases. Mr. Boehlke holds a 99% general
partnership interest in 2010 Union L.P. and Old Crossings holds the remaining 1%
limited partnership interest. The proceeds of the NHP loan exceeded the existing
secured indebtedness of 2010 Union L.P., and Mr. Boehlke received a distribution
from 2010 Union L.P. of $250,000 from such proceeds. Crossings has entered into
an operating lease (with terms substantially similar to those of the NHP
operating leases) with 2010 Union L.P. to operate its Union Park at Allenmore
residence, and that lease has been assigned to NHP as security for its loan to
2010 Union L.P.
ACQUISITION OF REMAINING EQUITY INTERESTS IN ALS-MIDWEST
On May 24, 1996, pursuant to the ALS-Midwest Restructuring, the Company
acquired the remaining equity interests not owned by the Company in the five
residences operated by the Company in Michigan. The ALS-Midwest residences are
each owned by a separate Michigan limited partnership, the general partner of
which is Alternative Living Services -- Midwest Inc. ("ALS-Midwest Inc."). Prior
to the ALS-Midwest Restructuring, (i) ALS and Damone each owned 50% of the
common stock of ALS-Midwest, and (ii) the limited partnership interests in the
ALS-Midwest limited partnerships were held by ALS and a small number of
unaffiliated investors (the "ALS-Midwest Investors"). See "Business--Joint
Ventures and Strategic Alliances."
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The Company acquired the limited partnership interests in ALS-Midwest held
by the ALS-Midwest Investors for aggregate consideration of 115,024 shares of
Common Stock and promissory notes in the aggregate principal amount of $2.9
million or an aggregate consideration of $6.2 million (for accounting purposes).
These promissory notes are due and payable on January 31, 1997 and bear interest
at the rate of 8% per annum. The Company acquired 100% of the outstanding stock
of ALS-Midwest Inc. pursuant to a merger transaction whereby the shareholders of
ALS-Midwest other than ALS received, in exchange for their shares of ALS-Midwest
Inc., $300,000 in cash and 57,512 shares of the Common Stock or an aggregate
consideration of $2.9 million (for accounting purposes). Contemporaneously with
the merger transaction, the Company refunded advances made to the ALS-Midwest
Partnerships by affiliates of Damone by a cash payment of $700,000 and delivery
of a promissory note in the amount of $1.4 million. This promissory note bears
interest at the rate of 9% and is due and payable in September 1996. Pursuant to
the ALS-Midwest Restructuring, ALS and Damone established a fee development
relationship relating to the development and construction of future ALS
residences in Michigan and Florida. See "Use of Proceeds" and "Business -- Joint
Ventures and Strategic Alliances -- Fee Development Relationship with The Damone
Group."
RECENT EQUITY TRANSACTIONS
On May 24, 1996, the Company raised $2.0 million of equity capital through
the private placement of 430,281 shares of Common Stock. See
"Management -- Executive Compensation -- Employment and Services
Agreements -- Services Agreement with Petty, Kneen & Company" and
"Business -- Joint Ventures and Strategic Alliances -- Proposed Joint Venture
with Pioneer Development Company."
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information concerning the executive officers
and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
William G. Petty, Jr....................... 50 Chairman of the Board
William F. Lasky........................... 41 President, Chief Executive Officer and
Richard W. Boehlke......................... 48 Vice Chairman of the Board
John W. Kneen.............................. 43 Vice President, Chief Financial Officer,
Treasurer and Secretary
D. Lee Field............................... 36 Senior Vice President
G. Faye Godwin............................. 54 Senior Vice President
Douglas A. Hennig.......................... 38 Senior Vice President
Thomas E. Komula........................... 41 Senior Vice President
Mary Lou Austin............................ 40 Vice President and Controller
David M. Boitano........................... 35 Vice President
David J. Hoff.............................. 30 Vice President, Construction and
Development
Pamela Edwards Klein....................... 41 Vice President, Corporate Development
Gene E. Burleson........................... 54 Director
Robert Haveman............................. 48 Director
Ronald G. Kenny............................ 40 Director
Jerry L. Tubergen.......................... 42 Director
</TABLE>
William G. Petty, Jr. has served as Chairman of the Board since December
1993 and served as Chief Executive Officer of the Company from December 1993 to
April 1996. Mr. Petty has served as the Vice Chairman of GranCare since July
1995. Mr. Petty also served as the Chairman of the Board, Chief Executive
Officer and President of Evergreen from June 1993 to July 1995 and as Chairman
of the Board, Chief Executive Officer and President of National Heritage, Inc.,
predecessor to Evergreen, from October 1992 to June 1993. Mr. Petty has been a
Managing Director of Omega Capital, Ltd., a private health care investment fund
("Omega Capital"), since 1986. Mr. Petty also served as a member of the Board of
Directors of Forum Group, Inc. ("Forum") and as one of three members of Forum's
Executive Committee from June 1993 to November 1994.
William F. Lasky has served as Chief Executive Officer of the Company since
April 1996 and as President of the Company since December 1993. He served as the
Managing Partner of the ALS Partnership from 1981 to December 1993 and as the
President of CLC from 1989 to December 1993. The ALS Partnership and CLC
developed and operated assisted living residences, six of which are currently
managed by the Company. Mr. Lasky served as a regional director of Unicare
Health Residences, a national operator of nursing homes, from 1981 to 1985. Mr.
Lasky is a member of the Board of Directors and the Chairman of ALFAA and is a
licensed nursing home administrator.
Richard W. Boehlke has served as the Vice Chairman of the Board of the
Company since May 1996. Mr. Boehlke served as President and Chief Executive
Officer of Crossings, which he founded in 1984, until Crossings merged with the
Company in May 1996. From 1980 to 1984, Mr. Boehlke was employed by National
Medical Enterprises, Inc. as Vice President -- Development responsible for all
new development within its long-term care group of companies.
John W. Kneen has served as the Chief Financial Officer and Treasurer of
the Company since April 1996 and as Vice President and Secretary of the Company
since December 1993. He served as Vice President of Corporate Development and
Assistant Secretary of Evergreen from December 1993 to July 1995, and as Vice
President and Chief Financial Officer of Evergreen Housing Partners, Inc. from
1991 to 1993. Mr. Kneen served as President of Premier Lifestyles, Inc., a
senior housing management company, from 1989 to 1991. Mr. Kneen is a Certified
Public Accountant.
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D. Lee Field has served as Senior Vice President of the Company since May
1996. Prior to joining the Company, he was employed from 1984 by Crossings,
where he held a succession of executive positions including Executive Vice
President and Chief Operating Officer from 1993 until the Crossings Merger, and
Vice President of Operations from 1989 to 1993. Mr. Field is a member of the
Board of Directors for the American Senior Housing Association and a member of
the Task Force for Assisted Living of the American Health Care Association.
G. Faye Godwin has served as Senior Vice President of the Company since
April 1996. From May 1995 to April 1996, Ms. Godwin served as the Vice President
of Operations of the Company. Previously, Ms. Godwin served as the Chief
Operating Officer of Standish Care, Inc., a publicly-held assisted living
company, from February 1994 to May 1995. From April 1989 to January 1994, Ms.
Godwin was Senior Vice President of Operations at Sunrise Assisted Living, an
assisted living company.
Douglas A. Hennig has served as Senior Vice President of the Company since
January 1996. From January 1993 to January 1996, Mr. Hennig served as the
President of Heartland. From 1991 to 1993, he was President of Hennig &
Associates, a consulting firm in Madison, Wisconsin involved in retirement
housing consulting and the development and management of assisted living
residences. From 1986 to 1991, he was Vice President of the Meridian Group in
Madison, Wisconsin, a market research company, with responsibility for market
research, marketing, operations management and development consulting for
retirement housing and assisted living.
Thomas E. Komula has served as a Senior Vice President of the Company since
July 1996. Prior to joining the Company, he served as the Chief Financial
Officer of MedRehab, Inc., a privately-held rehabilitation company, from March
1994 to April 1996. From September 1993 to March 1994, he was a partner at
Arthur Andersen & Co., and from September 1991 to September 1993, he was a
Senior Manager with Arthur Andersen & Co. Mr. Komula is a Certified Public
Accountant. The Company intends to appoint Mr. Komula as its Chief Financial
Officer following the completion of the Offering.
Mary Lou Austin has served as Vice President of the Company since April
1996 and as Controller since September 1995. Prior to joining the Company, she
was employed as Controller of the Social Development Commission of Milwaukee
from 1993 to 1995. From 1990 to 1993, Ms. Austin was Assistant Controller at
Time Insurance Company, a health insurance company. Ms. Austin is a Certified
Public Accountant.
David M. Boitano has served as Vice President of the Company since May
1996. Prior to joining the Company, he was employed from 1994 as Vice President
and Chief Financial Officer of Crossings. From 1986 to 1994, Mr. Boitano served
as Vice President and Controller of Exvere, Inc., a merger and acquisition
consulting firm, and of Franklin Holdings, Ltd., a multi-state holding company.
From 1983 to 1985, Mr. Boitano was employed by Ernst & Young. Mr. Boitano is a
Certified Public Accountant.
David J. Hoff has served as Vice President, Construction and Development,
since April 1996. From February 1995 to April 1996, Mr. Hoff served as the
Director of Construction and Development of the Company. From 1990 to 1995, Mr.
Hoff owned and operated a subcontracting firm which provided building
inspection, zoning administration and land planning services to the Town of
Brookfield, Wisconsin. Prior to 1990, Mr. Hoff was employed as an architect by
an architectural firm located in Milwaukee, Wisconsin which specialized in
institutional and retirement health care design. Mr. Hoff is a Registered
Architect and Certified Building Inspector in the State of Wisconsin.
Pamela Edwards Klein has served as Vice President of Corporate Development
since August 1995. Previously, Ms. Klein served as the Director of Market
Development for the Company from December 1993 to August 1995 and for the ALS
Partnership from March 1992 to December 1993. Ms. Klein was principal of her own
marketing consulting business from January 1991 to March 1992. From December
1987 to August 1989, Ms. Klein was a grants administrator with the Medical
College of Wisconsin.
Gene E. Burleson has served as a director of the Company since July 1995.
He became Chairman of the Board of GranCare in January 1994 and has served as
Chief Executive Officer of GranCare since December 1990. Previously, Mr.
Burleson served as President of American Medical International, Inc., a provider
of health care services, where from early 1988 to March 1989 he served as
President while continuing his role as
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Chief Operating Officer, a position he assumed in 1986. Prior to serving as
President of the parent company, Mr. Burleson served for nine years as President
and Chief Executive Officer of American Medical International -- European
Operations. Mr. Burleson currently serves on the board of directors of Deckers
Outdoor Corporation and Integrated Voice Solutions, Inc.
Robert Haveman has served as a director of the Company since May 1995. He
has served as the Secretary/Treasurer of the Prince Corporation, an automotive
interior trim manufacturer, since 1987 and served as a director of Evergreen
from June 1993 to July 1995.
Ronald G. Kenny has served as a director of the Company since May 1995. He
has served as Vice President-Finance of Huizenga Capital Management, Inc., a
privately held investment management company, since 1990. Mr. Kenny has served
as a director of GranCare since July 1995. Mr. Kenny also served as a director
of Evergreen from June 1993 to July 1995 and as director of National Heritage,
Inc. from October 1992 to June 1993.
Jerry L. Tubergen has served as a director of the Company since May 1995.
He has served as President and Chief Operating Officer of RDV Corporation, a
private financial management firm, since its formation in 1991. Mr. Tubergen
served as Managing Partner of Deloitte & Touche in Grand Rapids, Michigan from
1987 to 1991. Mr. Tubergen also serves as a director of the Orlando Magic, Ltd.,
a NBA franchise, and Genmar Holdings, Inc., a manufacturer and marketer of
motorized pleasure boats.
There are no family relationships among any of the executive officers or
directors of the Company. Each director of the Company other than Mr. Boehlke
was elected to the Board of Directors of the Company pursuant to the terms of
the Company's Amended and Restated Stockholders' Agreement dated as of January
15, 1996, which agreement will terminate and be of no further force and effect
upon the consummation of the Offering. Pursuant to the merger agreement entered
into by the Company and Crossings in connection with the Crossings Merger, Mr.
Boehlke was elected to the Board of Directors as its Vice Chairman and Messrs.
Field and Boitano were elected as executive officers of the Company. Pursuant to
a services agreement between Mr. Boehlke and the Company, the Company has agreed
to nominate Mr. Boehlke as a director of the Company during the three year term
of the services agreement. See "History and Organization -- Crossings Merger"
and "Management -- Executive Compensation -- Employment and Services Agreement."
No other arrangement or understanding exists between any executive officer or
any other person pursuant to which any executive officer was selected as an
executive officer of the Company. Subject to the terms of employment agreements,
executive officers of the Company are elected or appointed by the Board of
Directors and hold office until their successors are elected or until their
death, resignation or removal.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an audit committee (the "Audit
Committee") and a compensation committee (the "Compensation Committee"). The
Company does not have a nominating committee.
The Audit Committee is comprised of Messrs. Burleson, Haveman and Tubergen
with Mr. Tubergen serving as Chairman. The Audit Committee convenes when deemed
appropriate or necessary by its members. The primary functions of the Audit
Committee are to: (i) recommend an accounting firm to be appointed by the
Company as its independent auditors; (ii) consult with the Company's independent
auditors regarding the audit plan; and (iii) determine that management places no
restrictions on the scope or implementation of the independent auditors'
examination.
The Compensation Committee is comprised of Messrs. Boehlke, Kenny, Petty
and Tubergen, with Mr. Kenny serving as Chairman. The Compensation Committee:
(i) sets and approves the compensation (including salary, deferred compensation,
bonuses, incentive compensation and all other types of compensation or
remuneration) of the Company's executive officers; and (ii) administers the
Company's 1995 Plan.
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EXECUTIVE COMPENSATION
Compensation of Directors. Directors of the Company who are not parties to
services agreements with the Company and are not employees of the Company are
entitled to an annual retainer of $12,000, payable in quarterly installments. In
lieu of their retainer for the twelve month period commencing June 1, 1995, each
of Messrs. Burleson, Haveman, Kenny and Tubergen were granted a non-qualified
stock option pursuant to the 1995 Plan to purchase up to 7,745 shares of the
Common Stock at an exercise price of $4.65 per share, such options becoming
exercisable on June 1, 1996 and expiring on June 1, 2005. In lieu of their
annual retainer for the 36 month period commencing June 1, 1996, each of Messrs.
Burleson, Haveman, Kenny and Tubergen were granted a non-qualified stock option
pursuant to the 1995 Plan to purchase up to 12,422 shares of the Common Stock at
an exercise price of $8.69 per share, such options vesting one-third on June 1,
1997, one-third on June 1, 1998 and one-third on June 1, 1999, and expiring on
May 8, 2006. Directors are also entitled to reimbursement of reasonable
out-of-pocket expenses incurred by them in attending meetings of the Board of
Directors. See also "-- Employment and Services Agreement."
Summary of Compensation of Executive Officers. The following table sets
forth information as to all compensation paid or accrued during the last fiscal
year to the Company's chief executive officer and to each other executive
officer of the Company whose total salary and bonus exceeded $100,000 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SARS
- ------------------------------------------- ---- -------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
William G. Petty, Jr....................... 1995 $ -- -- $48,650 90,628
Chairman of the Board and
Chief Executive Officer(1)
William F. Lasky........................... 1995 $166,600 $30,000 -- 128,691
President and Director(2)
</TABLE>
- ---------------
(1) Mr. Petty is not an employee and was not an employee of the Company during
1995. Mr. Petty served as the Company's Chief Executive Officer until May
1996. The Company paid Mr. Petty fees aggregating $48,650 for his services
during the year ended December 31, 1995.
(2) Mr. Lasky became the Company's Chief Executive Officer in May 1996.
Stock Options Granted During Fiscal Year Ended December 31, 1995. The
following table sets forth information regarding the grant of stock options to
each of the Named Executive Officers. Neither of the Named Executive Officers
received SARs.
STOCK OPTION GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL 1995 ($/SHARE) DATE 5% 10%
- -------------------------- ------------ ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William G. Petty,
Jr.(1).................. 90,628(1) 26.2% $4.65 6/27/2005 $264,922 $671,364
William F. Lasky.......... 128,691 37.2% $4.65 6/27/2005 $376,189 $953,337
</TABLE>
- ---------------
(1) These options were granted subsequent to December 31, 1995 but were
committed to be granted by the Company in 1995 in connection with services
performed by Mr. Petty during 1995. These options vest at a rate of 25% per
year and first become exercisable on June 28, 1996.
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<PAGE> 68
STOCK OPTION YEAR-END VALUES
The following table sets forth information with respect to the number and
value of unexercised options held as of the end of the last fiscal year for each
of the Named Executive Officers. Neither of the Named Executive Officers
exercised stock options during 1995 or holds SARs.
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END (#) AT FY-END ($)(2)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William G. Petty, Jr. ................... -- 90,628(1) $ -- $ 0
William F. Lasky......................... 54,377 128,691 0 0
</TABLE>
- ---------------
(1) Includes options granted subsequent to December 31, 1995 but which were
committed to be granted by the Company in 1995 in connection with service
performed during 1995.
(2) There was no public trading market for the Common Stock at December 31,
1995. These values have been calculated based on the value of the Common
Stock determined by the Company's Board of Directors as of December 31,
1995. Based on assumed initial public offering price of $16.00 per share,
the value of Mr. Petty's options, all of which were unexercisable, was
$1,028,628 and the value of Mr. Lasky's options, 54,377 and 128,691 of which
were exercisable and unexercisable, respectively, was $617,179 and
$1,460,643, respectively.
EMPLOYMENT AND SERVICES AGREEMENTS
Services Agreement with Petty, Kneen & Company. The Company has entered
into a services agreement with Petty, Kneen & Company ("PK & Co."), a limited
liability company controlled by Messrs. Petty and Kneen. Pursuant to the
services agreement, PK & Co. has agreed to provide management, financial and
strategic planning services to the Company on a fee basis, including without
limitation, the services of Mr. Petty as Chairman and the services of Mr. Kneen
as Chief Financial Officer of the Company. The Company has agreed to pay an
annual fee of $320,000 to PK & Co. for such services; provided, however, such
fee shall be reduced to $200,000 if Mr. Kneen is not called upon to serve as
Chief Financial Officer of the Company. Pursuant to the services agreement, the
Company also has agreed to reimburse PK & Co. for certain out of pocket
expenses. In consideration of this service agreement, each of Messrs. Petty and
Kneen have agreed to provide the Company with a right of first refusal with
respect to certain acquisition opportunities relating to assisted living
residences or operations which come to their attention during the term of the
services agreement. This services agreement expires on April 30, 1998 and may be
extended on a quarter to quarter basis thereafter, subject to earlier
termination at the election of the Company upon 30 days notice. In consideration
of this services agreement, PK & Co. purchased 107,575 shares of Common Stock in
May 1996 at a price per share of $4.65.
Services Agreement with Richard W. Boehlke. As a condition of and
effective upon the Crossings Merger, the Company entered into a services
agreement with Mr. Boehlke, formerly Crossings' President and Chief Executive
Officer, pursuant to which he has agreed to provide general, policy-making
services to the Company and to undertake special projects designated from time
to time by the Board of Directors for the three year period ending May 1999. In
consideration of these services, the Company has agreed to pay Mr. Boehlke
$200,000 per year and has agreed to provide Mr. Boehlke certain other benefits,
including use of a company car and life and medical insurance coverage similar
to that provided to the Company's executive officers. During the term of the
agreement, the Company has agreed to nominate Mr. Boehlke to serve as a director
of the Company.
Employment Agreement with William F. Lasky. The Company has entered into
an employment agreement with Mr. Lasky with a term that expires on May 31, 1997,
unless earlier terminated pursuant to the terms thereof. The agreement is
automatically renewed for additional consecutive one-year terms unless timely
notice of nonrenewal is given by either the Company or Mr. Lasky. The employment
agreement provides that Mr. Lasky shall receive a base salary in an amount
determined by the Company's Board of Directors; provided, however, that in no
event may such base salary be less than $150,000. In addition, the
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<PAGE> 69
employment agreement provides that Mr. Lasky is entitled to receive incentive
bonuses of up to 35% of his base salary if the Company's earnings before
interest, taxes and depreciation are within ten percent of the earnings targeted
in the Company's annual business plan approved by the Board of Directors.
Pursuant to the employment agreement, the Company loaned $150,000 to Mr. Lasky
in June 1995, which loan is repayable in three annual installments of $50,000
beginning on June 30, 1996 plus interest at 6% per annum; provided, however,
that if Mr. Lasky is employed by the Company on any such repayment date, the
principal and interest then due shall be forgiven by the Company. The employment
agreement also provides for the granting of certain stock options described
above and certain other benefits typical in employment agreements with a senior
executive officer. Finally, the employment agreement provides that Mr. Lasky
will not disclose certain proprietary information belonging to the Company or
otherwise compete with the Company for a period of eighteen months following his
termination of employment except where such termination is by the Company
without "cause."
Employment Agreements with G. Faye Godwin, Douglas A. Hennig and Thomas E.
Komula. The Company has entered into employment agreements with each of Ms.
Godwin and Messrs. Hennig and Komula. These employment agreements are annual
agreements that automatically renew for consecutive one year terms unless timely
notice of nonrenewal is given either by the Company or the applicable officer.
These agreements provide that these officers shall receive a base salary in an
amount determined by the Company's Board of Directors, provided, however, that
in no event may such base salary be less than $110,000 in the case of Ms.
Godwin, $130,000 in the case of Mr. Hennig and $170,000 in the case of Mr.
Komula. Pursuant to these agreements, Ms. Godwin and Messrs. Hennig and Komula
are entitled to receive incentive bonuses payable, at the sole discretion of the
Board of Directors, if certain target earnings are achieved. These employment
agreements also provide for the granting of certain stock options and certain
other benefits typical in employment agreements with senior executive officers.
Pursuant to these employment agreements, each of Ms. Godwin and Messrs. Hennig
and Komula have agreed not to disclose certain proprietary information belonging
to the Company or otherwise to compete with the Company for a period of 12
months in the cases of Ms. Godwin and Mr. Komula and 18 months in the case of
Mr. Hennig following their respective termination of employment, except where
such termination is by the Company without "cause."
The employment agreement with Mr. Hennig was entered in connection with the
acquisition of Heartland (of which Mr. Hennig was the founder and president) and
afforded Mr. Hennig the right to purchase 53,525 shares of Common Stock at a per
share price of $4.65 (the "Hennig Stock"). The Hennig Stock is nontransferable
and is subject to the Company's right to repurchase such shares at the price
paid by Mr. Hennig for the Hennig Stock until such time as such shares become
vested, with vesting occurring 50% on the first anniversary of Mr. Hennig's
employment by the Company, 30% on the second anniversary and 20% on the third
anniversary. Pursuant to the employment agreement with Mr. Hennig, Mr. Hennig
also has the right to purchase an additional 41,589 shares of Common Stock at a
per share price of $7.21 at any time during the 30 day period commencing
December 1, 1996.
In addition, pursuant to his employment agreement, Mr. Hennig is entitled
to borrow up to $100,000 from the Company during the initial annual term of the
agreement, which loan shall bear interest at the rate of 6% per annum and shall
be repayable on the third anniversary of the date of the loan. In addition, if
the employment agreement with Mr. Hennig is renewed for a second annual term,
Mr. Hennig is entitled to borrow an additional $100,000 from the Company on
similar terms. Pursuant to these provisions, Mr. Hennig borrowed $60,000 from
the Company in May 1996. This loan is secured by Mr. Hennig's pledge of certain
shares of Common Stock owned by Mr. Hennig.
Employment Agreements with D. Lee Field and David M. Boitano. As a
condition of and effective upon the Crossings Merger, the Company entered into
employment agreements with each of Messrs. Field and Boitano. These agreements
provide for a one year term, and are automatically renewed for an additional one
year term unless timely notice of nonrenewal is given by the Company or the
applicable officer. The employment agreements provide that Messrs. Field and
Boitano shall receive a base salary in an amount (not less than $140,000)
determined by the Company's Board of Directors or President. Pursuant to these
employment agreements, Messrs. Field and Boitano are entitled to receive
incentive bonuses of up to 25% and 20% of their base salary, respectively,
payable at the discretion of the Board of Directors if certain targeted
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<PAGE> 70
earnings are achieved. The employment agreements also provide for the granting
of certain stock options and certain other benefits typical in employment
agreements with senior executive officers. Finally, pursuant to these employment
agreements, each of Messrs. Field and Boitano have agreed not to disclose
certain proprietary information belonging to the Company or otherwise to compete
with the Company for a period of twelve months following their respective
termination of employment, except where such termination is by the Company
without "cause."
1995 INCENTIVE COMPENSATION PLAN
The 1995 Plan provides key employees (who may also be directors) of the
Company and its subsidiaries performance incentives and also provides a means of
encouraging stock ownership in the Company by such persons. Under the 1995 Plan,
key employees of the Company or its affiliates are eligible to receive stock
options to purchase shares of the Company's Common Stock. The 1995 Plan allows a
maximum number of shares to be subject to options of 1,425,000. Options are
granted under the 1995 Plan on the basis of the optionee's contribution to the
Company, and no option may exceed a term of ten years. Options granted under the
1995 Plan may be either incentive stock options or options that do not qualify
as incentive stock options. The Company's Compensation Committee is authorized
to designate the recipients of options, the dates of grants, the number of
shares subject to options, the option price, the terms of payment on exercise of
the options, and the time during which the options may be exercised. The price
of incentive stock options granted under the 1995 Plan cannot be less than the
fair market value of the shares at the time the options are granted.
At June 30, 1996, options to purchase an aggregate of 789,149 shares of
Common Stock were granted and outstanding at a weighted average exercise price
of $6.08 per share, of which options to purchase 103,843 shares were exercisable
at such date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has appointed Messrs. Boehlke, Kenny, Petty and Tubergen as
members of the Compensation Committee. The Company has no compensation committee
interlocks.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 30, 1996 by: (i)
each person or entity known to the Company to own more than 5% of the
outstanding shares of the Common Stock; (ii) each of the Company's directors;
(iii) each of the Named Executive Officers; (iv) other Selling Stockholders; and
(v) all of the Company's directors and executive officers as a group. Except as
otherwise noted, the person or entity named has sole voting and investment power
over the shares indicated.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
OWNED PRIOR TO THE NUMBER OF OWNED AFTER THE
OFFERING SHARES OFFERING
------------------- BEING -------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SOLD NUMBER PERCENT
- ---------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Alternative Living Investors, L.L.C.(1)....... 4,302,994 45.2% -- -- --
184 Shuman Boulevard,
Suite 200
Naperville, Illinois 60563
GranCare, Inc.(2)............................. 1,892,302 19.9 1,892,302 -- --
One Ravinia Drive,
Suite 1500
Atlanta, Georgia 30346
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
OWNED PRIOR TO THE NUMBER OF OWNED AFTER THE
OFFERING SHARES OFFERING
------------------- BEING -------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SOLD NUMBER PERCENT
- ---------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Gene E. Burleson*(2)(3)....................... 1,900,047 19.9% 1,892,302 7,745 **
One Ravinia Drive, Suite 1500
Atlanta, Georgia 30346
Capital Consultants, Inc.(4).................. 1,003,524 10.5 721,651 281,873 2.2%
2300 SW First Avenue
Portland, Oregon 97201
Richard W. Boehlke*........................... 781,346 8.2 -- 781,346 6.2
1201 Pacific Avenue
Suite 1800
Tacoma, Washington 98402
Peter H. Huizenga(5)(6)....................... 753,024 7.9 -- 753,024 5.9
2215 York Road, Suite 500
Oakbrook, Illinois 60521
Jerry L. Tubergen(1)(5)(7)*................... 717,741 7.5 -- 717,741 5.6
126 Ottawa Ave., Suite 500
Grand Rapids, Michigan 49503
Robert Haveman(1)(5)(8)*...................... 653,194 6.9 -- 653,194 5.1
One Prince Center
Holland, Michigan 49423
William F. Lasky(9)*.......................... 543,313 5.7 -- 543,313 4.3
450 North Sunnyslope Road, Suite 200
Brookfield, Wisconsin 53003
Heartland Development Corporation(10)......... 198,547 2.1 198,547 -- --
William G. Petty, Jr.(1)(11)*................. 130,232 1.4 -- 130,232 1.0
Ronald G. Kenny(1)(5)(12)*.................... 29,260 ** -- 29,260 **
All Officers and Directors 4,944,665 51.1% 1,892,302 3,052,363 23.7%
as a Group (15 Persons)(13).................
</TABLE>
- ---------------
* See "Management" for position with the Company.
** Less than 1%
(1) ALI is a limited liability company that was formed in May 1995 as an
investment vehicle for a $20 million investment in the Company. See
"History and Organization -- 1995 Recapitalization Transaction." Messrs.
Haveman, Kenny, Petty and Tubergen serve as managers of ALI, but disclaim
beneficial ownership of the shares held by ALI. Immediately prior to the
closing of the Offering, ALI intends to liquidate and distribute to its
members their respective pro-rata interest in the shares of Common Stock
held by ALI. See note (5) below. Certain members of ALI have agreed to sell
up to 700,000 shares of Common Stock to the Underwriters if the
Underwriters' over-allotment option is exercised.
(2) Represents shares held by Evergreen, which merged with GranCare in July
1995. Gene E. Burleson, a director of the Company, is the Chairman of the
Board, President and Chief Executive Officer of GranCare and may be deemed
to beneficially own the shares of Common Stock held by it.
(3) Also includes options to acquire 7,745 shares exercisable within the next
60 days.
(4) Represents shares held by CCI as agent for clients for whom it holds
discretionary authority. Pursuant to the Agreement and Plan of Merger
entered into between the Company and Crossings in connection with the
Crossings Merger, the Company has granted certain registration rights to
CCI whereby CCI is entitled to include, as a Selling Stockholder, up to
742,602 shares of Common Stock in the Offering. Of the shares subject to
the Underwriters' over-allotment option, 20,951 are beneficially owned by
CCI as agent for clients for whom it holds discretionary authority.
Accordingly, if the Underwriters' over-allotment option is exercised in
full, the number of shares of Common Stock beneficially owned by CCI as
agent for clients will be 260,922.
(5) Represents shares of Common Stock to which the beneficial owner is entitled
to receive upon the distribution of the Common Stock from ALI based upon
such person's ownership of the membership units thereof. See note (1)
above.
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<PAGE> 72
(6) Includes 365,754 shares of Common Stock held by the Peter H. Huizenga
Testamentary Trust, 43,030 shares of Common Stock held by the Betsy
Huizenga Trust, 43,030 shares of Common Stock held by the Greta Huizenga
Trust, 43,030 shares of Common Stock held by the Peter H. Huizenga, Jr.
Trust and 43,030 shares of Common Stock held by the Timothy Dean Huizenga
Trust, all of which Mr. Huizenga may be deemed to beneficially own by
virtue of his role as a trustee.
(7) Includes (i) 258,180 shares attributable to member interests in ALI held by
Mr. Tubergen or trusts for which he serves as trustee (the "Trusts") and
(ii) options to acquire 7,745 shares exercisable within the next 60 days.
The co-trustees of the Trusts also serve as trustees to a trust holding
member interests in ALI representing an additional 65,545 shares. Of the
shares subject to the Underwriters' over-allotment option, 37,414 are owned
by Mr. Tubergen and 72,000 are owned by the Trusts. Accordingly, if the
Underwriters' over-allotment option is exercised in full, the number of
shares of Common Stock beneficially owned by Mr. Tubergen will be 608,327.
(8) Of these shares, 537,874 shares represent membership interests in ALI held
by two nonprofit corporations (the "Nonprofit Corporation") of which Mr.
Haveman serves as an officer. Mr. Haveman disclaims beneficial ownership of
the shares held by these corporations. Also includes options to acquire
7,745 shares exercisable within the next 60 days. Of the shares subject to
the Underwriters' over-allotment option, 115,000 are beneficially owned by
the Nonprofit Corporations. Accordingly, if the Underwriters'
over-allotment option is exercised in full, the number of shares of Common
Stock beneficially owned by the Nonprofit Corporations will be 422,874.
(9) Mr. Lasky's beneficial ownership includes shares held by CLC by virtue of
his position as an officer and majority shareholder of CLC and options to
acquire 86,550 shares within the next 60 days. CLC is a Wisconsin
corporation owned by Mr. Lasky and David Burr. CLC will sell up to 29,049
shares of its Common Stock in the Offering if and to the extent that the
Underwriters' over-allotment option is exercised. Of the proceeds from the
sale of Common Stock held by CLC, only so much as is necessary to satisfy
the income tax liability resulting from such sale will be distributed by
CLC to Messrs. Lasky and Burr. The remainder of the proceeds of such sale
will be used by CLC to redeem a portion of the shares of capital stock of
CLC held by Mr. Burr. If the Underwriters' over-allotment option is
exercised in full, Mr. Lasky will beneficially own 514,264 shares of Common
Stock.
(10) Pursuant to the Heartland Acquisition, Heartland Development Corporation
was granted certain registration rights whereby it is entitled to include,
as a Selling Stockholder, all of its shares of Common Stock in the
Offering.
(11) Represents 107,575 shares held by Petty, Kneen & Company, L.L.C., a company
owned and controlled by Mr. Petty and John W. Kneen and options to acquire
22,657 shares within the next 60 days. See "History and
Organization -- Recent Equity Transactions."
(12) Includes options to acquire 7,745 shares exercisable within the next 60
days. Mr. Kenny is a management employee of Huizenga Capital Management, a
sole proprietorship of Peter H. Huizenga. Mr. Kenny disclaims beneficial
ownership of any shares held by Mr. Huizenga and his affiliates.
(13) Also includes options to acquire 159,265 shares exercisable within the next
60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the Company was organized and capitalized in December 1993, Evergreen
had from time to time advanced funds to the Company, either pursuant to
additional capital investments or in the form of interest bearing advances.
During 1994, Evergreen advanced $2.7 million to the Company pursuant to a
capital call and $216,658 in the form of an interest bearing advance. During
1995, Evergreen made $3.8 million of additional interest bearing advances to the
Company to fund its growth and operations. Interest bearing advances made by
Evergreen bore interest at a rate of 9% per annum. The aggregate outstanding
advances from Evergreen of $4.0 million and accrued and unpaid interest thereon
of $55,400 were repaid with a portion of the net proceeds from the 1995
Recapitalization. See "History and Organization -- 1995 Recapitalization
Transaction."
In connection with the purchase by the Company of the Wynwood residence in
Sarasota, Florida, the Company gave the seller a note in the amount of $4.2
million which was payable on or before May 31, 1995. Evergreen guaranteed the
payment of this note made by the Company. Subsequently in June 1995, the Company
refinanced this note with permanent financing and released Evergreen from its
guarantee.
Evergreen granted bank lenders to two ALS-Midwest Partnerships a put option
entitling such bank lenders to sell to Evergreen loans made to such ALS-Midwest
Partnerships aggregating $4.0 million in the event either of the respective
partnerships as borrower, is in default in repaying such loans. These borrowings
were used by these partnerships to construct two Clare Bridge residences in
Michigan. In June 1996, the Company borrowed $8.5 million, a portion of which
was used to repay these borrowings, and pursuant thereto the Company secured the
release of the put options granted by Evergreen.
The Company manages six dementia care residences in Wisconsin for the ALS
Partnership, which is 50% owned and controlled by Mr. Lasky, the Company's
President and Chief Executive Officer, pursuant to
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<PAGE> 73
management agreements providing for a management fee of 13% of gross operating
revenues (until August 1996 when the fee will decrease to 11% for the remainder
of the term). The management agreements expire in December 1998, but may be
terminated by the Company upon 90 days notice to the ALS Partnership. The ALS
Partnership paid the Company management fees of $252,000, $290,000 and $14,400
for 1995, 1994 and 1993, respectively. The Company also manages a WovenHearts
residence in Lodi, Wisconsin owned by a partnership of which Douglas A. Hennig,
the Company's Senior Vice President, is a 25% general partner. The Company
expects to receive management fees of approximately $25,000 from this agreement
in 1996. The Company leases a Crossings residence (in Tacoma, Washington) from
the 2010 Union L.P. of which Richard W. Boehlke, the Vice Chairman of the Board
of the Company is the 99% general partner. The Company expects to pay aggregate
annual lease payments of approximately $652,000 pursuant to this lease in 1996.
The lease payments are equal to the periodic debt service and lease obligations
of the partnership with respect to the property. See "Risk Factors -- Potential
Conflicts of Interest of Certain Executive Officers and Directors" and "History
and Organization -- Crossings Merger -- Crossings REIT Transactions."
In connection with the Heartland acquisition, the Company borrowed an
aggregate of $8.7 million from RDV Capital Management L.P., a Delaware limited
partnership, the general partner of which is RDV Corporation. Jerry L. Tubergen,
a director of the Company, is the President and Chief Operating Officer of RDV
Corporation. See "Use of Proceeds," "History and Organization -- Acquisition of
Heartland Retirement Services, Inc." and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company conducted site evaluations and market feasibility studies for
GranCare in 1995 and expected to continue to provide such services during 1996.
The Company has billed GranCare approximately $75,000 and $63,000 for fees
relating to these services in 1995 and 1996, respectively. In addition, GranCare
provides pharmacy services to certain of the Company's residences. The Company
estimates that the aggregate fees to be paid by the Company to GranCare for such
service during 1996 will be approximately $60,000.
For certain additional background information regarding transactions
involving the Company and Crossings and their respective officers, directors and
stockholders, see "History and Organization."
The Company believes that each of the foregoing transactions was on terms
substantially similar to those that it could have obtained from unaffiliated
third parties. In the case of related party transactions, it is the Company's
policy to enter into such agreements on terms, which in the opinion of the
Company, are substantially similar to those that could otherwise be obtained
from unrelated third parties, and that all such transactions be approved by a
majority of the disinterested members of the Company's Board of Directors.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, $0.01 par value, and 5,000,000 shares of $0.01 par value
preferred stock (the "Preferred Stock"). Upon completion of the Offering,
12,710,849 shares of Common Stock will be issued and outstanding, 789,149 shares
of Common Stock will be reserved for issuance upon the exercise of stock options
previously granted, 1,425,000 shares of Common Stock will be reserved for
issuance upon the exercise of stock options which may be granted under the 1995
Plan and no Preferred Stock will be issued and outstanding. The following
summary does not purport to be complete and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the Company's
Restated Certificate of Incorporation and Bylaws, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part, and to the applicable provisions of the Delaware General Corporation Law
(the "DGCL").
COMMON STOCK
Voting Rights. Each share of Common Stock entitles the holder thereof to
one vote in all matters submitted to a vote of stockholders. The Common Stock
does not have cumulative voting rights, which means
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<PAGE> 74
that holders of a majority of the outstanding shares of Common Stock voting for
the election of directors can elect all directors then being elected.
Dividends. Each share of Common Stock has an equal and ratable right to
receive dividends to be paid from the Company's assets legally available
therefor when, as and if declared by the Board of Directors but subject to
rights of holders of any series of Preferred Stock. Delaware law generally
requires that dividends are payable only out of the Company's surplus or current
net profits in accordance with the DGCL. See "Dividend Policy".
Liquidation. In the event of the dissolution, liquidation or winding up of
the Company, the holders of Common Stock are entitled to share equally and
ratably in the assets available for distribution after payments are made to the
Company's creditors, but subject to the preferred liquidation rights of any
holders of any series of Preferred Stock of the Company.
Other. The holders of shares of Common Stock have no preemptive,
subscription, redemption or conversion rights and are not liable for further
call or assessment. All of the outstanding shares of Common Stock are, and the
Common Stock offered hereby by the Company will be, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without stockholder approval, to
issue from time to time up to 5,000,000 shares of Preferred Stock in one or more
series, and with respect to each series, to determine, subject to limitations
prescribed by law, any dividend rights and rates, any conversion or exchange
rights, any rights, terms and prices of redemption (including sinking fund
provisions), any liquidation preferences, any voting rights, and generally any
other rights, preferences, privileges, qualifications, limitations and
restrictions not in conflict with the Company's Restated Certificate of
Incorporation. To date, no series of Preferred Stock has been authorized or
issued. The Company has no present plans to issue any shares of Preferred Stock.
The issuance of shares of Preferred Stock by action of the Board of
Directors could adversely affect the voting power, dividend rights and other
rights of holders of the Common Stock. Issuance of shares of a series of
Preferred Stock also could, depending on the terms such series, either impede or
facilitate the completion of a merger, tender offer or other takeover attempt.
Although the Board of Directors is required to make a determination as to the
best interests of the Company's stockholders when issuing shares of Preferred
Stock, the Board of Directors could act in a manner that would discourage an
acquisition attempt or other transaction that some or a majority of the
stockholders might believe to be in the best interests of the Company or in
which stockholders might receive a premium for their Common Stock over the
then-prevailing market price. Although there are currently no plans to issue
shares of Preferred Stock or rights to purchase such shares, the Company
believes that the availability of the Preferred Stock will provide the Company
with increased flexibility in structuring future financings and acquisitions and
in meeting other corporate needs that might arise. The authorized shares of
Preferred Stock are available for issuance without further action by the
Company's stockholders, unless such action is required by applicable law or the
rules of any stock exchange on which the Common Stock may then be listed.
LIMITATIONS ON DIRECTORS' LIABILITY
The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock purchases
or redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The effect of these provisions is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above. These
provisions do not limit the liability of directors under federal securities laws
and do not affect the
71
<PAGE> 75
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW AND CERTAIN ANTI-TAKEOVER
MATTERS
Section 203 of the DGCL prohibits certain transactions between a publicly
held Delaware corporation and an "interested stockholder," which is defined as a
person who, together with any affiliates and/or associates of such person,
beneficially owns, directly or indirectly, 15 percent or more of the outstanding
voting shares of a Delaware corporation. This provision prohibits certain
business combinations (defined broadly to include mergers, consolidations, sales
or other dispositions of assets having an aggregate value of 10 percent or more
of the consolidated assets of the corporation, and certain transactions that
would increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period of
three years after the date the interested stockholder acquired its stock, unless
(i) the business combination or the transaction whereby the person became an
interested stockholder is approved by the corporation's board of directors prior
to the date of such transaction; (ii) the interested stockholder acquired at
least 85 percent of the voting stock of the corporation in the transaction in
which it became an interested stockholder; or (iii) the business combination is
approved by a majority of the board of directors and by the affirmative vote of
two-thirds of the outstanding voting stock owned by disinterested stockholders
at an annual or special meeting.
Upon completion of the Offering, the Corporation's Restated Certificate of
Incorporation will provide that any action required or permitted to be taken by
the stockholders must be effected at a duly called annual or special meeting of
such holders and may not be affected by any consent in writing by such holders,
unless such consent is unanimous.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company will act as the transfer agent and
registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
12,710,849 shares of Common Stock, without taking into account any outstanding
stock options. Of these shares, all of the shares of Common Stock offered hereby
will be freely tradeable without restriction or further registration under the
Securities Act, except for shares acquired by "affiliates" of the Company (as
defined in Rule 144 under the Securities Act).
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities,"
as defined in Rule 144, for at least two years, including "affiliates" of the
Company, would be entitled to sell within any three-month period that number of
shares that does not exceed the greater of (i) 1% of the number of shares of
Common Stock then outstanding or (ii) the average weekly trading volume of the
Common Stock during the four calendar weeks preceding such sale. Sales pursuant
to Rule 144 are subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Affiliates may sell shares not constituting restricted securities only
in accordance with the foregoing volume limitations and other restrictions but
without regard to the two year holding period. A person (or persons whose shares
are aggregated) who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least three years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above. The Commission has proposed but has not yet adopted amendments to Rule
144 which would shorten the required holding period for "restricted securities"
to one year (two years in the case of Rule 144(k)). The Company is unable to
estimate the number of shares that will be sold under Rule 144 since this will
depend in part on the market price for the Common Stock, the personal
circumstances of the holders of such shares and other factors (including any
amendments to Rule 144).
72
<PAGE> 76
The Company, the Selling Stockholders, all directors and officers of the
Company and all other holders of 5% or more of the shares of Common Stock and
options to purchase shares of Common Stock outstanding after the Offering have
agreed that, for a period of 180 days following the Offering, they will not
offer to sell, sell, contract to sell, grant any option to purchase or otherwise
dispose (or announce any offer, sale, grant of any option to purchase or other
disposition) of any shares of Common Stock held by them or any securities held
by them that are convertible into or exchangeable or exercisable for shares of
Common Stock, without the prior written consent of NatWest Securities Limited
(except that the Company may grant options to purchase shares of Common Stock
and issue shares upon the exercise thereof under the 1995 Plan.) Beginning 90
days after the date of this Prospectus, 456,763 restricted shares will first
become eligible for sale in the public market pursuant to Rule 144, subject to
the volume, resale and other limitations of such rule. All of these shares will
be subject to lock-up agreements with the Underwriters.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of Common Stock for future sale will
have on the market price of the Common Stock prevailing from time to time. Sales
of substantial amounts of Common Stock in the public market following the
Offering, or the perception that such sales might occur, could adversely affect
the prevailing market price of the Common Stock.
73
<PAGE> 77
UNDERWRITING
The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Selling Stockholders the number of shares of Common
Stock set forth opposite their names below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------- ----------------
<S> <C>
NatWest Securities Limited...................................................
McDonald & Company Securities, Inc...........................................
The Chicago Corporation......................................................
----------------
Total..............................................................
=============
</TABLE>
The Underwriters are obligated to purchase all the shares of Common Stock
offered hereby, if any such shares are purchased.
The Underwriters propose to offer the shares directly to the public
initially at the public offering price set forth on the cover page of this
Prospectus, and to certain securities dealers at such price less a concession
not in excess of $. per share of Common Stock. Such dealers may re-allow a
concession not in excess of $. per share of Common Stock to certain other
brokers and dealers. After the public offering, the per share price and such
concessions may be changed by the Underwriters. The Underwriters have informed
the Company and the Selling Stockholders that they do not intend to confirm
sales of shares of Common Stock to any accounts over which they exercise
discretionary authority.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the several Underwriters against certain
liabilities, including liabilities under the federal securities laws, or will
contribute to payments that the Underwriters may be required to make in respect
thereof.
The Company and certain Selling Stockholders have granted an option to the
Underwriters, exercisable for 30 days from the date of this Prospectus, to
purchase up to 900,000 additional shares of Common Stock at the initial public
offering price less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriters may exercise such option only to cover
over-allotments in the sale of the shares of Common Stock offered hereby. See
"Principal and Selling Stockholders."
The Chicago Corporation owns membership units in ALI which represent
beneficial ownership of approximately 64,545 shares of Common Stock (less than
1.0% of the shares of Common Stock to be outstanding after the Offering). In
addition, officers of NatWest Securities Limited, McDonald & Company Securities,
Inc. and The Chicago Corporation own membership units in ALI which represent, in
the aggregate, approximately 193,635 shares of Common Stock (1.5% of the shares
of Common Stock to be outstanding after the Offering). Immediately prior to the
closing of the Offering, ALI intends to liquidate and distribute to its members
their respective pro-rata interest in the shares of Common Stock held by ALI.
The Chicago Corporation may transfer shares of Common Stock it receives upon
such liquidation to its officers and employees as compensation.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any Common Stock within the United States,
its territories or possessions, or to persons who are citizens thereof or
residents therein. The Underwriting Agreement does not limit sales of the Common
Stock offered hereby outside of the United States.
National Westminster Bank Plc, New York Branch, an affiliate of NatWest
Securities Limited, will receive from the Company a $680,000 success fee for
financial advisory services rendered on behalf of Crossings in connection with
the Crossings Merger. This fee is payable upon the closing of the Offering.
NatWest Securities Limited has further represented and agreed that (a) it
has not offered or sold and will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(whether as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted
74
<PAGE> 78
and will not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 or the Financial
Services Act 1986 (the "Act"); (b) it has complied and will comply with all
applicable provisions of the Act with respect to anything done by it in relation
to the shares of Common Stock in, from, or otherwise involving the United
Kingdom; and (c) it has only issued or passed on and will only issue or pass on,
in the United Kingdom, any document that consists of or any part of listing
particulars, supplementary listing particulars, or any other document required
or permitted to be published by listing rules under Part IV of the Act, to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom
the document may otherwise lawfully be issued or passed on.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock was determined by
negotiation between the Company and the Underwriters. Among the factors that
were considered in determining the initial public offering price, in addition to
prevailing market and general economic conditions, were the history of, and
prospects for, the industry in which the Company operates, the ability of the
Company's management, the Company's past and present operations, the Company's
historical results of operations, the Company's earnings prospects, the prices
of similar securities of comparable companies and other relative factors. There
can be no assurance, however, that the price at which the Common Stock will sell
in the public market after the Offering will not be lower than the price at
which it is sold by the Underwriters. See "Risk Factors -- No Prior Public
Trading Market."
The Company, the Selling Stockholders, all directors and officers of the
Company and all other holders of 5% or more of the shares of Common Stock and
options to purchase Common Stock outstanding after the Offering have agreed with
the Underwriters that, for a period of 180 days following the Offering, they
will not offer to sell, sell, contract to sell, grant an option to purchase or
otherwise dispose (or announce any offer, sale, grant of any option or other
distribution) of any shares of Common Stock or any securities convertible into
or exchangeable for shares of Common Stock without the prior written consent of
NatWest Securities Limited (except that the Company may grant options to
purchase shares of Common Stock under the 1995 Plan and issue shares upon the
exercise of outstanding stock options). See "Principal and Selling Stockholders"
and "Management -- Executive Compensation."
At the request of the Company, up to 600,000 shares of Common Stock have
been reserved for sale to certain individuals, including directors and employees
of the Company and other entities with whom directors of the Company are
affiliated, members of their families and other persons having business
relationships with the Company. The price of such shares to such persons will be
the initial public offering price set forth on the cover of this prospectus. The
number of shares available for sale to the general public will be reduced to the
extent these persons purchase such reserved shares. Any reserved shares not
purchased will be offered by the Underwriters to the general public on the same
basis as the other shares offered hereby.
LEGAL MATTERS
Certain legal matters with respect to the shares offered hereby will be
passed upon for the Company by Rogers & Hardin, Atlanta, Georgia. Certain legal
matters in connection with the Offering will be passed upon for the Underwriters
by Jones, Day, Reavis & Pogue, Cleveland, Ohio.
EXPERTS
The consolidated financial statements of Alternative Living Services, Inc.
and subsidiaries as of December 31, 1994 and 1995 and for the period January 1,
1993 to December 13, 1993 for the Predecessor to the Company and for the period
December 14, 1993 to December 31, 1993 and the years ended December 31, 1994 and
1995 for the Company have been included herein and in the registration statement
of which this prospectus is a part in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein and in the registration statement upon the authority of said firm as
experts in accounting and auditing.
75
<PAGE> 79
The consolidated financial statements of Heartland Retirement Services,
Inc. and subsidiaries as of December 31, 1994 and 1995 and for each of the years
in the period from January 11, 1993 (inception) through December 31, 1995 have
been included herein and in the registration statement of which this prospectus
is a part in reliance upon the report of Arthur Andersen LLP, independent
certified public accountants, appearing elsewhere herein and in the registration
statement upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of Alternative Living Services-Midwest
Inc. and affiliates as of and for the year ended December 31, 1995 have been
included herein and in the registration statement of which this prospectus is a
part in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein and in the registration statement
upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of New Crossings International
Corporation and subsidiaries as of December 31, 1994 and 1995 and for each of
the years in the three-year period ended December 31, 1995, have been included
herein and in the registration statement of which this prospectus is a part in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and in the registration statement upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (herein, together with all
amendments thereto, called the "Registration Statement"), of which this
Prospectus constitutes a part, under the Securities Act and the rules and
regulations promulgated thereunder, with respect to the Common Stock offered
hereby. This Prospectus omits certain information contained in the Registration
Statement, and reference is made to the Registration Statement, including the
exhibits thereto, for further information with respect to the Company and the
securities offered hereby. Statements contained herein concerning the provisions
of documents are necessarily summaries of such documents; when any such document
is an exhibit to the Registration Statement, each such statement is qualified in
its entirety by reference to the copy of such document filed with the
Commission. The Registration Statement and the exhibits and schedules thereto
may be reviewed without charge at the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at the New York Regional
Office located at Seven World Trade Center, New York, New York 10048 and at the
Chicago Regional Office located at 500 Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained, upon payment of the
fee prescribed by the Commission, at the Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, registration statements and
certain other documents filed with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
76
<PAGE> 80
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES:
Independent Auditors' Report....................................................... F-3
Consolidated Balance Sheets, as of December 31, 1994 and 1995...................... F-4
Consolidated Statements of Operations, periods January 1, 1993 to December 13, 1993
and December 14, 1993 to December 31, 1993, and the years ended December 31,
1994 and 1995................................................................... F-5
Consolidated Statements of Changes in Stockholders' Equity, periods January 1, 1993
to December 13, 1993 and December 14, 1993 to December 31, 1993, and the years
ended December 31, 1994 and 1995................................................ F-6
Consolidated Statements of Cash Flows, periods January 1, 1993 to December 13, 1993
and December 14, 1993 to December 31, 1993, and the years ended December 31,
1994 and 1995................................................................... F-7
Notes to Consolidated Financial Statements......................................... F-8
Condensed Consolidated Balance Sheet, as of March 31, 1996 (unaudited)............. F-19
Condensed Consolidated Statements of Operations, three months ended March 31, 1995
and 1996 (unaudited)............................................................ F-20
Condensed Consolidated Statements of Cash Flows, three months ended March 31, 1995
and 1996 (unaudited)............................................................ F-21
Notes to Condensed Consolidated Financial Statements (unaudited)................... F-22
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES:
Report of Independent Public Accountants........................................... F-24
Consolidated Balance Sheets, as of December 31, 1994 and 1995...................... F-25
Consolidated Statements of Income, period from January 11, 1993 (inception) to
December 31, 1993 and the years ended December 31, 1994 and 1995................ F-26
Consolidated Statements of Changes in Shareholders' Equity, period from January 11,
1993 (inception) to December 31, 1993 and the years ended December 31, 1994 and
1995............................................................................ F-27
Consolidated Statements of Cash Flows, period from January 11, 1993 (inception) to
December 31, 1993 and the years ended December 31, 1994 and 1995................ F-28
Notes to Consolidated Financial Statements......................................... F-29
NEW CROSSINGS INTERNATIONAL CORPORATION:
Independent Auditors' Report....................................................... F-36
Combined Balance Sheets, as of December 31, 1994 and 1995.......................... F-37
Combined Statements of Operations, years ended December 31, 1993, 1994 and 1995.... F-38
Combined Statements of Shareholders' Deficit, years ended December 31, 1993, 1994
and 1995........................................................................ F-39
Combined Statements of Cash Flows, years ended December 31, 1993, 1994 and 1995.... F-40
Notes to Combined Financial Statements............................................. F-41
Condensed Consolidated Balance Sheet, as of March 31, 1996 (unaudited)............. F-51
Condensed Combined and Consolidated Statements of Operations, three months ended
March 31, 1995 and 1996 (unaudited)............................................. F-52
Condensed Combined and Consolidated Statements of Cash Flows, three months ended
March 31, 1995 and 1996 (unaudited)............................................. F-53
</TABLE>
F-1
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES:
Independent Auditors' Report....................................................... F-55
Combined Balance Sheet, December 31, 1995.......................................... F-56
Combined Statement of Operations, year ended December 31, 1995..................... F-57
Combined Statement of Changes in Stockholders' Equity, year ended December 31,
1995............................................................................ F-58
Combined Statement of Cash Flows, year ended December 31, 1995..................... F-59
Notes to Combined Financial Statements............................................. F-60
Condensed Combined Balance Sheet, as of March 31, 1996 (unaudited)................. F-64
Condensed Combined Statements of Operations, three months ended March 31, 1995 and
1996 (unaudited)................................................................ F-65
Condensed Combined Statements of Cash Flows, three months ended March 31, 1995 and
1996 (unaudited)................................................................ F-66
Notes to Condensed Combined Financial Statements (unaudited)....................... F-67
</TABLE>
F-2
<PAGE> 82
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Alternative Living Services, Inc.:
We have audited the accompanying consolidated balance sheets of Alternative
Living Services, Inc. and subsidiaries (the Company) as of December 31, 1994 and
1995, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the Predecessor for the period January
1, 1993 to December 13, 1993 and for the Company for the period December 14,
1993 (date of inception) to December 31, 1993 and the years ended December 31,
1994 and 1995. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 1994 and 1995, and the results of operations and cash flows for
the Predecessor for the period January 1, 1993 to December 13, 1993 and for the
Company for the period December 14, 1993 (date of inception) to December 31,
1993 and the years ended December 31, 1994 and 1995 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Milwaukee, Wisconsin
February 12, 1996,
except as to note 2(j),
which is as of May 17, 1996
F-3
<PAGE> 83
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 310,814 $ 2,947,964
Short-term investments.......................................... 50,000 50,000
Resident receivables, net....................................... 70,409 55,276
Other current assets............................................ 188,449 282,505
----------- -----------
Total current assets.................................... 619,672 3,335,745
----------- -----------
Property, plant and equipment, net................................ 9,167,085 27,289,291
Minority interest................................................. 553,368 --
Long-term investments............................................. -- 1,183,105
Investments in and advances to unconsolidated affiliates.......... 1,601,536 4,788,148
Other assets...................................................... 2,482,293 2,760,323
----------- -----------
Total assets............................................ $14,423,954 $39,356,612
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt.......................... $ 191,814 $ 162,419
Accounts payable................................................ 443,476 786,169
Accrued expenses................................................ 911,949 1,180,129
Advances from and notes payable to unconsolidated affiliates.... 284,356 --
----------- -----------
Total current liabilities............................... 1,831,595 2,128,717
----------- -----------
Long-term debt, less current installments......................... 6,356,260 17,100,996
Advances from and notes payable to unconsolidated affiliates...... 1,550,000 --
Other long-term liabilities....................................... 126,859 174,419
Minority interest................................................. -- 609,745
Stockholders' equity:
Common stock and additional paid-in capital..................... 5,216,527 21,745,607
Accumulated deficit............................................. (657,287) (2,402,872)
----------- -----------
Total stockholders' equity.............................. 4,559,240 19,342,735
----------- -----------
Total liabilities and stockholders' equity.............. $14,423,954 $39,356,612
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 84
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIODS JANUARY 1, 1993 TO DECEMBER 13, 1993 AND DECEMBER 14, 1993 TO DECEMBER
31, 1993, AND YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
PREDECESSOR
TO THE
COMPANY THE COMPANY
---------- ------------------------------------
1993 1993 1994 1995
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue:
Resident service fees......................... $2,636,329 $ 129,659 $4,505,884 $ 9,683,756
Other......................................... 4,500 17,420 450,556 780,378
---------- --------- ---------- -----------
Operating revenue............................... 2,640,829 147,079 4,956,440 10,464,134
---------- --------- ---------- -----------
Operating expenses:
Residence operations.......................... 1,671,957 86,697 2,933,549 7,206,988
Lease expense................................. 563,211 18,870 697,126 889,514
General and administrative.................... 423,262 40,823 1,457,719 2,599,170
Depreciation and amortization................. 100,438 6,330 258,247 814,571
---------- --------- ---------- -----------
Total operating expenses.............. 2,758,868 152,720 5,346,641 11,510,243
---------- --------- ---------- -----------
Operating loss.................................. (118,039) (5,641) (390,201) (1,046,109)
Other income (expense):
Interest expense.............................. (47,841) (8,571) (322,393) (1,047,031)
Interest income............................... -- -- 21,483 234,495
Gain on sale of land.......................... -- -- -- 438,659
Equity in losses of unconsolidated
affiliates................................. -- -- (500) (437,736)
Minority interest in losses of consolidated
subsidiaries............................... -- -- 48,536 112,137
---------- --------- ---------- -----------
Total other expense, net.............. (47,841) (8,571) (252,874) (699,476)
---------- --------- ---------- -----------
Net loss.............................. $ (165,880) $ (14,212) $ (643,075) $(1,745,585)
========= ======== ========= ==========
Net loss per share.............................. $ -- $ (0.22) $ (0.30)
======== ========= ==========
Weighted average shares outstanding............. 2,959,478 2,959,478 5,863,183
======== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 85
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
PERIODS JANUARY 1, 1993 TO DECEMBER 13, 1993 AND DECEMBER 14, 1993 TO DECEMBER
31, 1993, AND YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
AND ADDITIONAL
PAID-IN CAPITAL STOCK
-------------------- ACCUMULATED SUBSCRIPTION
PREDECESSOR TO THE COMPANY SHARES AMOUNTS DEFICIT RECEIVABLE TOTAL
- ----------------------------------------------- ------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1992.................. 6,155 $ 980,266 $ (616,059) $ (200,000) $ 164,207
Asset contribution in exchange for stock..... 199 50,000 -- -- 50,000
Adjustment to contributed capital............ -- (152,427) -- -- (152,427)
Receipt of stock subscription................ -- -- -- 200,000 200,000
Net loss..................................... -- -- (165,880) -- (165,880)
----- ----------- ----------- ------------ -----------
Balances at December 13, 1993.................. 6,354 $ 877,839 $ (781,939) $ -- $ 95,900
===== =========== =========== ============ ===========
<CAPTION>
COMMON STOCK
AND ADDITIONAL
PAID-IN CAPITAL STOCK
----------------------- ACCUMULATED SUBSCRIPTION
THE COMPANY SHARES AMOUNTS DEFICIT RECEIVABLE TOTAL
- -------------------------------------------- --------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Initial capitalization at December 14, 1993:
Common stock issued for cash.............. 112,378 $ 330,000 $ -- $ -- $ 330,000
Satisfaction of payment of short-term
advance................................. 58,002 170,000 -- -- 170,000
Common stock subscribed................... 754,021 2,200,000 -- (2,200,000) --
Liabilities assumed in excess of assets
transferred to the Company from the
Predecessor............................. 888,150 (160,815) -- -- (160,815)
Net loss.................................. -- -- (14,212) -- (14,212)
--------- ----------- ----------- ------------ -----------
Balances at December 31, 1993............... 1,812,551 2,539,185 (14,212) (2,200,000) 324,973
--------- ----------- ----------- ------------ -----------
Receipt of stock subscription............. -- -- -- 2,200,000 2,200,000
Contributed capital from majority
stockholder............................. -- 2,677,342 -- -- 2,677,342
Net loss.................................. -- -- (643,075) -- (643,075)
--------- ----------- ----------- ------------ -----------
Balances at December 31, 1994............... 1,812,551 5,216,527 (657,287) -- 4,559,240
--------- ----------- ----------- ------------ -----------
Net proceeds from private offering........ 4,302,994 19,029,080 -- -- 19,029,080
Retirement of stock held by minority
stockholder............................. (380,636) (2,500,000) -- -- (2,500,000)
Common stock issued for contributed
capital................................. 917,150 -- -- -- --
Net loss.................................. -- -- (1,745,585) -- (1,745,585)
--------- ----------- ----------- ------------ -----------
Balances at December 31, 1995............... 6,652,059 $21,745,607 $(2,402,872) $ -- $19,342,735
========= =========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 86
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIODS JANUARY 1, 1993 TO DECEMBER 13, 1993 AND DECEMBER 14, 1993 TO DECEMBER
31, 1993, AND YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
PREDECESSOR
TO THE
COMPANY THE COMPANY
----------- --------------------------------------
1993 1993 1994 1995
----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (165,880) $ (14,212) $ (643,075) $ (1,745,585)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 100,438 6,330 258,247 814,571
Gain on sale of land.............................. -- -- -- (438,659)
Minority interest in losses of consolidated
subsidiaries.................................... -- -- (48,536) (112,137)
(Increase) decrease in net resident receivables... (23,150) 12,350 (93,491) 15,133
(Increase) decrease in other current assets....... 21,878 -- (172,300) (92,618)
Increase (decrease) in accounts payable........... 5,792 (4,673) 57,741 342,693
Increase in accrued expenses...................... 299,038 42,646 168,170 223,093
Changes in other assets and liabilities and other
adjustments..................................... -- -- 116,338 (102,440)
----------- --------- ----------- ------------
Net cash provided by (used in) operating activities... 238,116 42,441 (356,906) (1,095,949)
----------- --------- ----------- ------------
Cash flows from investing activities:
Purchase of short-term investments.................. -- -- (50,000) --
Net proceeds from sale of land...................... -- -- -- 972,249
Acquisitions of affiliate and facility.............. -- -- (66,930) (850,000)
Payments for property, plant and equipment and
project development costs......................... (1,692,502) (10,184) (1,772,173) (12,667,187)
Investments in and advances to unconsolidated
affiliates........................................ (291,084) 74,641 (1,485,574) (3,186,612)
Increase in long-term investments................... -- -- -- (1,183,105)
Due from minority stockholder....................... -- (100,521) -- --
Payments for deferred costs......................... (18,470) (1,201) (30,274) (208,291)
----------- --------- ----------- ------------
Net cash used in investing activities................. (2,002,056) (37,265) (3,404,951) (17,122,946)
----------- --------- ----------- ------------
Cash flows from financing activities:
Contributions by minority partner and minority
stockholder....................................... -- -- 745,000 1,275,250
Purchase of remaining limited partners.............. -- -- (605,000) --
Payments for financing costs........................ -- (7,179) (36,579) (221,104)
Repayment of line of credit and short-term note
payable........................................... -- (25,000) -- (4,208,166)
Repayments of long-term debt........................ (136,041) (107,244) (1,320,503) (6,575,095)
Proceeds from issuance of long-term debt............ 1,650,000 -- -- 15,890,436
Changes in advances from and notes payable to
unconsolidated affiliates......................... 170,000 330,000 216,658 (1,834,356)
Issuance of common stock and other capital
contributions..................................... (102,427) -- 2,677,342 19,029,080
Retirement of stock held by minority stockholder.... -- -- -- (2,500,000)
Stock subscription received......................... 200,000 -- 2,200,000 --
----------- --------- ----------- ------------
Net cash provided by financing activities............. 1,781,532 190,577 3,876,918 20,856,045
----------- --------- ----------- ------------
Net increase in cash and cash equivalents............. 17,592 195,753 115,061 2,637,150
Cash and cash equivalents:
Beginning of period................................. -- -- 195,753 310,814
----------- --------- ----------- ------------
End of period....................................... $ 17,592 $ 195,753 $ 310,814 $ 2,947,964
=========== ========= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 87
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) BUSINESS
Alternative Living Services, Inc. (the Company) develops, owns and operates
assisted living residences. As of December 31, 1995, the Company operated and
consolidated in its financial statements eight residences totaling 428 living
units located in Wisconsin, Pennsylvania and Florida. As of the same date, the
Company had two residences in construction and two in different stages of
pre-construction development. In addition, the Company is a 50% owner of the
corporation which is the general partner of limited partnerships formed to
develop and operate seven residences in Michigan.
The Company was organized in December 1993, and was initially capitalized
by Evergreen Healthcare, Inc. ("Evergreen") and Care Living Centers, Inc.
("CLC"). Evergreen, then a NYSE-listed operator of long-term care facilities,
became a wholly-owned subsidiary of GranCare in July 1995. At the time of the
Company's organization, CLC was owned 25% by William F. Lasky, the Company's
President and Chief Executive Officer, and 75% by two other shareholders.
Pursuant to the terms of an acquisition agreement between Evergreen, CLC and
Alternative Living Services, a Wisconsin general partnership owned 50% by Mr.
Lasky and 50% by two other individuals (the "ALS Partnership"), the Company was
initially capitalized with (i) $2.7 million in cash contributed by Evergreen in
exchange for a 51% interest in the Company and (ii) certain assets and
contractual rights owned by CLC which were contributed in exchange for the
remaining 49% interest in the Company. Immediately prior to the consummation of
the transaction (i) Assisted Care, Inc. ("Assisted Care"), a corporation formed
by the shareholder of CLC in 1989 to develop assisted living facilities outside
of the State of Wisconsin, was merged with and into CLC and (ii) the ALS
Partnership conveyed certain of its assets relating too its assisted living
business to CLC. Accordingly, for financial reporting purposes, the combined
financial statements of these two affiliated companies for all periods prior to
December 14, 1993 are referred to as the "Predecessor." The net assets of the
Predecessor which were not transferred to the Company at the initial
capitalization were primarily intercompany receivables and payables and
intangible assets, totaling $256,715.
Subsequent to the issuance of stock in May 1995, the Company was no longer
a majority-owned subsidiary of Evergreen. (See note 11.)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are as follows:
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. Results of operations of the
majority-owned subsidiaries are included from the date of acquisition. All
significant intercompany accounts and transactions with such subsidiaries
have been eliminated in the consolidation.
(b) Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents for purposes of
the consolidated statements of cash flows.
(c) Property, Plant and Equipment
Property, plant and equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed over the estimated lives of the
assets using the straight-line method. Buildings and improvements are
depreciated over 20 to 40 years, and furniture, fixtures and equipment are
depreciated over seven years. Maintenance and repairs are expensed as
incurred.
F-8
<PAGE> 88
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of each balance sheet date, the Company's management evaluates the
carrying value of property, plant and equipment for possible impairment based
upon the expectations of undiscounted operating cash flows derived from the use
of the assets.
(d) Intangible Assets and Project Development Costs
Intangible Assets and Project Development Costs, which are included in
Other Assets, are composed of organization costs, pre-opening costs,
deferred financing costs, and project development costs. Organization costs
are amortized on a straight-line basis over five years. Pre-opening costs
are amortized on a straight-line basis over twelve months. Deferred
financing costs are amortized on a straight-line basis over the term of the
debt.
(e) Goodwill
Goodwill represents the cost of acquired net assets in excess of their
fair market values. Amortization of goodwill is computed using the
straight-line method over a period of forty years. The Company's management
periodically evaluates goodwill for impairment based upon expectations of
nondiscounted operating cash flows in relation to the net capital
investment in the subsidiary.
(f) Revenue
Revenue, which is recorded primarily when services are rendered,
consists primarily of resident service fees which are reported at net
realizable amounts. Other revenue consists primarily of management and
development fees from unconsolidated affiliates.
(g) Income Taxes
Deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
(h) Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalents and short-term
investments approximate fair value due to the short-term nature of the
accounts and due to the accounts earning interest at current market rates.
The carrying amount of the Company's debt approximates fair value due to
the interest rates approximating the current rates available to the Company
for similar borrowing arrangements.
(i) Use of Estimates
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles. The preparation
of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE> 89
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) Net Loss Per Share
Net loss per share is based upon the weighted average number of the
Company's common and common equivalent shares outstanding during each
period. Per share amounts for the Predecessor for the period in 1993 prior
to the inception of the Company is not presented as they would not provide
comparable or meaningful information. Common equivalent shares include
stock options, which have been included using the treasury stock method
only when their effect is dilutive.
On May 17, 1996, the Board of Directors authorized and the
stockholders approved the filing of a Restated Certificate of Incorporation
that provides for (a) the authorization of 5 million shares of preferred
stock, $0.01 par value, the terms of which may be determined by the Board
of Directors from time to time, (b) the authorization of 30 million shares
of common stock, $0.01 par value, and (c) a 1,812.55 for 1 stock split of
its common stock. Accordingly, the stock split and the changes in preferred
and common stock have been given retroactive effect in the accompanying
consolidated financial statements.
In connection with an anticipated initial public offering (IPO), on
May 28, 1996 the Company has filed a registration statement with the
Securities and Exchange Commission (SEC). Pursuant to the requirements of
the SEC, for purposes of net loss per share, common stock issued and common
stock options granted at per share amounts less than the anticipated IPO
price per share subsequent to May 1995 have been reflected as outstanding
for all periods presented. Accordingly, weighted average shares outstanding
was increased by 1,146,928 shares for the effect of such common stock and
stock options.
(k) New Accounting Standards
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in the first quarter of 1996. The effect
of adoption of Statement 121 is not expected to be material to the
Company's financial statements.
In October 1995, the FASB issued Statement No. 123, Accounting for
Stock-Based Compensation, which provides an alternative to APB Opinion No.
25, Accounting for Stock Issued to Employees, in accounting for stock-based
compensation issued to employees. The Statement allows for a fair value-
based method of accounting for employee stock options and similar equity
instruments. However, for companies that continue to account for
stock-based compensation arrangements under Opinion No. 25, Statement 123
requires disclosure of the pro forma effect on net income and earnings per
share of its fair value-based accounting for those arrangements. The
Company will adopt Statement 123 in the first quarter of 1996 and has
elected to continue to account for stock-based compensation arrangements
under APB Opinion No. 25.
F-10
<PAGE> 90
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment at December 31, follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Land........................................................ $ 1,439,854 $ 4,591,898
Land improvements........................................... -- 529,440
Buildings................................................... 7,253,844 16,562,595
Furniture, fixtures and equipment........................... 1,578,776 3,274,576
Construction in progress.................................... -- 4,088,424
----------- -----------
Total property, plant and equipment......................... 10,272,474 29,046,933
Less accumulated depreciation............................... 1,105,389 1,757,642
----------- -----------
Property, plant and equipment, net.......................... $ 9,167,085 $27,289,291
========== ==========
</TABLE>
Interest is capitalized in connection with the construction of residences
and is amortized over the estimated useful lives of the residences. Interest
capitalized in 1995 was approximately $62,000.
Construction in process at December 31, 1995 consisted principally of costs
related to the development of assisted living residences, with outstanding
construction commitments totaling approximately $10,702,000.
(4) ACQUISITIONS
The Company acquired a 60% partnership interest in CCCI/Northampton Limited
Partnership (the Northampton Partnership) on September 19, 1994, which operates
Northampton Manor, an assisted living residence located in Pennsylvania. The
total purchase cost of $1,266,930, including acquisition costs of $66,930, was
paid in cash.
The total purchase cost of the Northampton Partnership was allocated to the
acquired assets and assumed or incurred liabilities as follows:
<TABLE>
<S> <C>
Current assets.......................................................... $ 1,318,425
Property, plant and equipment........................................... 6,854,997
Minority interest in accumulated deficit................................ 504,832
Goodwill................................................................ 969,347
Other assets............................................................ 17,372
Current liabilities..................................................... (215,196)
Long-term debt.......................................................... (8,182,847)
-----------
$ 1,266,930
==========
</TABLE>
As of December 31, 1995, the Company had a 60% ownership interest in three
development projects and a 51% ownership interest in another development
project. The 40% and 49% interests in these consolidated affiliates not held by
the Company and the losses therefrom have been reflected as minority interest in
the consolidated balance sheets and as minority interest in losses of
consolidated subsidiaries in the consolidated statements of operations.
The Company acquired the Palmer Ranch, an 86-unit assisted living residence
in Sarasota, Florida on March 31, 1995. The total purchase cost of $850,000,
including acquisition costs of $51,815, was paid in cash.
F-11
<PAGE> 91
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total purchase cost of the Palmer Ranch was allocated to the acquired
assets and assumed or incurred liabilities as follows:
<TABLE>
<S> <C>
Current assets........................................................... $ 1,438
Property, plant and equipment............................................ 6,550,000
Goodwill................................................................. 50,000
Other assets............................................................. 51,815
Short-term note payable.................................................. (4,208,166)
Other current liabilities................................................ (45,087)
Long-term debt........................................................... (1,400,000)
Other liabilities........................................................ (150,000)
----------
$ 850,000
=========
</TABLE>
Consolidated pro forma operating revenue, net loss and net loss per share
of the Company for 1994 and 1995 as if the Northampton Partnership and the
Palmer Ranch had been acquired as of January 1, 1994, are as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Operating revenue........................................... $ 8,813,000 $10,946,000
========== ==========
Net loss.................................................... (1,012,000) (1,727,000)
========== ==========
Net loss per weighted average outstanding share............. $ (0.34) $ (0.29)
========== ==========
</TABLE>
(5) LONG-TERM INVESTMENTS
Long-term investments are comprised of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Collateral reserve fund, $1,000,000 certificate of deposit and
accrued interest required to be maintained until July 10,
2000........................................................ $ -- $1,015,677
Debt reserve fund, $112,000 certificate of deposit and accrued
interest required to be maintained until July 10, 2000...... -- 113,756
Debt reserve fund, $53,000 certificate of deposit and accrued
interest required to be maintained until August 15, 2002.... -- 53,672
---------- ----------
Total long-term investments................................... $ -- $1,183,105
========= =========
</TABLE>
F-12
<PAGE> 92
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consist of the
following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Investments in unconsolidated affiliates:
ALS-Midwest Inc. ........................................... $ -- $ 514,349
North Schoenherr Limited Partnership........................ 515,233 434,864
Marsh/Tihart Limited Partnership............................ 100,000 200,000
Eisenhower/State Limited Partnership........................ 425,000 432,070
---------- ----------
Total investments in unconsolidated affiliates................ 1,040,233 1,581,283
---------- ----------
Advances to unconsolidated affiliates:
Partnerships................................................ 454,582 2,539,860
Notes receivable............................................ 75,000 382,761
Other....................................................... 31,721 284,244
---------- ----------
Total advances to unconsolidated affiliates................... 561,303 3,206,865
---------- ----------
Total investments in and advances to unconsolidated
affiliates.................................................. $1,601,536 $4,788,148
========= =========
</TABLE>
The investment in ALS-Midwest Inc. (ALS-Midwest) represents a 50% ownership
in a corporation formed in 1991 to develop assisted living residences. The
investment in ALS-Midwest is recorded using the equity method. Projects
developed to fund these residences have been organized as separate limited
partnerships, with ALS-Midwest as the sole general partner, and the Company as a
limited partner. Other limited partners are unrelated investors.
North Schoenherr Limited Partnership was formed to develop the Hamilton
House I residence in Utica, Michigan, which opened January 16, 1995. ALS Midwest
owns a 50% interest in North Schoenherr Limited Partnership. The Company's
investment interest (through ALS-Midwest) is recorded using the equity method.
Marsh/Tihart Limited Partnership was formed to develop the Hamilton House I
residence in Lansing, Michigan, which was under construction at December 31,
1995. ALS Midwest owns a 73% interest in Marsh/ Tihart Limited Partnership. The
Company's investment interest (through ALS-Midwest) is recorded using the equity
method.
Eisenhower/State Limited Partnership was formed to develop the Hamilton
House I residence in Ann Arbor, Michigan, which opened June 8, 1995. ALS Midwest
owns a 50% interest in Eisenhower/State Limited Partnership. The Company's
investment interest (through ALS-Midwest) is recorded using the equity method.
Advances to unconsolidated affiliates also includes management fees
pursuant to an agreement with ALS Partnership (Partnership), which is 50% owned
and controlled by an officer and a shareholder. Under the terms of the
agreement, the Partnership is obligated to pay a monthly management fee of up to
12% to 15% of gross operating revenue. During 1994 and 1995, the management
fees, included in other revenue, were $290,000 and $252,000, respectively.
Notes receivable at December 31, 1995 includes $150,000 due from an officer
and a shareholder of the Company, which is repayable in three annual
installments of $50,000 plus interest at 6%, beginning June 30, 1996.
F-13
<PAGE> 93
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) OTHER ASSETS
Other assets are comprised of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Project development costs..................................... $1,365,325 $1,170,914
Goodwill, net................................................. 957,990 954,522
Organizational and other costs, net........................... 110,099 88,692
Deferred financing costs, net................................. 36,579 273,079
Deposits and other............................................ 12,300 273,116
---------- ----------
Total other assets............................................ $2,482,293 $2,760,323
========= =========
</TABLE>
(8) LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- -----------
<S> <C> <C>
Note payable, due April 20, 1995, interest at 9.5%........... $ 56,572 $ --
Mortgage payable, interest at 8.8%, refinanced in 1995....... 5,451,937 --
Mortgage payable, interest at 8.1%, refinanced in 1995....... 1,039,565 --
Mortgage payable, due in 20 quarterly installments, the first
four quarterly installments represent interest only,
interest at 8% through June 30, 1996, thereafter interest
at the prime rate plus 1% not to exceed 10% (9.5% at
December 31, 1995), outstanding principal balance of
approximately $954,000 due on March 31, 2000............... -- 1,000,000
Mortgage payable, due in 20 quarterly installments, the first
four quarterly installments represent interest only,
interest at the prime rate plus 1% not to exceed 10% (9.5%
at December 31, 1995), outstanding principal balance of
approximately $380,000 due on April 2, 2000................ -- 400,000
Mortgage payable, due in 60 monthly installments including
interest at 9.21%, outstanding principal balance of
approximately $4,027,000 due on July 10, 2000.............. -- 4,279,064
Mortgage payable, due in 72 monthly installments including
interest at 9.985%, outstanding principal balance of
approximately $1,751,000 due on August 15, 2002............ -- 1,913,915
Mortgage payable, due in 120 monthly installments including
interest at 8.46% through June 30, 2000, thereafter at the
five-year U.S. Treasury rate plus 2.5% (7.88% at December
31, 1995), outstanding principal balance of approximately
$5,046,000 due on June 1, 2005............................. -- 6,567,357
</TABLE>
F-14
<PAGE> 94
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1994 1995
---------- -----------
<S> <C> <C>
Note payable, due November 20, 2020, first twelve monthly
payments represent interest only, interest at the prime
rate plus 1% (9.5% at December 31, 1995), secured by the
Clare Bridge project of Lower Makefield and all rents,
income and furniture and equipment......................... -- 3,103,079
---------- -----------
Total long-term debt......................................... 6,548,074 17,263,415
Less current installments.................................... 191,814 162,419
---------- -----------
Total long-term debt, less current installments.............. $6,356,260 $17,100,996
========= ==========
</TABLE>
The Company is required to maintain letters of credit aggregating
$1,000,000 under terms of the mortgage payable due June 1, 2005, until such time
as Northampton Manor can maintain a certain minimum debt service coverage ratio
for twelve consecutive months or until certain performance criteria are met.
The mortgages payable are secured by security agreements and guarantees by
the Company. In addition, certain security agreements require the Company to
maintain collateral and debt reserve funds (see Notes 5 and 14).
Interest paid for the years ended December 31, 1994 and 1995 was $142,270
and $1,044,863, respectively.
Principal payments on long-term debt for the next five years and thereafter
are as follows:
<TABLE>
<S> <C>
1996.................................................................... $ 162,419
1997.................................................................... 217,732
1998.................................................................... 235,332
1999.................................................................... 257,716
2000.................................................................... 282,228
Thereafter.............................................................. 16,107,988
-----------
Total long-term debt.................................................... $17,263,415
==========
</TABLE>
(9) ACCRUED EXPENSES
Accrued expenses are comprised of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Accrued salaries and wages................................... $255,935 $ 332,097
Advance rents and deposits................................... 520,133 545,584
Other........................................................ 135,881 302,448
-------- ----------
Total accrued expenses....................................... $911,949 $1,180,129
======== =========
</TABLE>
F-15
<PAGE> 95
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) ADVANCES FROM AND NOTES PAYABLE TO UNCONSOLIDATED AFFILIATES
Advances from and notes payable to unconsolidated affiliates consist of the
following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Advances -- Evergreen....................................... $ 216,658 --
Note payable -- Evergreen................................... 1,550,000 --
Note payable -- minority stockholder........................ 67,698 --
---------- ----------
Total advances from and notes payable to unconsolidated
affiliates................................................ 1,834,356 --
Less current installments................................... 284,356 --
---------- ----------
Total advances from and notes payable to unconsolidated
affiliates, less current installments..................... $1,550,000 --
========= =========
</TABLE>
The advances and notes payable to Evergreen, interest at 9%, were paid in
full in May 1995. See Note 11.
(11) STOCKHOLDERS' EQUITY
The Company completed a private placement equity offering on May 26, 1995,
resulting in net proceeds of $19,029,080, for 4,302,994 shares of its common
stock. Simultaneously, the Company issued 917,150 shares of its stock to
Evergreen as consideration for $2,677,342 cash received during 1994, which is
reflected as common stock and additional paid-in capital in the accompanying
balance sheet.
The Company has 30,000,000 shares of common stock authorized, and 1,812,551
shares and 6,652,059 shares of no par, common shares issued and outstanding at
December 31, 1994 and 1995, respectively.
(12) STOCK OPTION PLAN
The Company adopted an incentive compensation plan (the 1995 Plan) during
1995, which provides key employees of the Company performance incentives, and
also provides a means of encouraging stock ownership in the Company by officers,
directors, and key employees through the issuance of stock options.
The Compensation Committee is authorized to designate recipients of the
options, date of grants, the number of shares subject to options, and the time
during which the options may be exercised. The price of stock options granted
under the plan cannot be less than the fair market value of the shares at the
time the options are granted.
Options to purchase an aggregate of 459,902 shares of common stock were
issued and outstanding at December 31, 1995, at a weighted average exercise
price of $4.38 per share, of which options to purchase 103,483 shares were
exercisable at such date.
F-16
<PAGE> 96
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) INCOME TAXES
Deferred tax assets and liabilities consist of the following at December
31:
<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $228,600 $ 800,200
Investment in unconsolidated affiliates.................... 1,400 105,100
Other...................................................... 56,000 104,100
-------- ----------
Total deferred tax assets.................................... 286,000 1,009,400
Less valuation allowance..................................... 259,500 917,500
-------- ----------
Deferred tax assets, net of valuation allowance.............. $ 26,500 $ 91,900
-------- ----------
Deferred tax liability -- tax versus book depreciation....... $ 26,500 $ 91,900
======== =========
</TABLE>
The Company has approximately $2,030,000 of net operating loss
carryforwards for income tax purposes at December 31, 1995, which will begin to
expire, if unused, beginning in the year 2008. The loss may be further limited
as to future use due to the change in control provisions in the Internal Revenue
Code which apply because of the issuance of stock in the private placement in
May 1995.
(14) COMMITMENTS AND CONTINGENCIES
The Company leases certain properties under non-cancelable operating leases
that expire at various dates through the year 2014.
Future annual minimum operating lease payments at December 31, 1995 are as
follows:
<TABLE>
<S> <C>
1996.................................................................... $ 1,088,249
1997.................................................................... 1,109,970
1998.................................................................... 1,137,957
1999.................................................................... 1,167,482
2000.................................................................... 1,077,870
Thereafter.............................................................. 15,514,590
-----------
$21,096,118
==========
</TABLE>
The Company has guaranteed specific obligations of several unconsolidated
affiliates, totaling $5,680,000 at December 31, 1995. These obligations consist
primarily of construction financing and lease agreements entered into by
partially-owned limited partnerships. The Company anticipates that its
unconsolidated affiliates will be able to perform under their respective
financings and other obligations, and that no payments will be required and no
losses will be incurred under such guarantees.
(15) SUBSEQUENT EVENTS
The Company sold two assisted living residences for approximately
$7,022,000 on January 22, 1996 and leased them back under a ten-year sale and
lease-back agreement. The transaction produced a gain of approximately
$1,083,000, which will be deferred and amortized over the lease period.
On January 26, 1996 the Company acquired Heartland Retirement Services,
Inc. (Heartland) for $5,500,000 cash plus 261,424 shares of the Company's common
stock with an estimated market value of $1,749,000. The acquisition was
effective as of January 1, 1996. This acquisition was financed with bridge
financing of approximately $8,700,000 which was obtained from a private
financial management firm whose president is a director of the Company. As of
January 1, 1996, Heartland operated 20 assisted living residences.
F-17
<PAGE> 97
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 24, 1996, the Company acquired New Crossings International
Corporation, a company which operates 15 assisted living residences as of May,
1996. The total purchase consideration was 2,007,049 shares of the Company's
common stock with an estimated market value of $9,281,000. (unaudited)
On May 24, 1996, the Company acquired the limited partnership interest in
five Michigan limited partnerships owned by unrelated investors for aggregate
consideration of 115,025 shares of common stock and promissory notes in the
aggregate principal amount of $2,900,000. These promissory notes are due and
payable on January 31, 1997 and bear interest at the rate of 8% per annum. The
Company also acquired 100% of the outstanding stock of ALS-Midwest pursuant to a
merger transaction whereby the shareholders of ALS-Midwest, other than the
Company, received, in exchange for their shares of ALS-Midwest, $300,000 in cash
and 57,512 shares of the Company's common stock. (unaudited)
On May 24, 1996, the Company raised approximately $2 million of equity
capital through the private placement of 430,281 shares of the Company's common
stock. (unaudited)
F-18
<PAGE> 98
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1996
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 6,816,266
Short-term investments....................................................... 50,000
Resident receivables, net.................................................... 235,647
Other current assets......................................................... 424,323
------------
Total current assets................................................. 7,526,236
------------
Property, plant and equipment, net............................................. 35,029,600
Long-term investments.......................................................... 1,167,658
Investments in and advances to unconsolidated affiliates....................... 6,754,273
Other assets................................................................... 3,346,086
------------
Total assets......................................................... $ 53,823,853
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt....................................... $ 104,991
Accounts payable............................................................. 388,917
Accrued expenses............................................................. 1,360,067
------------
Total current liabilities............................................ 1,853,975
------------
Long-term debt, less current installments...................................... 30,631,646
Other long-term liabilities.................................................... 1,350,504
Minority interest.............................................................. 637,088
Stockholders' equity:
Common stock and additional paid-in capital.................................. 23,743,238
Accumulated deficit.......................................................... (4,392,598)
------------
Total stockholders' equity........................................... 19,350,640
------------
Total liabilities and stockholders' equity........................... $ 53,823,853
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-19
<PAGE> 99
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1995 1996
---------- -----------
<S> <C> <C>
Revenue:
Resident service fees.......................................... $1,982,928 $4,033,003
Other.......................................................... 98,352 292,115
---------- -----------
Operating revenue................................................ 2,081,280 4,325,118
---------- -----------
Operating expenses:
Residence operations........................................... 1,347,562 3,241,020
Lease expense.................................................. 426,158 487,532
General and administrative..................................... 582,620 1,583,452
Depreciation and amortization.................................. 145,257 365,237
---------- -----------
Total operating expenses............................... 2,501,597 5,677,241
---------- -----------
Operating loss................................................... (420,317) (1,352,123)
---------- -----------
Other income (expense):
Interest expense............................................... (180,858) (530,051)
Interest income................................................ 1,352 139,223
Loss on sale of land........................................... -- (20,766)
Equity in (losses) income of unconsolidated affiliates......... 38,913 (84,809)
Minority interest in losses of consolidated subsidiaries....... 22,413 44,699
---------- -----------
Total other expense, net............................... (118,180) (451,704)
---------- -----------
Net loss......................................................... $(538,497) $(1,803,827)
========= ==========
Net loss per share............................................... $(0.18) $(0.22)
========= ==========
Weighted average shares outstanding.............................. 2,959,478 8,060,411
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-20
<PAGE> 100
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................ $ (538,497) $(1,803,827)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................ 145,257 365,237
(Increase) decrease in net resident receivables.............. 14,678 (439,480)
(Increase) decrease in other current assets.................. (32,079) 85,750
Decrease in accounts payable................................. (76,365) (515,886)
Increase in accrued expenses................................. 890,265 56,258
Changes in other assets and liabilities and other
adjustments................................................. (1,494,090) 1,048,059
----------- -----------
Net cash used in operating activities............................. (1,090,831) (1,203,887)
----------- -----------
Cash flows from investing activities:
Sale of property under lease.................................... -- 5,975,101
Payments for property, plant and equipment and project
development costs............................................ (6,831,962) (2,406,859)
Changes in investments in and advances to unconsolidated
affiliates................................................... 658,016 (1,683,548)
Increase in long-term investments............................... -- 15,447
Cash from acquisition........................................... -- 1,100,100
----------- -----------
Net cash provided by (used in) investing activities............... (6,173,946) 3,000,241
----------- -----------
Cash flows from financing activities:
Repayments of long-term debt.................................... (1,491,323) (8,203,331)
Proceeds from issuance of long-term debt........................ 11,050,000 10,026,464
Changes in advances from and notes payable to unconsolidated
affiliates................................................... (1,834,356) --
Issuance of common stock and other capital contribution......... -- 248,815
----------- -----------
Net cash provided by financing activities......................... 7,724,321 2,071,948
----------- -----------
Net increase in cash and cash equivalents......................... 459,544 3,868,302
Cash and cash equivalents:
Beginning of period............................................. 310,814 2,947,964
----------- -----------
End of period................................................... $ 770,358 $ 6,816,266
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-21
<PAGE> 101
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheet as of March 31, 1996 and condensed
consolidated statements of operations and cash flows for the three months ended
March 31, 1995 and 1996 contained herein, which are unaudited, include the
accounts of the Company and its affiliates which are under the common financial
control of the Company. All significant intercompany accounts have been
eliminated in consolidation. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. Adjustments consist only of normal recurring items. The results of
operations for the three months ended March 31, 1995 and 1996, are not
necessarily indicative of the results to be expected for the full fiscal year.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. Reference is made to the Company's audited
financial statements and the related notes as of December 31, 1994 and 1995 and
for each of the years then ended, which provide additional disclosures and a
further description of accounting policies.
(2) BUSINESS COMBINATION
On January 26, 1996 the Company acquired Heartland Retirement Services,
Inc. (Heartland) for $5,500,000 cash plus 261,424 shares of the Company's common
stock with an estimated market value of $1,749,000. The acquisition was
effective as of January 1, 1996. This acquisition was financed by a bridge loan
of approximately $8,700,000 which was obtained from a private financial
management firm whose president is a director of the Company. As of January 1,
1996, Heartland operated 20 assisted living residences.
(3) NEW ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The effect of adopting Statement 121 was not material to the
Company's financial statements.
Effective January 1, 1996, the Company adopted FASB Statement No. 123,
Accounting for Stock-Based Compensation, which provides an alternative to APB
Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for
stock-based compensation issued to employees. The Company has elected to
continue to account for stock-based compensation arrangements under APB Opinion
No. 25. However the Company will begin to disclose the pro forma effect on net
income and earnings per share of the fair value-based accounting for those
arrangements, as required by Statement 123, beginning with its 1996 annual
report.
(4) SUBSEQUENT EVENTS
On May 24, 1996, the Company acquired New Crossings International
Corporation a company which operates 15 assisted living facilities as of May,
1996. The total purchase consideration was 2,007,049 shares of the Company's
common stock with an estimated value of $9,281,000.
On May 24, 1996 the Company acquired the limited partnership interest in
five Michigan limited partnerships owned by unrelated investors for aggregate
consideration of 115,025 shares of common stock and promissory notes in the
aggregate principal amount of $2,900,000. These promissory notes are due and
payable on January 31, 1997 and bear interest at the rate of 8% per annum. The
Company also acquired 100% of the outstanding stock of ALS-Midwest pursuant to a
merger transaction whereby the shareholders of ALS-Midwest other than the
Company received, in exchange for their shares of ALS-Midwest, $300,000 in cash
and 57,512 shares of the Company's common stock.
F-22
<PAGE> 102
On May 24, 1996, the Company raised approximately $2 million of equity
capital through the private placement of 430,281 shares of the Company's common
stock.
On May 17, 1996, the Board of Directors authorized and the stockholders
approved the filing of a Restated Certificate of Incorporation that provides for
(a) the authorization of 5 million shares of preferred stock, $0.01 par value,
the terms of which may be determined by the Board of Directors from time to
time, (b) the authorization of 30 million shares of common stock, $0.01 par
value, and (c) 1,812.55 for 1 stock split of its common stock. Accordingly, the
stock split and the changes in preferred and common stock have been given
retroactive effect in the accompanying condensed consolidated financial
statements.
In connection with an anticipated initial public offering (IPO), the
Company intends to file a registration statement with the Securities and
Exchange Commission (SEC). Pursuant to the requirements of the SEC, for purposes
of net loss per share, common stock issued and common stock options granted at
per share amounts less than the anticipated IPO price per share subsequent to
May 1995 have been reflected as outstanding for all periods presented.
Accordingly, weighted average shares outstanding was increased by 1,146,928
shares for the effect of such common stock and stock options.
F-23
<PAGE> 103
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Heartland Retirement Services, Inc.:
We have audited the accompanying consolidated balance sheets of Heartland
Retirement Services, Inc. (a majority owned subsidiary of Heartland Development
Corporation) and Subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for the period from inception, January 11, 1993, through December 31,
1993, and for each of the years ended December 31, 1994 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 9 to the financial statements, on January 26, 1996,
the shareholders of Heartland Retirement Services, Inc. sold all of their stock
to Alternative Living Services, Inc.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Heartland Retirement
Services, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
results of its operations and its cash flows for the period from inception,
January 11, 1993, through December 31, 1993, and for the years ended December
31, 1994 and 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 26, 1996.
F-24
<PAGE> 104
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 122,209 $1,100,100
Resident receivables.............................................. 131,748 185,617
Due from related party............................................ 584,317 --
Food inventory.................................................... -- 18,606
Prepaids and other current assets................................. 2,423 71,641
---------- ----------
Total current assets...................................... 840,697 1,375,964
Property and equipment:
Land.............................................................. 76,045 743,519
Land improvements................................................. -- 27,355
Buildings......................................................... -- 6,307,150
Furniture and fixtures............................................ 38,779 555,167
Computers and equipment........................................... 20,290 108,230
Construction in progress.......................................... 24,698 180,042
---------- ----------
159,812 7,921,463
Less -- Accumulated depreciation.................................. (3,667) (77,592)
---------- ----------
156,145 7,843,871
---------- ----------
Investments and other assets:
Investments....................................................... 57,586 282,577
Goodwill.......................................................... -- 12,771
Other assets, net of amortization................................. 118,017 94,230
Deferred income taxes............................................. 48,466 137,323
---------- ----------
224,069 526,901
---------- ----------
Total assets.............................................. $1,220,911 $9,746,736
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 33,274 $ 161,680
Real estate taxes payable......................................... 1,040 80,453
Other accrued expenses............................................ 71,424 109,887
Deferred revenue.................................................. 144,761 120,820
Construction note payable......................................... 97,369 --
Income taxes payable.............................................. 1,782 --
Due to related party.............................................. -- 4,433,878
Current maturities of mortgage note payable....................... -- 41,454
---------- ----------
Total current liabilities................................. 349,650 4,948,172
Mortgage notes payable.............................................. -- 3,556,192
Minority interest................................................... -- 32,042
Shareholders' equity
Common stock, $1 par value; authorized 9,000 shares; issued and
outstanding 100 shares......................................... 100 100
Additional paid-in capital........................................ 1,404,758 2,632,625
Accumulated deficit............................................... (533,597) (1,422,395)
---------- ----------
Total shareholders' equity................................ 871,261 1,210,330
---------- ----------
Total liabilities and shareholders' equity................ $1,220,911 $9,746,736
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-25
<PAGE> 105
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIOD FROM INCEPTION (JANUARY 11, 1993) TO DECEMBER 31, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- -----------
<S> <C> <C> <C>
Revenue:
Resident service fees.................................... $ -- $ -- $ 1,140,779
Other.................................................... 260,834 359,062 281,951
--------- --------- -----------
Operating revenue.......................................... 260,834 359,062 1,422,730
Operating expenses:
Operating and maintenance................................ -- -- 207,443
Salary and related costs................................. 146,817 308,665 1,413,796
General and administrative............................... 430,659 648,325 861,387
Real estate taxes and insurance.......................... -- 2,915 54,111
Depreciation and amortization............................ 16,307 9,188 108,486
--------- --------- -----------
Total operating expenses......................... 593,783 969,093 (2,645,223)
Operating loss........................................... (332,949) (610,031) (1,222,493)
Other income (expense):
Equity in losses of unconsolidated affiliates............ -- (1,617) (47,496)
Interest expense......................................... -- -- (226,807)
Interest income.......................................... 9,366 52,175 8,901
Minority interest in losses of consolidated subsidiary... -- -- 12,958
--------- --------- -----------
Net loss before income taxes..................... (323,583) (559,473) (1,474,937)
Income tax benefit......................................... 129,838 219,621 586,139
--------- --------- -----------
Net loss......................................... $(193,745) $(339,852) $ (888,798)
========= ========= ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-26
<PAGE> 106
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 11, 1993) TO DECEMBER 31, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balances at January 11, 1993...................... $100 $ 2,758 $ -- $ 2,858
Net loss........................................ -- -- (193,745) (193,745)
Capital contribution from Parent................ -- 1,402,000 -- 1,402,000
------ ---------- ----------- ----------
Balances at December 31, 1993..................... 100 1,404,758 (193,745) 1,211,113
Net loss........................................ -- -- (339,852) (339,852)
------ ---------- ----------- ----------
Balances at December 31, 1994..................... 100 1,404,758 (533,597) 871,261
Net loss........................................ -- -- (888,798) (888,798)
Capital contribution from Parent................ -- 1,227,867 -- 1,227,867
------ ---------- ----------- ----------
Balances at December 31, 1995..................... $100 $2,632,625 $(1,422,395) $1,210,330
====== ========= ========== =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-27
<PAGE> 107
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 11, 1993) TO DECEMBER 31, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $ (193,745) $(339,852) $ (888,798)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization....................... 27,566 9,188 108,486
Deferred income taxes............................... (19,836) (28,630) (85,857)
Changes in operating assets and liabilities --
Increase in accounts receivable................... (113,854) (12,243) (53,869)
(Increase) decrease in due from related party..... 11,341 (273,401) 584,317
(Increase) decrease in prepaids and other current
assets......................................... (12,630) 5,958 (87,824)
Increase in other noncurrent assets............... -- (15,420) (23,545)
Increase in accounts payable and accrued
expenses....................................... 47,848 47,596 166,869
Increase (decrease) in deferred revenue........... 22,325 122,436 (23,941)
Increase (decrease) in taxes payable.............. 5,273 (3,491) 77,631
----------- --------- -----------
Cash used in operations........................ (225,712) (487,859) (229,531)
Cash flows from investing activities:
Loan to Parent......................................... (1,145,000) -- --
Parent loan repayment.................................. -- 698,000 447,000
Purchase of equity investments......................... (8,770) (46,842) (224,991)
Payments for property and equipment.................... -- (159,812) (6,874,642)
----------- --------- -----------
Cash provided by (used in) investing
activities................................... (1,153,770) 491,346 (6,652,633)
Cash flows from financing activities:
Net proceeds from mortgage notes payable............... -- 97,369 3,500,277
Capital contribution from Parent....................... 1,402,000 -- 340,858
Net contribution of minority interest in subsidiary.... -- -- 32,042
Loans from related parties............................. -- -- 3,986,878
Financing costs........................................ -- (2,050) --
----------- --------- -----------
Cash provided by financing activities.......... 1,402,000 95,319 7,860,055
Net increase in cash................................... 22,518 98,806 977,891
Cash at beginning of period............................ 885 23,403 122,209
----------- --------- -----------
Cash at end of period.................................. $ 23,403 $ 122,209 $ 1,100,100
========== ========= ==========
Cash paid during the year for interest................. -- -- $ 181,551
Cash received during the year for taxes................ -- -- $ 366,359
Direct purchase of property by Parent.................. -- -- $ 887,009
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-28
<PAGE> 108
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Heartland Retirement Services, Inc. ("Heartland"), a 95.5% owned subsidiary
of Heartland Development Corporation ("HDC" or "Parent") was incorporated on
January 11, 1993, to provide assisted-living products and services to older
adults. Heartland has developed an assisted-living trademark, known as
WovenHearts(R), which is marketed and franchised in Wisconsin and the
continental United States. Heartland develops, owns and operates a number of
community based residential facilities operating under the WovenHearts name.
Residents require assistance with the activities of daily living and, thus, are
no longer able to live independently. Each resident pays a monthly fee that
covers the use of an individual living unit and common areas, as well as
utilities, meals, housekeeping and assistance with the routine activities of
daily living such as bathing and dressing. Heartland also provides retirement
housing consulting services.
WovenCare Systems, Inc. ("WovenCare"), formerly Hennig & Associates, Inc.,
is a wholly owned subsidiary of Heartland which provides property management
services for various assisted living residences.
As of December 31, 1995, the Company owned, and consolidated in its
financial statements, 12 assisted living facilities with 15 to 20 units each, as
follows:
<TABLE>
<CAPTION>
PERCENT COMMENCED
LEGAL ENTITY LOCATION OWNED OPERATIONS
------------------------------------ ---------------------- -------- ----------------
<S> <C> <C> <C>
Heartland Retirement Services Clintonville,
Clintonville Associates, LLC Wisconsin 100% July, 1995
Heartland Retirement Services
Edgerton Associates, LLC Edgerton, Wisconsin 100 October, 1995
Heartland Retirement Services
Janesville Associates, LLC Janesville, Wisconsin 100 October, 1995
Heartland Retirement Services
Jefferson I Associates, LLC Jefferson, Wisconsin 100 October, 1995
Heartland Retirement Services
Kaukauna Associates, LLC Kaukauna, Wisconsin 100 July, 1995
Heartland Retirement Services
Manitowoc Associates, LLC Manitowoc, Wisconsin 100 December, 1995
Heartland Retirement Services
Neenah Associates, LLC Neenah, Wisconsin 100 Anticipated
February, 1996
Heartland Retirement Services
New London Associates, LLC New London, Wisconsin 100 April, 1995
Heartland Retirement Services
Onalaska Associates, LLC Onalaska, Wisconsin 100 June, 1995
Heartland Retirement Services
Platteville Associates, LLC Platteville, Wisconsin 72.7 November, 1995
Heartland Retirement Services
Rice Lake Associates, LLC Rice Lake, Wisconsin 100 October, 1995
Heartland Retirement Services
Shawano Associates, LLC Shawano, Wisconsin 100 July, 1995
</TABLE>
F-29
<PAGE> 109
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidation policy
The consolidated financial statements include the accounts of Heartland and
its wholly-owned and majority-owned subsidiaries. All significant intercompany
accounts are eliminated in consolidation. The 1993 accounting period covered by
the accompanying financial statements is from January 11, 1993 (commencement of
operations) through December 31, 1993.
Investments
Heartland and its subsidiaries are general partners in three limited
partnerships and members in four limited liability companies that each own a
single community based retirement facility. The Company's investment in each of
these entities at December 31, 1995 is between .5% and 50%. These investments
are accounted for under the equity method in which Heartland records its
proportionate share of the partnership's or limited liability company's net
income or loss.
Cash and cash equivalents
Cash and cash equivalents include cash on deposit held at financial
institutions with original maturities of three months or less.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the following estimated useful lives of the
assets:
<TABLE>
<CAPTION>
YEARS
----
<S> <C>
Buildings..................................................................... 40
Furniture and fixtures........................................................ 12
Computers and equipment....................................................... 3-5
</TABLE>
Interest incurred during construction periods is capitalized as part of the
building costs. Capitalized interest was $46,490 in the year ended December 31,
1995. There was no interest capitalized during the years ended December 31, 1993
and 1994. Capitalized interest costs are computed using the borrowing rate for
construction expenditures (9.75% for 1995).
Maintenance and repair costs are charged to expense as incurred, and
renewals and improvements are added to property.
As of each balance sheet date, the Company's management evaluates the
carrying value of property, plant and equipment for possible impairment based
upon the expectation of undiscounted operating cash flows derived from the use
of the assets.
Construction in progress
Construction in progress at December 31, 1994 and 1995 relates to one
project and 14 projects, respectively. The 1995 projects are scheduled for
completion in 1996 and are at various stages of development. Construction in
progress on these projects include earnest money deposits on land purchases,
building permits, architecture plans, site analysis and other development costs
associated with the facilities. The 1994 project has been completed.
F-30
<PAGE> 110
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other noncurrent assets
Other noncurrent assets consist of the following as of December 31:
<TABLE>
<CAPTION>
AMORTIZATION
1994 1995 LIFE
-------- ------- ---------------
<S> <C> <C> <C>
Trademark costs................................. $ 7,123 $ 6,013 7 years
Financing costs................................. 2,050 43,209 Term of debt
Franchise costs................................. 36,896 36,052 5 years
Brochures....................................... 71,948 -- As used
Other........................................... -- 8,956 1 year or less
-------- -------
$118,017 $94,230
======== =======
</TABLE>
Revenue recognition
Revenues are recorded when services are rendered and consist primarily of
residents' fees for basic housing and support services including routine
nursing, and optional personalized assistance on a fee for service basis. The
residency agreements are on a month to month basis. Heartland may adjust the
monthly charge with 30 days advance notice.
The Company charges its new residents an upfront, nonrefundable admission
fee which is charged to residents to cover estimated costs of processing and
evaluating new residents. Such admission fee revenues are included in residents'
fees and are recorded when the fees are received and totaled approximately $0,
$0 and $136,000 for the periods ended December 31, 1993, 1994, and 1995,
respectively. The costs of processing and evaluating prospective new residents
are expensed as incurred.
Heartland also derives revenue from retirement housing consulting services
and franchise sales. Consulting service revenue is recognized as services are
performed and initial franchise fee revenue is recognized when all related
franchise services have been performed. A monthly franchise fee based on a
percentage of gross receipts is charged to the Company's three franchisees and
is recognized as earned. Consulting service revenues were approximately
$227,000, $115,000, and $45,000 for the periods ended December 31, 1993, 1994
and 1995, respectively. Franchise fee revenues were approximately $0, $72,500,
and $47,500 for the periods ended December 31, 1993, 1994, and 1995,
respectively. Consulting service and franchise fee revenues are included in
other revenues in the financial statements.
Heartland receives a development fee for services related to facility
start-up costs. These services include, but are not limited to governmental
approvals, facility design, construction management, financing negotiation,
licensing, and initial resident lease-up. Revenues are recognized over the
construction period and totaled approximately $0, $139,500, and $80,500 for the
periods ended December 31, 1993, 1994 and 1995, respectively.
The deferred revenue represents that portion of franchise revenues and
development fee revenues that have been billed, but for which services have not
yet been provided.
Income taxes
Deferred income taxes are provided for differences in the financial
reporting and income tax basis of assets and liabilities.
F-31
<PAGE> 111
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill
Costs in excess of fair market value at date of acquisition have been
recorded as goodwill and amortized over fifteen years on a straight-line basis.
The Company's management periodically evaluates goodwill for impairment based
upon the future economic benefit of the recorded balance.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents approximate fair value
because of the short-term nature of these accounts and because they are invested
in accounts earning market rates of interest. The carrying amount of the
Company's debt approximates fair value because the interest rates approximate
the current rates available to the Company.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ACQUISITION OF ASSISTED LIVING FACILITIES
In 1995, the Company purchased nine assisted living facilities for
$5,295,739 (including closing costs of $12,489). The acquisitions have been
accounted for as a purchase and, accordingly, the purchase price was allocated
to the assets acquired based on the estimated fair value of such assets at date
of acquisition. Allocation of the cash purchase price is summarized as follows:
<TABLE>
<S> <C>
Land..................................................................... $ 310,600
Building................................................................. 4,755,807
Furniture and equipment.................................................. 287,000
Construction in progress................................................. 65,129
Goodwill................................................................. 15,871
Liabilities assumed...................................................... (138,668)
----------
Total cash purchase price................................................ $5,295,739
=========
</TABLE>
(3) RELATED PARTY TRANSACTIONS
The following is a summary of related party balances:
<TABLE>
<CAPTION>
1994 1995
--------- -----------
<S> <C> <C>
Due from related parties:
Parent..................................................... $ 805,674 $ 158,482
Other...................................................... 17,712 286,244
--------- -----------
823,386 444,726
--------- -----------
Due (to) related parties:
Parent..................................................... (232,437) (3,263,269)
Other...................................................... (6,632) (1,615,335)
--------- -----------
(239,069) (4,878,604)
--------- -----------
Net due (to) from related parties............................ $ 584,317 $(4,433,878)
========= ==========
</TABLE>
F-32
<PAGE> 112
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in the amount due from related parties at December 31, 1994 and
1995, is $447,000 and $277,744, respectively, for a related party loan. This
loan is due on demand and bears interest based on the prime interest rate. The
rate on this loan was 8.50% and 8.65% at December 31, 1994 and 1995,
respectively. In addition, the amount due from Parent at December 31, 1994 and
1995, includes $306,692 and $158,482, respectively, for income taxes receivable
(see Note 6).
During 1993, 1994 and 1995, Heartland incurred approximately $228,000,
$114,000 and $117,100, respectively, in allocated expenses from its sister
company, which included office rent and vehicle mileage.
Included in the amount due to Parent at December 31, 1994 and 1995 is $0
and $2,919,000, respectively, of 8.25% to 8.75% mortgage notes payable and $0
and $299,014, respectively of an 8.25% intercompany revolving credit agreement.
Included in due to other at December 31, 1995, is a $1,583,000 8.25% note
payable due to a sister company (see Note 9).
Management and partnership fees
WovenCare receives a 6% management fee and Heartland receives a 2%
partnership management fee based on the gross receipts for certain of the
entities in which they have investments. Heartland recognized management fees
and partnership management fee service revenues of approximately $34,000,
$32,000 and $109,000 in 1993, 1994, and 1995, respectively, from these related
entities.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following as of December 31, 1995:
<TABLE>
<S> <C>
Mortgage notes payable to a financial institution; with varying annual
payments including interest at 9.75% through 1997 and at 1% above prime
thereafter; due March through November, 2000; secured by specific
residence properties................................................... $3,597,646
----------
Total.................................................................... 3,597,646
Less -- Current maturities............................................... 41,454
----------
Mortgage notes payable................................................... $3,556,192
==========
</TABLE>
As of December 31, 1995, the following principal payments are scheduled:
<TABLE>
<S> <C>
1996..................................................................... $ 41,454
1997..................................................................... 50,812
1998..................................................................... 52,189
1999..................................................................... 57,627
2000..................................................................... 3,395,564
----------
$3,597,646
==========
</TABLE>
(5) COMMON STOCK
In 1993, Heartland issued 4.5 shares of its common stock to the minority
shareholder in exchange for 100% of the minority shareholder's common stock in
WovenCare. As a result of this transaction, WovenCare became a wholly owned
subsidiary of Heartland.
As part of this transaction, Heartland entered into a shareholder agreement
with the minority shareholder. This agreement allows the minority shareholder to
put any or all of his Heartland common stock to the Company during a 30-day
period each year beginning in 1997 at the greater of 1.5 times book value or its
fair market value, as defined. In addition, the agreement allows Heartland to
purchase the stock from the minority
F-33
<PAGE> 113
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shareholder at 1.5 times book value or fair value upon the occurrence of certain
events. As discussed in Note 9, the minority shareholder sold these shares on
January 26, 1996.
(6) STOCK APPRECIATION RIGHTS
A 1993 stock appreciation rights agreement between Heartland and its 4.5%
minority shareholder was cancelled in January 1996, in connection with the sale
of Heartland stock by the shareholders as discussed in Note 9. As none of the
financial performance targets had been met, no provision has been recorded in
the financial statements for these rights.
(7) INCOME TAXES
Heartland has an agreement with its Parent for the apportionment of Federal
income tax liabilities and benefits. The Parent calculates Federal taxes on a
with and without Heartland basis and charges Heartland for its portion of any
incremental Federal income tax liability. Conversely, the Parent will reimburse
Heartland for any reduction of its Federal income tax liability related to the
operations of Heartland. The income tax benefit receivable is included in due
from related party.
The income tax (provision) benefit consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.............................................. $115,275 $192,773 $497,232
State................................................ (5,273) (1,782) 50
Deferred
19,836 28,630 88,857
-------- -------- --------
Total.................................................. $129,838 $219,621 $586,139
======== ======== ========
</TABLE>
The effective income tax rate exceeded the Federal statutory rate due
primarily to state income taxes.
The net deferred income tax asset in the accompanying balance sheets
include the following amounts of deferred income tax assets and liabilities:
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Deferred income tax asset......................................... $52,446 $154,116
Deferred income tax liability..................................... (3,980) (16,793)
------- --------
Net deferred income tax asset..................................... $48,466 $137,323
======= ========
</TABLE>
The deferred income tax liability results primarily from differences in the
financial reporting and income tax basis of property and consulting and
franchise revenues.
At December 31, 1995, the Company has recorded a deferred income tax asset
related to the State of Wisconsin net operating loss carryforwards:
<TABLE>
<CAPTION>
NET OPERATING
EXPIRE AT CLOSE OF TAX YEARS YEAR LOSS
ENDED DECEMBER 31, GENERATED CARRYFORWARD
- ------------------------------ --------- --------------
<S> <C> <C>
2008 1993 $ 335,199
2009 1994 540,971
2010 1995 1,466,351
--------------
$2,342,521
===========
</TABLE>
F-34
<PAGE> 114
HEARTLAND RETIREMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) COMMITMENTS
As the general partner for Hennig Lodi Limited Partnership, WovenCare has
guaranteed a mortgage note of $319,000 and a business note of $35,600. These
notes are secured by the property of the limited partnership.
Heartland has guaranteed its share of mortgage notes on behalf of several
unconsolidated limited partnerships and limited liability companies in which the
company has an ownership interest. The Heartland obligation is limited to its
investment percentage in each development multiplied times the mortgage note
balance due, or an aggregate of $3,864,642. These notes are secured by the
property of each limited partnership or limited liability company. The mortgage
note obligation of one of these entities is a $2.5 million Wisconsin Health and
Educational Facilities Authority (WHEFA) revenue bond issue that the Parent has
partially guaranteed with a letter of credit of $500,000. See Note 9.
Heartland has entered into certain contracts for the construction of
residential assisted-living residences in Minnesota and Wisconsin. Completion of
the residences is scheduled throughout 1996. At December 31, 1995, approximately
$17,000 is still to be incurred under the terms of these contracts.
Heartland has also entered into agreements to purchase certain land and
buildings during 1996, with the intention of constructing and operating
assisted-living residences. At December 31, 1995, Heartland has approximately
$1,292,000 net of earnest money deposits of outstanding commitments under these
agreements.
Heartland has also entered into development agreements to engage an outside
party to locate and develop assisted-living residences within Wisconsin and
Minnesota. Terms of these agreements specify that payments will be made upon
completion of certain services including, among other things, site control and
construction. At December 31, 1995, approximately $266,000 is still to be
incurred assuming all terms of these contracts have been met.
Heartland has entered into three franchise agreements which contain a
provision whereby the franchisee has the right to terminate the franchise
agreement upon a change in the controlling majority ownership of the Company. As
indicated in Note 9, a change in ownership occurred in January 1996. Assuming
these residences are leased up, if the franchisees terminate these agreements,
the Company will forfeit approximately $35,000 of annual ongoing revenues.
(9) SALE OF HEARTLAND
On January 26, 1996, the Heartland shareholders sold all of their stock to
Alternative Living Services, Inc., an unrelated party. Heartland, at that time,
became a wholly owned subsidiary of Alternative Living Services, Inc. Just prior
to closing, the Parent made a capital contribution to Heartland, effective
January 1, 1996, consisting of the $1,583,000 note payable to its sister
company. In connection with the sale, all amounts due to or from related parties
were repaid on January 26, 1996. Other than these amounts due to or from related
parties, all other mortgage notes payable of Heartland continue to be
obligations of Heartland after the sale. In addition, Alternative Living
Services, Inc. provided a $500,000 cash deposit replacing the Parent letter of
credit under the WHEFA bond facility.
F-35
<PAGE> 115
INDEPENDENT AUDITORS' REPORT
The Board of Directors
New Crossings International Corporation:
We have audited the accompanying combined balance sheets of New Crossings
International Corporation as of December 31, 1994 and 1995, and the related
combined statements of operations, shareholders' deficit, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of New
Crossings International Corporation as of December 31, 1994 and 1995, and the
combined results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Seattle, Washington
February 5, 1996
F-36
<PAGE> 116
NEW CROSSINGS INTERNATIONAL CORPORATION
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................ $ 838,565 $ 2,931,507
Accounts receivable............................................. 98,036 219,481
Notes receivable................................................ 30,000 --
Inventory....................................................... 52,690 56,225
Prepaid rent.................................................... 53,197 526,186
Prepaid expenses................................................ 158,848 150,930
------------ ------------
Total current assets.................................... 1,231,336 3,884,329
Property and equipment, net....................................... 53,519,190 6,769,823
Notes receivable from related party............................... 741,257 --
Loan fees, net of accumulated amortization of $611,918 and $30,696
in 1994 and 1995, respectively.................................. 1,063,796 36,278
Deferred lease charge............................................. 4,351,600 4,247,173
Lease deposits.................................................... 22,059 1,560,065
Other assets, net................................................. 654,682 375,437
------------ ------------
$ 61,583,920 $ 16,873,105
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt and capital leases............ $ 25,596,440 $ 69,418
Notes payable to related party.................................. 53,075 --
Accounts payable................................................ 438,911 602,626
Accrued payroll and payroll taxes............................... 303,778 426,315
Accrued interest payable........................................ 1,185,628 1,016,631
Other accrued expenses.......................................... 345,340 615,852
Property taxes.................................................. 614,888 310,203
Unearned revenue................................................ 228,760 157,578
------------ ------------
Total current liabilities............................... 28,766,820 3,198,623
Security deposits................................................. 116,724 96,628
Deferred gain on sale............................................. 2,054,463 13,109,712
Sale/leaseback obligation......................................... 4,351,600 4,247,173
Long-term debt and capital leases................................. 44,925,423 7,682,527
------------ ------------
Total liabilities....................................... 80,215,030 28,334,663
------------ ------------
Mandatorily redeemable preferred stock -- Series A preferred, par
value $.001, 240,000 shares issued and outstanding in 1995
(liquidation preference of $25.00 per share).................... -- 6,000,000
Commitments and contingencies
Minority interest................................................. 1,148,724 --
Shareholders' deficit:
Preferred stock, $.001 par value. Authorized 5,000,000
shares -- Series B preferred stock, 260,000 shares issued and
outstanding in 1995 (liquidation preference of $25.00 per
share)....................................................... -- 260
Common stock, $.001 par value. Authorized 40,000,000 shares;
issued and outstanding 150,000 and 192,563 shares in 1994 and
1995,
respectively................................................. 150 193
Additional paid-in capital...................................... 36,903 6,831,145
Accumulated deficit............................................. (19,816,887) (24,293,156)
------------ ------------
Total shareholders' deficit............................. (19,779,834) (17,461,558)
------------ ------------
$ 61,583,920 $ 16,873,105
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-37
<PAGE> 117
NEW CROSSINGS INTERNATIONAL CORPORATION
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues.................................... $17,977,881 $19,760,802 $21,725,841
----------- ----------- -----------
Expenses:
Residence operations.......................... 10,432,107 11,183,617 12,444,171
Lease expense................................. 812,987 789,000 1,147,475
General and administrative.................... 2,464,637 1,536,630 2,188,158
Depreciation and amortization................. 1,721,595 1,973,608 1,814,446
Provision for writedown of development
projects................................... -- 258,000 --
----------- ----------- -----------
Total operating expenses.............. 15,431,326 15,740,855 17,594,250
----------- ----------- -----------
Income from operations................ 2,546,555 4,019,947 4,131,591
----------- ----------- -----------
Other income (expense):
Interest expense.............................. (6,268,690) (5,627,798) (5,961,595)
Interest income............................... 131,181 89,835 153,721
Other expense................................. -- -- (256,686)
----------- ----------- -----------
Other expense, net.................... (6,137,509) (5,537,963) (6,064,560)
----------- ----------- -----------
Loss before extraordinary items and
minority interest................... (3,590,954) (1,518,016) (1,932,969)
Extraordinary items:
Gains from extinguishment of debt............. 699,176 -- 499,769
Losses from extinguishment of debt............ -- -- (879,045)
----------- ----------- -----------
Loss before minority interest......... (2,891,778) (1,518,016) (2,312,245)
Minority interest............................... 2,794 49,000 84,381
----------- ----------- -----------
Net loss.............................. $(2,894,572) $(1,567,016) $(2,396,626)
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-38
<PAGE> 118
NEW CROSSINGS INTERNATIONAL CORPORATION
COMBINED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
PREFERRED
STOCK --
SERIES B COMMON STOCK ADDITIONAL
---------------- ---------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1992............. -- $ -- 150,000 $150 $ 36,903 $(15,138,442) $(15,101,389)
Distributions.......... -- -- -- -- -- (80,342) (80,342)
Net loss............... -- -- -- -- -- (2,894,572) (2,894,572)
------- ------ ------- ------ ---------- ------------ ------------
Balances at December
31, 1993............. -- -- 150,000 150 36,903 (18,113,356) (18,076,303)
------- ------ ------- ------ ---------- ------------ ------------
Distributions.......... -- -- -- -- -- (136,515) (136,515)
Net loss............... -- -- -- -- -- (1,567,016) (1,567,016)
------- ------ ------- ------ ---------- ------------ ------------
Balances at December
31, 1994............. -- -- 150,000 150 36,903 (19,816,887) (19,779,834)
------- ------ ------- ------ ---------- ------------ ------------
Distributions.......... -- -- -- -- -- (2,079,643) (2,079,643)
Contribution -- transfer
of development
project to a
shareholder.......... -- -- -- -- 290,289 -- 290,289
Issuance of Series B
preferred stock...... 260,000 260 -- -- 6,499,740 -- 6,500,000
Stock bonus grants..... -- -- 42,563 43 4,213 -- 4,256
Net loss............... -- -- -- -- -- (2,396,626) (2,396,626)
------- ------ ------- ------ ---------- ------------ ------------
Balances at December
31, 1995............. 260,000 $260 192,563 $193 $6,831,145 $(24,293,156) $(17,461,558)
======= ====== ======= ====== ========= =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-39
<PAGE> 119
NEW CROSSINGS INTERNATIONAL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................................... $(2,894,572) $ (1,567,016) $ (2,106,337)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Gains from extinguishment of debt........................... (699,176) -- (499,769)
Losses from extinguishment of debt.......................... -- -- 879,045
Provision for writedown of development projects............. -- 258,000 --
Depreciation and amortization............................... 1,721,595 1,973,608 1,814,446
Amortization of deferred gain............................... (41,792) (47,302) (46,186)
Amortization of discount on participation notes............. -- (21,000) (36,000)
Stock bonus grants.......................................... -- -- 43
Write-off of note receivable from related party............. -- -- 107,870
Loss (gain) on disposal of assets........................... -- 53,557 (264,582)
Minority interest........................................... 2,794 49,000 84,381
Reclassification from stockholder receivable to
compensation.............................................. 314,239 69,393 49,135
Note payable issued for legal settlement.................... 150,000 -- --
Changes in operating assets and liabilities:
Accounts receivable....................................... 95,018 9,406 (121,445)
Inventory................................................. (3,534) 226 (3,535)
Prepaid rent.............................................. (1,073) (7,476) (472,989)
Prepaid expenses.......................................... 4,571 (52,124) 7,918
Lease deposits............................................ (22,704) 16,592 (1,538,006)
Other assets.............................................. 354,768 13,956 279,245
Accounts payable.......................................... 190,178 (244,344) 163,715
Accrued payroll and payroll taxes......................... 95,733 (44,471) 122,537
Accrued interest payable.................................. (118,256) (630,921) (147,434)
Other accrued expenses.................................... (103,577) 146,790 270,512
Property taxes............................................ 590,746 24,142 (304,685)
Unearned revenues......................................... 7,111 104,786 (71,182)
Security deposits......................................... (50,062) (27,441) (20,096)
----------- ------------ ------------
Net cash provided by (used in) operating activities.... (407,993) 77,361 (1,853,399)
----------- ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment........................... (1,324,392) (4,346,356) (700,162)
Sales of property and equipment............................... 7,312 90,430 44,770,804
Investment in partnership..................................... (1,000) -- --
Decrease in notes receivable.................................. 235,758 -- 30,000
Decrease in notes receivable from related parties............. -- -- 584,252
Purchase of minority interest................................. -- -- (1,233,105)
Issuance of note receivable to related party.................. (80,000) (472,941) --
----------- ------------ ------------
Net cash provided by (used in) investing activities.... (1,162,322) (4,728,867) 43,451,789
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from debt............................................ 8,307,112 14,973,734 100,000
Principal payments on debt.................................... (6,513,043) (10,127,927) (45,483,730)
Increase in participation obligation.......................... -- (276,000) --
Discount on restructured notes payable........................ -- 599,142 --
Issuance of preferred stock................................... -- -- 6,500,000
Payment of loan fees.......................................... (102,138) -- (11,500)
Advances from related parties................................. 31,200 -- --
Payments to related parties................................... -- (43,833) (53,075)
Distribution to partners...................................... (80,342) (56,515) (557,143)
----------- ------------ ------------
Net cash provided by (used in) financing activities.... 1,642,789 5,068,601 (39,505,448)
----------- ------------ ------------
Net increase in cash................................... 72,474 417,095 2,092,942
Cash at beginning of year....................................... 348,996 421,470 838,565
----------- ------------ ------------
Cash at end of year............................................. $ 421,470 $ 838,565 $ 2,931,507
============ ============= =============
</TABLE>
See accompanying notes to combined financial statements.
F-40
<PAGE> 120
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Operations
Crossings International Corporation (Old Crossings), based in Tacoma,
Washington, was organized in 1984 to own, operate, develop and acquire assisted
living and related senior living residences located primarily in the western
United States. On December 21, 1995, New Crossings International Corporation
(Crossings) was formed and issued 192,563 shares of common stock for all of the
outstanding shares of Old Crossings, which became a wholly-owned subsidiary of
Crossings. The operations of Crossings are essentially the same as Old Crossings
and, therefore, the financial statements essentially represent the operations of
Crossings for all periods. For additional information related to the Crossings
restructuring see Notes 4, 5, 6, 10, 11 and 14.
(b) Principles of Combination
The accompanying combined financial statements reflect the combined
operating results and financial position of the following assisted living and
senior living residences all of which have common ownership, management and
control through Old Crossings and, subsequent to December 21, 1995, Crossings
(collectively referred to as the "Company"):
<TABLE>
<CAPTION>
NUMBER OF
NAME UNITS LOCATION
---------------------------------------------- --------- --------------------------
<S> <C> <C>
Inn at Canterbury............................. 60 Aurora, Colorado
Canterbury Gardens............................ 159 Aurora, Colorado
The Palms at Loma Linda....................... 140 Loma Linda, California
Columbia Edgewater Properties................. 128 Richland, Washington
Heritage at Meridian Park..................... 112 Tualatin, Oregon
Forest Grove Residential Center............... 88 Forest Grove, Oregon
McMinnville Residential Center................ 87 McMinnville, Oregon
Atrium Associates............................. 82 Boulder, Colorado
RiverPlace.................................... 80 Boise, Idaho
Ridge Point................................... 76 Boulder, Colorado
Heritage at Rogue Valley...................... 76 Medford, Oregon
Heritage at Mount Hood........................ 78 Gresham, Oregon
Albany Residential Center..................... 74 Albany, Oregon
Valley Park Associates........................ 63 Albany, Oregon
---------
1,303
========
</TABLE>
The investors interest in all residences that are not wholly owned by the
Company are recorded as minority interests.
In addition, the Company owns a 1% interest in 2010 Union Limited
Partnership (2010) a partnership which operates a 119 unit senior living
residence. Effective December 21, 1995, the Company began leasing the residence.
The operating results subsequent to this date are included in the combined
financial statements. The investment in the 2010 partnership is accounted for on
the cost basis since the Company is a limited partner and does not maintain
control over partnership operations.
All significant intercompany accounts and transactions have been eliminated
in the accompanying combined financial statements.
F-41
<PAGE> 121
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Revenue Recognition
Resident units are rented on a month-to-month basis and rent is recognized
in the month the units are occupied.
(d) Inventory
Inventory consists of food and supplies and is stated at the lower of cost
(first-in, first-out) or market.
(e) Property Acquisition and Development Costs
The Company capitalizes all costs incurred directly in acquiring and
developing real estate. Among those costs are feasibility studies, land
acquisition costs, construction and development period interest and real estate
taxes, construction costs, and other direct project costs. These costs are
capitalized only to the extent that they are incurred prior to the date of
substantial completion or when a certificate of occupancy is issued and to the
extent considered recoverable through future operating cash flows of the
facility.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the related assets
which range from five to seven years for fixtures and equipment and forty years
for buildings. Leasehold improvements are amortized over the lesser of the
useful life of the improvement or the lease term.
As of each balance sheet date, the Company's management evaluates the
carrying value of property, plant and equipment for possible impairment based
upon the expectations of undiscounted operating cash flows derived from the use
of the assets.
(g) Loan Fees
Deferred loan fees are amortized using the straight-line method over the
term of the related debt which ranges from four to forty years.
(h) Deferred Lease Charge
Deferred lease charge represents a deferred charge established in
connection with the sale/leaseback of Heritage at Meridian Park (Heritage) as
discussed in note 6. The Company's obligation under the first mortgage was not
released at the time of the transaction. The deferred charge is reduced as
principal payments on the first mortgage associated with the property are made
by the buyer of Heritage.
(i) Income Taxes
Deferred income taxes are provided based on the estimated future tax
effects of temporary differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are recorded for
deferred tax assets when it is more likely than not that such deferred tax
assets will not be realized.
The combined deferred income taxes reflect income taxes as if all combined
residences were C-corporations.
F-42
<PAGE> 122
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(j) Use of Estimates
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Interest paid...................................... $6,386,946 $5,659,142 $5,961,595
Interest capitalized............................... 288,953 347,338 --
</TABLE>
The following is a summary of noncash investing and financing activities:
- Debt of $2,512,500 was relieved as a result of a statutory Warrant
Deed for the property in lieu of foreclosure in 1994.
- The Company purchased equipment under capital leases totaling $25,130,
$108,067 and $70,966 for the years ended December 31, 1993, 1994 and
1995, respectively.
- The decrease of $90,806, $105,099 and $104,427 in deferred lease
charge for the years ended December 31, 1993, 1994 and 1995,
respectively, represent noncash items relating to the decrease of the
sale/leaseback obligation and the corresponding asset.
- In 1994, a note receivable from a partner of an affiliate for $80,000
was charged against the capital interest in one of the partnership
accounts as a result of litigation.
- In 1995, notes payable of $62,500 were issued to former partners as
part of an equity distribution.
- In 1995, fixed assets, other assets, interest payable and debt of
approximately $2,775,000, $74,000, $21,000 and $3,100,000,
respectively, related to the Legends condominium project were
transferred to a corporation owned by the president of the Company
(note 4). As the liabilities assumed exceeded the assets transferred, a
contribution of $290,000 was recorded by the Company.
- In 1995, mortgage notes payable of approximately $9,304,000 were
assumed by Nationwide Health Properties, Inc. (NHP), a real estate
investment trust, in conjunction with a sale/leaseback transaction.
- In 1995, $6,000,000 of Series A Preferred Stock was issued in payment
of certain mortgage debt as part of the restructuring.
F-43
<PAGE> 123
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
----------- ----------
<S> <C> <C>
Land..................................................... $ 4,922,407 $ 750,748
Buildings and improvements............................... 50,821,197 6,409,105
Fixtures and equipment................................... 2,716,765 973,995
Leasehold improvements................................... 45,601 47,720
----------- ----------
58,505,970 8,181,568
Less accumulated depreciation and amortization........... 7,002,125 1,433,445
Construction in progress................................. 2,015,345 21,700
----------- ----------
$53,519,190 $6,769,823
========== =========
</TABLE>
Depreciation and amortization expense related to property and equipment was
$1,530,973, $1,634,961 and $1,706,530 in 1993, 1994 and 1995, respectively.
At December 31, 1994 and 1995, property and equipment includes $308,610 and
$338,300, respectively, of fixtures and equipment held under capital leases.
Related accumulated amortization totaled $117,580 and $153,610, respectively.
Substantially all property and equipment serve as collateral for long-term
debt (note 5). On December 21, 1995, most of this property and equipment was
included in the sales/leaseback transaction more fully described in note 6.
The Legends condominium project was originally planned to be a senior
living co-op community. During 1994, the Company finalized the redefinition of
this project as a senior condominium project. In conjunction with that change,
the Company expensed $258,000 for costs associated with the original business
purpose which have no future benefit. In June 1995, the Company transferred all
assets and liabilities related to the Legends condominium, including the first
mortgage, to a corporation that is owned by the Company's president. The
transaction resulted in a contribution of $290,289 as the liabilities assumed
exceeded the assets.
(4) RELATED-PARTY TRANSACTIONS
At December 31, 1994, the Company had an unsecured interest only
stockholder note receivable, due January 1, 2024 with a balance of $633,387. The
Company also had a note receivable of $107,870 with 2010, interest and principal
both due upon maturity. Both notes had interest rates of 8.50%. The stockholder
note was repaid to the Company during 1995 and the note receivable with 2010 was
written off.
At December 31, 1994, the Company also owed an officer and a former officer
of Crossings $32,475 and $20,600, respectively. Officers notes payable had
matured December 12, 1993. The officer and former officer agreed to extend the
payments on a month-to-month basis provided the Company paid an extension fee
totaling $1,250 each per month. The amounts were paid during 1995.
Crossings Aviation, Inc. is wholly owned by the president of the Company.
During 1993, 1994 and 1995, the Company paid approximately $121,859, $42,500 and
$31,000, respectively, to the aviation company for travel services.
In 1993, the Company invested $500,836 in 2010 in which the Company's
president maintains a 99% general partnership interest. Subsequently, the
Company wrote-off this investment. The write-off has been included in general
and administrative expense in 1993. On December 21, 1995, in conjunction with
2010's mortgage financing transaction with a real estate investment trust, the
Company entered into an operating lease with 2010. The Company retains a 1%
limited partnership interest in 2010.
F-44
<PAGE> 124
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consist of the following at
December 31:
<TABLE>
<CAPTION>
1994 1995
----------- ----------
<S> <C> <C>
Mortgage notes payable, fixed interest rates of 8% to
10.9%...................................................... $45,221,624 $ --
Mortgage notes payable, variable interest rates of 6.9% to
9.75%...................................................... 6,985,599 --
Project development notes payable, interest rates of 10% to
12%........................................................ 4,648,816 --
Project development notes, non interest bearing.............. 205,000 --
Equity participation notes, including contingent
participation obligations.................................. 13,263,279 --
Capital lease obligations, interest at rates between 3.4% and
23% payable in monthly installments, due through 2000...... 197,545 178,870
----------- ----------
70,521,863 173,870
Debt refinanced long-term through a sale/leaseback
transaction (see note 14):
Mortgage notes payable, fixed interest rates of 8% to
10.9%................................................... -- 6,085,900
Equity participation notes, including contingent
participation obligations............................... -- 1,487,175
----------- ----------
70,521,863 7,751,945
Less current portion......................................... 25,596,440 69,418
----------- ----------
Total long-term debt and capital lease obligations,
excluding current portion........................ $44,925,423 $7,682,527
========== =========
</TABLE>
Equity Participation Notes Payable
At December 31, 1994, the Company had ten equity participation notes
payable administered through Capital Consultants, Inc. (CCI), as agent for
pension funds with equity participation rights ranging from 30% to 90%. The
aggregate outstanding loan balances for each individual facility were
periodically compared to the estimated fair value of the underlying property.
Prior to fiscal year 1993, an obligation for a contingent equity participation
(participation obligation) of approximately $977,000 was expensed related to two
of the participation notes in the period that it was determined that the fair
value of the properties exceeded the aggregate outstanding loan balances at
those facilities. The contingent obligation is included in the outstanding
balance of equity participation notes.
During 1994, the Company modified the loan terms whereby the equity
participation percentages payable to the lender upon sale or refinance of the
residences or maturity of the notes was increased by 5% to 40%. The new equity
participation percentages ranged from 76.5% to 95% of agreed-upon net sale
proceeds or residual fair market value. The Company also agreed to pay 17% of
future development fees to CCI until the notes were repaid. Past due interest of
approximately $599,000 was forgiven. The increased equity participation
percentages resulted in an addition to the participation obligation of
approximately $276,000.
The restructuring qualifies as a troubled debt restructuring in accordance
with generally accepted accounting principles and as such, the interest forgiven
and the increase in participation obligation was being recognized over the
remaining terms of the underlying participation notes until they were paid off
in December 1995 and January 1996 at which time the participation obligation and
interest forgiven was written off and included in the calculation of the
deferred gain on sale (see notes 6 and 14). The net reduction in interest
expense attributable to the deferred amortization items was $21,000 and $36,000
in 1994 and 1995, respectively.
F-45
<PAGE> 125
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) SALES/LEASEBACKS OF FACILITIES AND DEFERRED GAIN
In January 1991, the Company entered into a sale/leaseback transaction for
Heritage at Meridian Park located in Tualatin, Oregon. The buyer received the
building and personal property, and assumed the first mortgage of $4.6 million
and the underlying land lease. However, the Company remains obligated under the
first mortgage on the property which matures on December 1, 1999.
The Company received $1.3 million in cash and entered into a ten-year lease
with two five-year renewal options. The Company realized a gain of approximately
$2.2 million which has been deferred because of the Company's continuing
involvement with the facility. The gain is being amortized into income as an
offset to lease expense over the initial lease term based on payments with
respect to the underlying mortgage for which the Company's obligation was not
released. The total deferred gain at December 31, 1994 and 1995 was $2,054,463
and $2,008,279, respectively. At December 31, 1994 and 1995, the mortgage
balance serviced by the purchaser, but for which the Company remains liable, was
$4,351,600 and $4,247,173, respectively.
In December 1995, the Company entered into a series of sale/leaseback
transactions with respect to twelve properties with annual rent payments
approximately $5.4 million, initial lease terms ranging from 17 to 19 years and
three ten-year renewal options. In conjunction with these transactions, the
Company purchased the partnership interests related to three properties prior to
entering into the sale/leaseback transactions with NHP. The only residence
controlled by the Company that was not included in the above transactions was
The Palms at Loma Linda (The Palms). The Company completed a sale/leaseback
transaction with respect to The Palms in January 1996 (see note 14).
The Company received approximately $44.5 million in cash and entered into
various lease agreements with initial terms ranging between seventeen and
nineteen years with three ten-year renewal options. The Company realized a gain
of approximately $11.1 million which is recorded as a deferred gain because of
the Company's continuing involvement with the facilities through the associated
operating leases. The deferred gain will be amortized into income as an offset
to lease expense over the initial lease term using the straight-line method.
The extinguishment of approximately $23.5 million of debt, which included
$13.3 million of equity participation notes, was accomplished through the
issuance of 240,000 shares of Mandatorily Redeemable Series A Preferred Stock
and 260,000 shares of Series B Preferred Stock and the application of proceeds
from the sale/leaseback transaction with NHP.
F-46
<PAGE> 126
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
The provision for income taxes differs from the amount of income taxes
determined by applying the applicable U.S. statutory Federal rate of 35% to
pretax income primarily as a result of limitations on the Company's ability to
utilize net operating losses.
The tax effect of temporary differences that give rise to significant
portions of Federal deferred tax assets (liabilities) are comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $3,732,000 $4,477,000 $2,307,000
Deferred loan fees............................. 432,000 373,000 13,000
Deferred gain.................................. 736,000 719,000 4,107,000
---------- ---------- ----------
Total gross deferred tax asset......... 4,900,000 5,569,000 6,427,000
Less valuation allowance....................... 4,343,000 4,951,000 5,756,000
---------- ---------- ----------
Deferred tax asset, net................ 557,000 618,000 671,000
Deferred tax liability -- property and equipment
principally due to differences in depreciation
and amortization............................... 557,000 618,000 671,000
---------- ---------- ----------
Net deferred tax asset................. $ -- $ -- $ --
========= ========= =========
</TABLE>
The net increase in the total valuation allowance was $510,000, $608,000
and $805,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
The increases were primarily due to increases in the amount of net operating
loss carryforwards and deferred gain for which the Company is not assured of
utilization.
As of December 31, 1995, the Company has net operating loss carryforwards
of approximately $6,600,000. Unused net operating loss carryforwards will expire
commencing in the years 2002 through 2010. Suspended Passive Activity Losses of
approximately $1,041,000 do not have an expiration date. These carryforwards may
result in a tax benefit when the Company has future taxable income. If
substantial changes in the Company's ownership should occur, there could be an
annual limitation on the amount of the net operating loss carryforwards which
could be utilized.
(8) COMMITMENTS AND CONTINGENCIES
The Company leases land and buildings for residences and corporate
operations under various long-term rental agreements expiring in varying years
through approximately 2014. All of these leases represent operating leases and,
accordingly, rental payments are recorded as rent expense when incurred.
As of December 31, 1995, substantially all of the Company's operating
leases, except for 2010, are leased from NHP, an unrelated third party, as a
result of the sale/leaseback transactions that occurred in December 1995.
F-47
<PAGE> 127
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum lease payments under noncancelable leases at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- ------------
<S> <C> <C>
1996......................................................... $ 85,664 $ 6,500,680
1997......................................................... 40,403 6,515,944
1998......................................................... 34,783 6,539,777
1999......................................................... 32,022 6,548,274
2000......................................................... 10,471 6,585,895
Thereafter................................................... -- 73,262,365
-------- ------------
Total minimum lease payments....................... 203,343 $105,952,935
===========
Less amount representing interest............................ 24,473
--------
Present value of net minimum lease payments........ 178,870
Less current portion......................................... 69,418
--------
Long-term capital lease obligations................ $109,452
========
</TABLE>
Lease expense is recorded net of the amortization of $43,000, $49,000 and
$49,000 of the deferred gain on the sale/leaseback for the years ended December
31, 1993, 1994 and 1995, respectively. In addition, the Company is responsible
for all operating and maintenance costs associated with the Heritage at Meridian
Park facility.
(9) EXTRAORDINARY GAINS AND LOSSES
During 1993 a note for approximately $354,000 and related accrued interest
of approximately $345,000 was extinguished which resulted in a gain of
approximately $699,000. As discussed in note 6, 1995 sales/ leaseback
transactions resulted in extraordinary gains of $499,769 related to debt
extinguished and extraordinary losses of $879,045 resulting from the write-off
of deferred loan fees associated with loans held on sold facilities.
(10) REDEEMABLE PREFERRED STOCK
In December 1995, the Company issued 240,000 shares of Series A Preferred
Stock (Series A) valued at $25 per share to CCI in conjunction with the payoff
of all outstanding debt to CCI, including the participating notes and all
respective obligations thereunder, and the buyout of CCI's interest in
McMinnville Residential Center. Holders of Series A preferred stock are entitled
to cumulative cash dividends beginning January 15, 1997 in the amount of
$2.08 1/3 per annum, per share, due and payable before January 15 of the
following year.
Series A is redeemable at the option of the Company under certain
circumstances at $25 plus accrued dividends whether declared or not.
Shareholders have the right to redeem shares if the Company fails to pay the
required dividends. Furthermore, the Series A holders may exercise their options
to redeem all (but not less than all) of the outstanding preferred shares, given
proper notice for such action, at an amount of $25.00 per share.
Any shares not redeemed prior to an initial public offering ("IPO") meeting
certain minimum requirements, are convertible into common stock based on a
conversion formula dependent on the IPO price but, in general, at the value of
the preferred shares divided by the IPO price. Upon liquidation, the Series A
holders would receive an amount equal to $25 per share up to $6,000,000 and
would not participate in any other equity.
F-48
<PAGE> 128
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(11) SHAREHOLDERS' DEFICIT
In December 1995, the Company changed the par value of common stock from
$.10 per share to $.001 per share and increased the number of authorized shares
of common stock and preferred stock to 40,000,000 and 5,000,000, respectively.
Common stock and additional paid-in capital have been adjusted for all years to
reflect the change in par value.
In December 1995, the Company issued 260,000 shares of Series B Preferred
Stock (Series B) to CCI in exchange for $6,500,0000 in cash which was primarily
used in conjunction with the payoff of all outstanding obligations to CCI. The
Series B Preferred Stock is redeemable in part at the option of the Company
under certain circumstances at the greater of $32.50 per share or a conversion
ratio pursuant to an IPO. Any shares not redeemed prior to an IPO meeting
certain minimum requirements are convertible into common stock based on a
conversion formula dependent on the IPO price. Holders of Series B are not
entitled to receive any dividends; however, the Series B holders, as a class,
have the right to elect one director. Subsequent to January 15, 1997, the
holders of the majority of Series B have the right to remove any and all
directors.
(12) STOCK BONUS AND OPTION PLAN
In June 1995, the Company established a Stock Bonus and Option Plan (Plan)
in which stock can be granted to employees as bonus shares or options. The
options may be granted as either incentive or nonqualified stock options. The
Plan is administered by the Board of Directors or an administrative committee if
the Board of Directors so desires. Incentive options may be granted only to
officers or other employees of the Company while nonqualified options may be
granted to employees and other persons as the plan administrator selects. The
Company has reserved 42,563 shares of common stock for issuance under this Plan.
In July 1995, the Company granted a stock bonus of 42,563 shares of common
stock to employees in recognition of past performance. Consequently, there are
no shares available for grant under the Plan. Compensation expense of $4,256 has
been recognized based upon an estimated value of $.10 at the time of the grant.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock-Based Compensation. This pronouncement establishes
the accounting and reporting standards for stock-based employee compensation
plans, including stock purchase plans, stock options and stock appreciation
rights. This new standard defines a fair value-based method of accounting for
these equity instruments. This method measures compensation cost based on the
value of the award and recognizes that cost over the service period. Companies
may elect to adopt this standard or to continue accounting for these types of
equity instruments under current guidance, APB Opinion No. 25, Accounting for
Stock Issued to Employees. Companies which elect to continue using the guidance
of Opinion 25 must make pro forma disclosures of net earnings and earnings per
share as if this new statement had been applied. This new standard is applicable
to financial statements for fiscal years beginning after December 15, 1995.
The Company anticipates that it will continue to use the rules of APB
Opinion No. 25 and make the pro forma disclosures required under the new
standard.
(13) LIQUIDITY
The Company has incurred recurring losses and has a net capital deficiency.
In December 1995, the Company began restructuring its long-term obligations
through sale/leaseback transactions more fully described in note 6. The
restructuring was completed in January 1996 as described in note 14. Although
debt service reductions will be replaced in part by increased lease payments,
management believes that the restructured operations will allow the Company to
obtain additional borrowings and generate additional cash from operations. As
part of the restructuring, a $14,280,000 financing commitment for new
developments was obtained from NHP and the Company obtained approximately
$8,900,000 in construction loan financing.
F-49
<PAGE> 129
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(14) SUBSEQUENT EVENTS
(a) The Palms Sale/Leaseback
In January 1996, the Company completed a sale/leaseback arrangement related
to The Palms with an initial lease term expiring when the facility reaches 95%
occupancy or in three years, whichever occurs first, and annual lease payments
of approximately $640,000. Debt of approximately $7,513,000, which includes
deferred gain on restructuring (note 5) of approximately $87,000, was removed
from the Company's records and assumed by the buyer/lessor. The underlying
property and equipment was also conveyed to the buyer/lessor. The Company
remains obligated for the first mortgage on the property. Because of the
Company's continuing involvement, the mortgage obligation will continue as a
liability of the Company, a corresponding deferred charge will be established
and amortized until maturity or repayment of the related debt, and the related
gain on sale of approximately $1,660,000 will be deferred and amortized over the
remaining term of the debt.
(b) Acquisition by Alternative Living Services, Inc. (Unaudited)
On May 24, 1996, the Company merged with Alternative Living Services, Inc.,
a company which operates assisted living residences primarily in the midwest and
eastern United States. Immediately prior to, and in connection with, the merger,
the Series A and Series B Preferred Stock was converted into Crossings common
stock. The total purchase consideration paid by Alternative Living Services,
Inc. was 2,007,049 shares of Alternative Living Services, Inc.'s common stock
with an estimated market value of $9,281,000.
F-50
<PAGE> 130
NEW CROSSINGS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1996
------------
<S> <C>
ASSETS
Current assets:
Cash......................................................................... $ 1,787,785
Accounts receivable.......................................................... 257,496
Inventory.................................................................... 46,193
Prepaid rent................................................................. 546,511
Prepaid expenses............................................................. 97,915
------------
Total current assets................................................. 2,735,900
Property and equipment, net.................................................... 807,001
Deferred lease charge.......................................................... 10,224,044
Lease deposits................................................................. 1,623,064
Other assets, net.............................................................. 739,048
------------
$ 16,129,055
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt and capital leases......................... $ 52,311
Accounts payable............................................................. 804,536
Accrued payroll and payroll taxes............................................ 441,169
Accrued interest payable..................................................... 67,500
Other accrued expenses....................................................... 480,787
Property taxes............................................................... 280,413
Unearned revenue............................................................. 208,337
------------
Total current liabilities............................................ 2,335,053
Security deposits.............................................................. 91,278
Deferred gain on sale.......................................................... 14,631,582
Sale/leaseback obligation...................................................... 10,224,044
Long-term debt and capital leases.............................................. 115,167
------------
Total liabilities.................................................... 27,397,124
------------
Mandatorily redeemable preferred stock -- Series A preferred, par value $.001;
240,000 shares issued and outstanding (liquidation preference of $25.00 per
share)....................................................................... 6,000,000
Commitments and contingencies
Shareholders' deficit:
Preferred stock, $.001 par value. Authorized 5,000,000 shares -- Series B
preferred stock, 260,000 shares issued and outstanding (liquidation
preference of $25.00 per share)........................................... 260
Common stock, $.001 par value. Authorized 40,000,000 shares; issued and
outstanding 192,563 shares................................................ 193
Additional paid-in capital................................................... 6,831,145
Accumulated deficit.......................................................... (24,099,667)
------------
Total shareholders' deficit.......................................... (17,268,069)
------------
$ 16,129,055
===========
</TABLE>
See accompanying notes to condensed combined and consolidated financial
statements.
F-51
<PAGE> 131
NEW CROSSINGS INTERNATIONAL CORPORATION
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
----------- ----------
<S> <C> <C>
Net revenues......................................................... $ 5,374,200 $5,942,095
----------- ----------
Expenses:
Residence operations............................................... 2,921,460 3,476,951
Lease expense...................................................... 156,370 1,714,541
General and administrative......................................... 519,196 704,137
Depreciation and amortization...................................... 449,622 23,436
----------- ----------
Total operating expenses................................... 4,046,648 5,919,065
----------- ----------
Income from operations..................................... 1,327,552 23,030
----------- ----------
Other income (expense):
Interest expense................................................... (1,439,726) (12,998)
Interest income.................................................... 39,100 42,380
Other income....................................................... -- 8,453
----------- ----------
Other income (expense), net..................................... (1,400,626) 37,835
----------- ----------
Income (loss) before extraordinary item......................... (73,074) 60,865
Extraordinary item -- gain from extinguishment of debt............. -- 132,624
----------- ----------
Net income (loss).......................................... $ (73,074) $ 193,489
========== =========
</TABLE>
See accompanying notes to condensed combined and consolidated financial
statements.
F-52
<PAGE> 132
NEW CROSSINGS INTERNATIONAL CORPORATION
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995, AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities (including
changes in all operating assets and liabilities)................... $ 50,871 $ (593,459)
--------- -----------
Cash used in investing activities -- purchases of property and
equipment.......................................................... (197,635) (532,159)
--------- -----------
Cash flows from financing activities:
Proceeds from debt................................................. 145,091 --
Principal payments on debt......................................... (149,916) (18,104)
Payments to related parties........................................ (22,094) --
Distribution to partners........................................... (134,661) --
--------- -----------
Net cash used in financing activities...................... (161,580) (18,104)
--------- -----------
Net decrease in cash....................................... (308,344) (1,143,722)
Cash at beginning of period.......................................... 838,565 2,931,507
--------- -----------
Cash at end of period................................................ $ 530,221 $ 1,787,785
========= ==========
</TABLE>
See accompanying notes to condensed combined and consolidated financial
statements.
F-53
<PAGE> 133
NEW CROSSINGS INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying condensed combined and consolidated financial statements
reflect the operating results and financial position of certain assisted living
and senior living residences under the common ownership, management and control
of Crossings International Corporation and subsequent to December 21, 1995 New
Crossings International Corporation (collectively referred to as the "Company").
The unaudited interim condensed combined and consolidated financial statements
and related notes have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of only normal recurring items, necessary for a fair
presentation of the results for the interim periods presented. Interim results
are not necessarily indicative of results for a full year.
(2) THE PALMS SALE/LEASEBACK
In January 1996, the Company completed a sale/leaseback arrangement related
to a residence. Debt of approximately $7,513,000, which includes deferred gain
on restructuring of approximately $87,000 was removed from the Company's records
and assumed by the buyer/lessor. The underlying property and equipment of
approximately $6,481,000 was also conveyed to the buyer/lessor. The Company will
remain obligated for the first mortgage on the property. Because of the
Company's continuing involvement the mortgage obligation will continue as a
liability of the Company, a corresponding deferred charge will be established
and amortized until maturity or repayment of the related debt, and the related
gain on sale of approximately $1,660,000 will be deferred and amortized over the
remaining maturity or repayment of the debt term.
(3) SUBSEQUENT EVENTS
On May 24, 1996, the Company merged with Alternative Living Services, Inc.,
a company which operates assisted living residences primarily in the midwest and
eastern United States. Immediately prior to, and in connection with, the merger,
the Series A and Series B Preferred Stock was converted into Crossings common
stock. The total purchase consideration paid by Alternative Living Services,
Inc. was 2,007,049 shares of Alternative Living Services, Inc.'s common stock
with an estimated market value of $9,281,000.
(4) NEW ACCOUNTING STANDARDS
Effective January 1, 1995, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The effect of adopting Statement 121 was not material to the
Company's financial statements.
F-54
<PAGE> 134
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Alternative Living Services -- Midwest Inc.:
We have audited the accompanying combined balance sheet of Alternative
Living Services -- Midwest Inc. and Affiliates (the Company) as of December 31,
1995, and the related combined statements of operations, changes in
stockholders' equity, and cash flows for the year ended December 31, 1995. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Alternative Living
Services -- Midwest Inc. and Affiliates at December 31, 1995, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Milwaukee, Wisconsin
April 18, 1996
F-55
<PAGE> 135
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 577,205
Resident receivables, net........................................... 134,336
Other current assets................................................ 127,940
-----------
Total current assets........................................ 839,481
-----------
Property, plant and equipment, net.................................... 10,496,005
Other assets.......................................................... 3,440,110
-----------
Total assets................................................ $14,775,596
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 1,635,033
Accrued expenses.................................................... 455,436
Notes payable to banks.............................................. 5,679,865
Advances from and notes payable to related entities................. 3,204,946
-----------
Total current liabilities................................... 10,975,280
-----------
Minority interest..................................................... 2,634,367
Stockholders' equity:
Common stock and additional paid-in capital......................... 2,017,437
Accumulated deficit................................................. (851,488)
-----------
Total stockholders' equity.................................. 1,165,949
-----------
Total liabilities and stockholders' equity.................. $14,775,596
==========
</TABLE>
See accompanying notes to combined financial statements.
F-56
<PAGE> 136
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Revenue:
Resident service fees................................................ $2,504,388
Other................................................................ 298,152
----------
Operating revenue...................................................... 2,802,540
----------
Operating expenses:
Residence operations................................................. 2,765,644
General and administrative........................................... 319,711
Depreciation and amortization........................................ 379,848
----------
Total operating expenses..................................... 3,465,203
----------
Operating loss......................................................... (622,663)
----------
Other income (expense):
Interest expense..................................................... (542,913)
Interest income...................................................... 57,067
Minority interest in losses of combined affiliates................... 423,946
----------
Total other expense, net..................................... (61,900)
----------
Net loss............................................................... $ (724,563)
=========
</TABLE>
See accompanying notes to combined financial statements.
F-57
<PAGE> 137
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK
AND ADDITIONAL
PAID-IN CAPITAL
------------------- ACCUMULATED
SHARES AMOUNTS DEFICIT TOTAL
------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balances at December 31, 1994...................... 20,000 $ 747,612 $ (62,725) $ 684,887
------ ---------- ----------- ----------
Contributed capital.............................. 1,269,825 -- 1,269,825
Distribution of dividends........................ -- (64,200) (64,200)
Net loss......................................... -- (724,563) (724,563)
------ ---------- ----------- ----------
Balances at December 31, 1995...................... 20,000 $2,017,437 $(851,488) $1,165,949
====== ========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
F-58
<PAGE> 138
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss..................................................................... $ (724,563)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization............................................. 379,848
Minority interest in losses of combined affiliates........................ (423,946)
Increase in other current assets.......................................... (101,393)
Increase in accounts payable.............................................. 1,529,068
Increase in accrued expenses.............................................. 329,208
Changes in other assets and liabilities and other adjustments............. (701,969)
------------
Net cash provided by operating activities...................................... 286,253
------------
Cash flows from investing activities --
payments for property, plant and equipment and project development costs..... (10,745,698)
------------
Cash flows from financing activities:
Proceeds from notes payable to bank.......................................... 5,651,717
Payments on notes payable to bank............................................ (148,356)
Changes in advances from and notes payable to related entities............... 1,126,478
Contributed capital.......................................................... 1,269,825
Contributions by minority partners........................................... 3,058,313
Distribution of dividends.................................................... (64,200)
------------
Net cash provided by financing activities...................................... 10,893,777
------------
Net increase in cash and cash equivalents...................................... 434,332
Cash and cash equivalents:
Beginning of period.......................................................... 142,873
------------
End of period................................................................ $ 577,205
===========
</TABLE>
See accompanying notes to combined financial statements.
F-59
<PAGE> 139
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) BUSINESS
Alternative Living Services -- Midwest Inc. (the Company) was incorporated
in 1991 to develop assisted living residences in Michigan and other midwest
states.
Limited partnerships are formed for each Michigan facility developed. The
Company serves as the sole general partner and holds approximately 45% to 73% of
each partnership formed. Limited partnerships formed to date and the Company's
respective ownership percentage are as follows:
Hamilton House (45% interest), formed to develop the Hamilton House-I
residence in Farmington Hills, Michigan, which opened July 18, 1994.
North Schoenherr (50% interest), formed to develop the Hamilton
House-I residence in Utica, Michigan, which opened January 16, 1995.
Eisenhower/State (50% interest), formed to develop the Hamilton
House-I residence in Ann Arbor, Michigan, which opened June 8, 1995.
Twelve Mile Drake (45% interest), formed to develop the Hamilton
House-II residence in Farmington Hills, Michigan, which opened October 1,
1995.
Marsh/Tihart (73% interest), formed to develop the Hamilton House-I
residence in Lansing, Michigan, which was under construction at December
31, 1995.
Six Mile Abbey (50% interest), formed to develop the Hamilton House-II
residence in Northville, Michigan, which was under construction at December
31, 1995.
Northpointe Utica (50% interest), formed to develop the Hamilton
House-II residence in Utica, Michigan, which was under construction at
December 31, 1995.
Residences owned by these limited partnerships are operated and managed by
Alternative Living Services, Inc., (ALS, Inc.) which develops, owns and operates
assisted living residences, including residences for the frail elderly and
specialty care residences for individuals with Alzheimer's disease and other
dementia. ALS, Inc. is paid management fees of approximately 8% of monthly
revenues by the limited partnerships in exchange for the management services
performed. Additionally, ALS, Inc. participates as a limited partner in several
of the limited partnerships.
The Company has authorized, issued and outstanding 20,000 shares of no par
common stock at December 31, 1995, of which ALS, Inc. holds 10,000 shares.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are as follows:
(a) Combined Financial Statements
The combined financial statements include the accounts of the Company
and its affiliates which are under the common financial control of the
Company. Results of operations of the affiliates are included from the date
of acquisition. All significant intercompany accounts and transactions with
its affiliates have been eliminated in the combined financial statements.
Minority interest represents the ownership percentage of accumulated
losses and capital contributions made by the limited partners other than
ALS, Inc. The ownership interests of the Company and its affiliates and
ALS, Inc. have been included in total stockholders' equity.
F-60
<PAGE> 140
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(b) Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents for purposes of
the combined statement of cash flows.
(c) Property, Plant and Equipment
Property, plant and equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed over the estimated lives of the
assets using the straight-line method. Buildings are depreciated over 20 to
40 years, and furniture, fixtures and equipment are depreciated over five
to seven years. Maintenance and repairs are expensed as incurred.
As of each balance sheet date, the Company's management evaluates the
carrying value of property, plant and equipment for possible impairment
based upon the expectations of operating cash flows derived from the use of
the assets.
(d) Other Assets
Other assets includes organizational and other costs which are
amortized on a straight-line basis over five years. Also included in other
assets are land acquisition and project development costs incurred in the
initial development of new residences, and capital contributions receivable
from unaffiliated limited partners. Land acquisition and project
development costs will become a component of the total cost of the new
residences, and will be amortized over their respective useful lives.
(e) Income Taxes
Deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(f) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents approximate fair
value due to the short-term nature of the accounts and due to the accounts
earning interest at current market rates. The carrying amount of the
Company's note payable to bank and advances from and notes payable to
related entities approximates fair value due to the interest rates
approximating the current rates available to the Company for similar
borrowing arrangements.
(g) Use of Estimates
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles. The preparation
of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-61
<PAGE> 141
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment at December 31, 1995 follows:
<TABLE>
<S> <C>
Land and land improvements.............................................. $ 1,544,603
Buildings............................................................... 7,512,810
Furniture and fixtures.................................................. 1,392,588
Construction in progress................................................ 347,421
-----------
Total property, plant and equipment..................................... 10,797,422
Less accumulated depreciation........................................... 301,417
-----------
Property, plant and equipment, net...................................... $10,496,005
==========
</TABLE>
Interest is capitalized in connection with the construction of facilities
and is amortized over the estimated useful lives of the facilities. Interest
capitalized during 1995 was approximately $280,000.
(4) OTHER ASSETS
Other assets are comprised of the following at December 31, 1995:
<TABLE>
<S> <C>
Land acquisition and project development costs........................... $2,926,893
Organization, finance and other costs.................................... 377,946
Capital contribution receivable.......................................... 135,271
----------
Total other assets............................................. $3,440,110
=========
</TABLE>
(5) NOTES PAYABLE TO BANKS
Notes payable to banks consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Mortgage notes payable, interest at the prime rate plus 1.25% to 2.5%
(10.25% at December 31, 1995), payable on demand....................... $4,209,761
Mortgage note payable, interest at 10.75%, payable on demand............. 1,470,104
----------
Total notes payable to banks................................... $5,679,865
=========
</TABLE>
(6) ADVANCES FROM AND NOTES PAYABLE TO RELATED ENTITIES
Advances from and notes payable to related entities consist of the
following at December 31, 1995:
<TABLE>
<S> <C>
Advances and notes payable -- The Damone Group, Inc...................... $1,029,700
Advances and notes payable -- ALS, Inc................................... 2,063,389
Advances and notes payable -- other related entities..................... 111,857
----------
Total advances from and notes payable to related entities...... $3,204,946
=========
</TABLE>
These advances from and notes payable to related entities are payable on
demand, with interest at 9%.
F-62
<PAGE> 142
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
Deferred tax assets and liabilities consist of the following at December
31, 1995:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards........................................ $ 72,700
Investment in affiliates................................................ 184,700
--------
Total deferred tax assets................................................. 257,400
Less valuation allowance.................................................. 257,400
--------
Deferred tax assets, net of valuation allowance........................... $ --
========
</TABLE>
The Company has approximately $204,600 of net operating loss carryforwards
for income tax purposes at December 31, 1995, which will begin to expire, if
unused, beginning in the year 2005.
(8) COMMITMENTS AND CONTINGENCIES
At December 31, 1995, capital expenditure commitments for the construction
of two Michigan facilities developed by Six Mile Abbey and Northpointe Utica
limited partnerships were approximately $13,300,000. Costs incurred through
December 31, 1995 of approximately $2,908,000 are included in land acquisition
and project development costs. Both facilities are expected to become
operational in 1996.
F-63
<PAGE> 143
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1996
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 845,200
Resident receivables, net..................................................... 308,801
Other current assets.......................................................... 92,859
-----------
Total current assets.................................................. 1,246,860
-----------
Property, plant and equipment, net.............................................. 15,189,408
Other assets.................................................................... 407,600
-----------
Total assets.......................................................... $16,843,868
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 2,214,848
Accrued expenses.............................................................. 596,537
Notes payable to banks........................................................ 5,660,259
Advances from and notes payable to related entities........................... 3,958,936
-----------
Total current liabilities............................................. 12,430,580
-----------
Minority interest............................................................... 2,623,236
Stockholders' equity:
Common stock and additional paid-in capital................................... 2,679,060
Accumulated deficit........................................................... (889,008)
-----------
Total stockholders' equity............................................ 1,790,052
-----------
Total liabilities and stockholders' equity............................ $16,843,868
==========
</TABLE>
See accompanying notes to condensed combined financial statements.
F-64
<PAGE> 144
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1996
-------- ----------
<S> <C> <C>
Revenue:
Resident service fees................................................ $414,041 $1,141,481
Other................................................................ -- 200,324
-------- ----------
Operating revenue............................................ 414,041 1,341,805
-------- ----------
Operating expenses:
Residence operations................................................. 334,843 868,821
Lease expense........................................................ 3,342 50,678
General and administrative........................................... 18,947 114,414
Depreciation and amortization........................................ 51,878 119,776
-------- ----------
Total operating expenses..................................... 409,010 1,153,689
-------- ----------
Operating income....................................................... 5,031 188,116
-------- ----------
Other income (expense):
Interest expense..................................................... (82,160) (239,452)
Interest income...................................................... 2,717 2,675
Minority interest in losses of combined affiliates................... -- 11,131
-------- ----------
Total other expense, net..................................... (79,443) (225,646)
-------- ----------
Net loss............................................................... $(74,412) $ (37,530)
======== =========
</TABLE>
See accompanying notes to condensed combined financial statements.
F-65
<PAGE> 145
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................... $ (74,412) $ (37,530)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization................................... 51,878 119,776
Minority interest in losses of combined affiliates.............. -- (11,131)
Increase in resident receivables................................ (12,990) (174,465)
Decrease (increase) in other current assets..................... (76,519) 35,081
Increase in accounts payable.................................... 18,110 579,815
Increase in accrued expenses.................................... 69,864 141,101
Changes in other assets and liabilities and other adjustments... 320,901 124,209
--------- -----------
Net cash provided by operating activities............................ 296,832 776,856
--------- -----------
Cash flows from investing activities --
payments for property, plant and equipment and project development
costs........................................................... (26,432) (1,904,875)
--------- -----------
Cash flows from financing activities:
Proceeds from notes payable to bank................................ 21,000 --
Payments on notes payable to bank.................................. (209,564) (19,606)
Changes in advances from and notes payable to related entities..... 150,203 753,990
Contributed capital................................................ -- 661,630
--------- -----------
Net cash provided by (used in) financing activities.................. (38,361) 1,396,014
--------- -----------
Net increase in cash and cash equivalents............................ 232,039 267,995
Cash and cash equivalents:
Beginning of period................................................ 142,894 577,205
--------- -----------
End of period...................................................... $ 374,933 $ 845,200
========= ==========
</TABLE>
See accompanying notes to condensed combined financial statements.
F-66
<PAGE> 146
ALTERNATIVE LIVING SERVICES -- MIDWEST INC. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed combined balance sheet as of March 31, 1996 and related
condensed combined statements of operations and cash flows for the three months
ended March 31, 1995 and 1996 contained herein, which are unaudited, include the
accounts of Alternative Living Services -- Midwest Inc. (ALS-Midwest) and its
affiliates which are under the common financial control of ALS-Midwest. All
significant intercompany accounts have been eliminated in the combination. In
the opinion of management, all adjustments necessary for a fair presentation of
such financial statements have been included. Adjustments consist only of normal
recurring items. The results of operations for the three months ended March 31,
1995 and 1996, are not necessarily indicative of the results to be expected for
the full fiscal year.
The condensed combined financial statements do not include all information
and footnotes necessary for a complete presentation of financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles. Reference is made to ALS-Midwest's audited financial
statements and the related notes as of December 31, 1995 and for the year then
ended, which provide additional disclosures and a further description of
accounting policies.
(2) NEW ACCOUNTING STANDARD
Effective January 1, 1995, ALS-Midwest adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The effect of adopting Statement 121 was not material to
ALS-Midwest's financial statements.
F-67
<PAGE> 147
Series of photographs of residents of the Company surrounding the
following text:
OUR MISSION
We believe that older people have the right to lead
valued, productive lives. Our mission is to provide
support to individuals that enables them to prolong
their ability to live in a dignified, caring environment.
We are dedicated to setting the standard for quality
of life for our residents.
[LOGO] ALTERNATIVE LIVING SERVICES
<PAGE> 148
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 16
Dividend Policy....................... 17
Dilution.............................. 18
Capitalization........................ 19
Pro Forma Financial Information....... 20
Selected Consolidated Financial
Data................................ 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 37
History and Organization.............. 57
Management............................ 61
Principal and Selling Stockholders.... 67
Certain Relationships and Related
Transactions........................ 69
Description of Capital Stock.......... 70
Shares Eligible for Future Sale....... 72
Underwriting.......................... 74
Legal Matters......................... 75
Experts............................... 75
Additional Information................ 76
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
6,000,000 SHARES
[ALTERNATIVE LIVING SERVICES LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
NATWEST SECURITIES LIMITED
MCDONALD & COMPANY
SECURITIES, INC.
THE CHICAGO CORPORATION
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 149
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid in connection with
the issuance and distribution of the securities being registered, other than
underwriting discounts and commissions, and all such expenses will be borne by
the Registrant. All amounts are estimates except for the Securities and Exchange
Commission registration fee and the National Association of Securities Dealers,
Inc. ("NASD") filing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................................. $ 42,828
NASD Fee......................................................................... 12,920
AMEX Listing Fee................................................................. 42,500
Printing and Mailing Expenses.................................................... 350,000
Legal Fees and Expenses.......................................................... 560,000
Accounting Fees and Expenses..................................................... 375,000
Transfer Agent's Fees and Expenses............................................... 3,500
Blue Sky Fees and Expenses....................................................... 40,000
Miscellaneous Expenses........................................................... 173,252
----------
Total.................................................................. $1,600,000
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
permits a Delaware corporation to limit the personal liability of its directors
in accordance with the provisions set forth therein. The Restated Certificate of
Incorporation of the Registrant provides that the personal liability of its
directors shall be limited to the fullest extent permitted by applicable law.
Section 145 of the General Corporation Law of the State of Delaware
contains provisions permitting Delaware corporations to indemnify directors,
officers, employees or agents against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person was or is a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, provided that (i) such person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the corporation's best interest, and (ii) in the case of a criminal proceeding
such person had no reasonable cause to believe his or her conduct was unlawful.
In the case of actions or suits by or in the right of the corporation, no
indemnification shall be made in a case in which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
have determined upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses. Indemnification as described
above shall only be granted in a specific case upon a determination that
indemnification is proper in the circumstances because the indemnified person
has met the applicable standard of conduct. Such determination shall be made (a)
by a majority vote of the directors who are not parties to such proceeding, even
though less than a quorum, (b) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (c)
by the stockholders of the corporation. Notwithstanding the foregoing, to the
extent that a director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) or (b) of Section 145, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. The Restated Certificate of Incorporation and the Restated
Bylaws of the Registrant provide for indemnification of its directors and
officers to the fullest extent permitted by applicable law.
II-1
<PAGE> 150
The form of Underwriting Agreement attached hereto as Exhibit 1.1, which
provides for, among other things, the Registrant's sale to the Underwriters of
the securities being registered herein, will obligate the Underwriters to
indemnify the Registrant and Registrant's officers and directors against certain
liabilities under the Securities Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the Company's initial capitalization on December 14,
1993, the Company issued 975,151 shares of Common Stock to Evergreen Healthcare,
Inc., a Georgia corporation ("Evergreen"), 380,636 shares of Common Stock to
Care Living Centers, Inc., a Wisconsin corporation, and 456,763 shares of Common
Stock to Dr. Kraig E. Lorenzen. These securities were issued without
registration under the Securities Act in reliance upon the exemption in Section
4(2) of the Securities Act.
On May 24, 1995, the Company issued 4,302,994 shares of Common Stock to
Alternative Living Investors, L.L.C., a Delaware limited liability company,
pursuant to the Company's 1995 recapitalization transaction for $20,000,000 and
917,151 shares of Common Stock to Evergreen pursuant to a September 21, 1994
capital call for $2,677,342. These securities were issued without registration
under the Securities Act in reliance upon the exemption in Section 4(2) of the
Securities Act.
On January 25, 1996 in connection with the Company's acquisition of all of
the outstanding capital stock of Heartland Retirement Services, Inc., a
Wisconsin corporation ("Heartland"), the Company issued an aggregate of 207,899
shares of Common Stock to Heartland Development Corporation, a Wisconsin
corporation, and Douglas A. Hennig, the sole shareholders of Heartland (the
"Heartland Acquisition"). These securities were issued without registration
under the Securities Act in reliance upon the exemption in Section 4(2) of the
Securities Act. In addition, pursuant to the terms of the employment agreement
entered into by and between the Company and Mr. Hennig as part of the Heartland
Acquisition, the Company issued 53,525 shares of Common Stock to Mr. Hennig for
$248,748.12 and the Company granted Mr. Hennig an option to acquire an aggregate
of 41,580 shares of Common Stock. These securities were issued without
registration under the Securities Act in reliance upon the exemption in Section
4(2) of the Securities Act.
On May 24, 1996, the Company issued 322,706 shares of Common Stock for
$1,500,583.00 to Assisted Living Equity Investors, a New York general
partnership, ("ALE"), pursuant to the terms of a Stock Purchase Agreement dated
as of May 22, 1996 by and between the Company and Pioneer. These securities were
issued without registration under the Securities Act in reliance upon the
exemption in Rule 506 of Regulation D promulgated pursuant to Section 4(2) of
the Securities Act.
On May 24, 1996, the Company issued 107,575 shares of Common Stock for
$500,023.75 to Petty, Kneen & Company, L.L.C. ("PK & Co."), a Delaware limited
liability company organized by William G. Petty, Jr. and John W. Kneen, the
Chairman of the Board and the Chief Financial Officer of the Company,
respectively, pursuant to the terms of the Purchase Agreement dated as of May
22, 1996 by and between the Company and PK & Co. These securities were issued
without registration under the Securities Act in reliance upon the exemption in
Rule 506 of Regulation D promulgated pursuant to Section 4(2) of the Securities
Act.
On May 24, 1996 in connection with the merger of Alternative Living
Services -- Midwest Inc. ("ALS-Midwest") with and into ALS Acquisition Corp., a
wholly-owned subsidiary of the Company, the Company issued an aggregate of
57,512 shares of Common Stock to Water Cliff Limited Partnership, Michael J.
Damone and the Michael G. Damone Trust dated November 4, 1969, the sole
shareholders of ALS-Midwest other than the Company. These securities were issued
without registration under the Securities Act in reliance upon the exemption in
Rule 504 of Regulation D promulgated pursuant to Section 3(b) of the Securities
Act and in reliance upon the exemption in Rule 506 of Regulation D promulgated
pursuant to Section 4(2) of the Securities Act.
On May 24, 1996 in connection with the acquisition by the Company of all of
the limited partnership interests in five Michigan limited partnerships not
already held by the Company or by ALS-Midwest pursuant to the terms of the
Limited Partner Interest Purchase Agreement by and among the Company,
ALS-Midwest, Lionel S. Margolick and the limited partners named therein dated as
of May 20, 1996, the Company issued an
II-2
<PAGE> 151
aggregate of 115,024 shares of Common Stock. These securities were issued
without registration under the Securities Act in reliance upon the exemption in
Rule 506 of Regulation D promulgated pursuant to Section 4(2) of the Securities
Act.
On May 24, 1996 in connection with the merger of New Crossing International
Corporation, a Nevada corporation ("Crossings"), with and into the Company
pursuant to the Agreement and Plan of Merger by and between the Company,
Crossings and Capital Consultants, Inc. dated as of May 22, 1996, the Company
issued and aggregate of 2,007,049 shares of Common Stock to the shareholders of
Crossings. These securities were issued without registration under the
Securities Act in reliance upon the exemption in Rule 506 of Regulation D
promulgated pursuant to Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.+
3.1 -- Restated Certificate of Incorporation of Registrant.
3.2 -- Restated Bylaws of Registrant.
4.1 -- See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven of the Company's
Restated Certificate of Incorporation filed as Exhibit 3.1 to this Registration
Statement and Articles 2, 3, 5, 7 and 8 of the Company's Restated Bylaws filed as
Exhibit 3.2 to this Registration Statement.
4.2 -- Form of Common Stock certificate.+
5.1 -- Opinion and Consent of Rogers & Hardin.*
10.1 -- Stock Purchase Agreement dated as of May 22, 1996 by and between Assisted Living
Equity Investors and the Company.*
10.2 -- Services Agreement effective as of January 1, 1996 by and between Petty, Kneen &
Company, L.L.C. and the Company.
10.3 -- Purchase Agreement dated as of May 22, 1996 by and between Petty, Kneen & Company,
L.L.C. and the Company.
10.4 -- Agreement and Plan of Merger among the Company, ALS Acquisition Corp., Alternative
Living Services-Midwest Inc. and the shareholders of Alternative Living
Services-Midwest Inc. dated as of May 20, 1996.
10.5 -- Limited Partner Interest Purchase Agreement by and among the Company, Alternative
Living Services-Midwest Inc., Lionel S. Margolick and the Limited Partners
referenced herein dated as of May 20, 1996.
10.6 -- Agreement and Plan of Merger dated as of May 22, 1996 between the Company, New
Crossings International Corporation and Capital Consultants, Inc.*
10.7 -- Services Agreement by and between Richard W. Boelhke and the Company dated as of
May 23, 1996.
10.8 -- Employment Agreement by and between D. Lee Field and the Company dated as of May
23, 1996.
10.9 -- Employment Agreement by and between David M. Boitano and the Company dated as of
May 23, 1996.
10.10 -- Amended and Restated Alternative Living Services, Inc. 1995 Incentive Compensation
Plan.*
10.11 -- Employment Agreement by and between G. Faye Godwin and the Company dated as of May
23, 1996.
</TABLE>
II-3
<PAGE> 152
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------------------------
<C> <C> <S>
10.12 -- Employment Agreement by and between Douglas A. Hennig and the Company dated as of
January 25, 1996, as amended.
10.13 -- Employment Agreement by and between William F. Lasky and the Company dated as of
December 14, 1993, as amended.
10.14 -- Recapitalization Agreement dated as of May 23, 1995 by and among the Company,
Evergreen Healthcare, Inc., Care Living Centers, Inc., William F. Lasky, David
Burr, Kraig E. Lorenzen and Alternative Living Investors, L.L.C.
10.15 -- Stock Purchase Agreement among Heartland Retirement Services, Inc., the
shareholders of Heartland Retirement Services, Inc. and the Company dated as of
January 25, 1996.*
10.16 -- Loan Agreement dated as of January 25, 1996 by and among RDV Capital Management
L.P. and the Company.*
10.17 -- Lease Agreement between Healthcare REIT, Inc. and the Company dated as of January
22, 1996 (Clare Bridge of Bradenton).
10.18 -- Lease Agreement between Healthcare REIT, Inc. and the Company dated as of January
22, 1996 (Clare Bridge of Sarasota).
10.19 -- Loan Agreement by and between ALS-Stonefield, Inc. and Healthcare Capital Finance,
Inc. dated as of August 10, 1995.
10.20 -- Loan Agreement by and between SouthTrust Bank of Alabama, National Association and
the Company dated as of June 19, 1995.
10.21 -- Reimbursement Agreement dated as of March 29, 1995 by and between Evergreen
Healthcare, Inc. and the Company.*
10.22 -- Joint Venture Agreement dated as of November 15, 1995 by and between Days
Development Company, LC and the Company.
10.23 -- Acquisition Agreement dated as of September 20, 1994 by and between
CCCI/Northampton Limited Partnership, Continuing Care Concepts, Inc. and the
Company, as amended.
10.24 -- Construction Loan and Security Agreement between Clare Bridge of Montgomery and
Main Line Federal Savings Bank dated as of March 8, 1996.
10.25 -- Loan Agreement dated as of April 30, 1996 by and between North Pointe-Utica
Limited Partnership and GMAC Commercial Mortgage Corporation.
10.26 -- Loan Agreement dated as of April 30, 1996 by and between Six Mile/Abby Limited
Partnership and GMAC Commercial Mortgage Corporation.
10.27 -- Construction Loan and Security Agreement between Clare Bridge of Lower Makefield
and Main Line Federal Savings Bank dated as of November 20, 1995.
10.28 -- Lease Agreement by and between Badger II Limited Partnership and the Company dated
as of December 19, 1994, as amended.*
10.29 -- Mortgage and Security Agreement between CCCI/Northampton Limited Partnership and
Main Line Federal Savings Bank dated as of June 30, 1995.
10.30 -- Building Loan Agreement by and between Wynwood of Chapel Hill, LLC and Wachovia
Bank of North Carolina, N.A. dated as of February 29, 1996.
10.31 -- Lease dated as of February 27, 1996 by and between George Gialamas and the
Company.
10.32 -- Assisted Living Consultant and Management Services Agreement by and between
Alternative Living Services and the Company dated as of December 14, 1993.
10.33 -- Purchase and Sale Agreement dated as of December 15, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.*
10.34 -- Schedule of Purchase and Sale Agreements substantially similar to exhibit 10.33.*
</TABLE>
II-4
<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------------------------
<C> <C> <S>
10.35 -- Lease and Security Agreement by and between Nationwide Health Properties, Inc. and
New Crossings International Corporation dated as of December 15, 1995 (the
Atrium).
10.36 -- Schedule of Lease and Security Agreements by and between Nationwide Health
Properties, Inc. and New Crossings International Corporation substantially similar
to exhibit 10.35.
10.37 -- Loan Agreement dated as of October 31, 1988 by and between Forest Grove
Residential Center Limited Partnership and Oregon Housing Agency, State of Oregon,
together with Amendment to Loan Agreement for Forest Grove Residential Center
dated as of August 20, 1995 by and between Oregon Housing Agency, State of Oregon
and New Crossings International Corporation.*
10.38 -- Purchase and Sale Agreement dated as of December 15, 1995 by and among Crossing
International Corporation, New Crossings International Corporation, 2010 Union
Limited Partnership and Nationwide Health Properties, Inc.*
10.39 -- Assumption Agreement dated as of July 23, 1990 between Albany Residential Center,
Beaulieu-Draper Limited, the Oregon Housing Agency, State of Oregon and Crossings
International Corporation.*
10.40 -- Oregon Housing Agency, State of Oregon, Loan Agreement dated as of October 31,
1988, between Forest Grove Residential Center Limited Partnership and the State of
Oregon.*
10.41 -- Oregon Housing Agency, State of Oregon, Loan Agreement dated March 22, 1991,
between McMinnville Residential Estates Limited Partnership and the State of
Oregon, Oregon Housing Authority.*
10.42 -- Loan Agreement by and between Nationwide Health Properties, Inc. and 2010 Union
Limited Partnership dated as of December 15, 1995, as amended.
10.43 -- Sublease and Security Agreement by and between 2010 Union Limited Partnership and
New Crossings International Corporation dated as of December 15, 1995.
10.44 -- Operating Lease dated as of January 1, 1991 by and between Capital Consultants,
Inc. and Crossings International Corporation as amended.*
10.45 -- Lease dated as of January 10, 1996 between Capital Consultants, Inc. and Crossing
International Corporation.*
10.46 -- Loan Agreement dated as of June 13, 1991 as amended by and between Capital
Consultants, Inc. and Crossings International Corporation.*
10.47 -- Real Estate Purchase and Sale Agreement by and between C.J. Case and R.W. Case, II
and New Crossings International Corporation dated April 2, 1996.*
10.48 -- Lease and Security Agreement by and between National Health Properties, Inc. and
New Crossings International Corporation dated March 27, 1996.*
10.49 -- Lease Agreement by and between Wild West Post No. 91 Veterans of Foreign Wars and
2010 Union Limited Partnership dated December 2, 1985 and amended on April 15,
1993 and December 1995.*
10.50 -- Sublease Agreement between Franciscan Health Services Northwest and Crossings
International Corporation dated October 1, 1994.*
10.51 -- Assumption Agreement dated August 30, 1990 by and between Forest Grove Residential
Center Limited Partnership, Robert Cook and Larry Draper, the Oregon Housing
Agency and Crossings International Corporation.*
10.52 -- Assumption Agreement dated July 29, 1991 by and between McMinnville Residential
Estates Limited Partnership, the Oregon Housing Agency and McMinnville Residential
Center Limited Partnership.*
</TABLE>
II-5
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------------------------
<C> <C> <S>
10.53 -- Assumption Agreement dated December 18, 1995 by and between Crossings
International Corporation, New Crossings International Corporation, Oregon Housing
Agency and National Health Properties, Inc. (Albany Residential).*
10.54 -- Schedule of Assumption Agreements substantially similar to exhibit 10.53.*
10.55 -- Lease Approval Agreement dated December 18, 1995 by and between National Health
Properties, Inc., New Crossings International Corporation and Oregon Housing
Agency (Albany Residential).*
10.56 -- Schedule of Lease Approval Agreements substantially similar to exhibit 10.55.*
10.57 -- Side Letter Agreement dated December 18, 1995 by Oregon Housing Agency accepted
and agreed to by National Health Properties, Inc. and New Crossings International
Corporation (Albany Residential).*
10.58 -- Schedule of Side Letter Agreements substantially similar to exhibit 10.57.*
10.59 -- Management Agreement dated August 30, 1990 by and between Housing Division, State
of Oregon and Crossings International Corporation (Albany Residential).*
10.60 -- Management Agreement dated July 29, 1991 by and between Housing Division, State of
Oregon, McMinnville Limited Partnership and Crossings International Corporation
(McMinnville).*
10.61 -- Consent Agreement dated December 1995 by and among Legacy Health Systems,
Crossings International Corporation and National Health Properties, Inc.*
10.62 -- Sublease and Security Agreement by and between Nationwide Health Properties, Inc.
and New Crossings International Corporation dated as of December 15, 1995.
10.63 -- Employment Agreement by and between Thomas E. Komula and the Company dated as of
July 3, 1996.*
11.1 -- Statement re Computation of Per Share Earnings.*
21.1 -- Subsidiaries of the Registrant.+
23.1 -- Consent of Rogers & Hardin (included in Exhibit 5.1).
23.2 -- Consents of KPMG Peat Marwick LLP.*
23.3 -- Consent of Arthur Andersen LLP.*
24.1 -- Power of Attorney.
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
+ To be filed by amendment.
* Filed herewith.
(b) Financial Statement Schedules.
Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
II-6
<PAGE> 155
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required to permit prompt delivery
to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 156
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Brookfield,
State of Wisconsin, on the 5th day of July, 1996.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ JOHN W. KNEEN
------------------------------------
John W. Kneen
Vice President, Treasurer, Chief
Financial Officer and Secretary
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- -------------
<S> <C> <C>
* President, Chief Executive July 5, 1996
- --------------------------------------------- Officer and Director (Principal
William F. Lasky Executive Officer)
/s/ JOHN W. KNEEN Vice President, Treasurer, Chief July 5, 1996
- --------------------------------------------- Financial Officer and Secretary
John W. Kneen (Principal Financial Officer)
* Vice President and Controller July 5, 1995
- --------------------------------------------- (Principal Accounting Officer)
Mary Lou Austin
* Chairman of the Board and July 5, 1996
- --------------------------------------------- Director
William G. Petty, Jr.
* Vice Chairman and Director July 5, 1996
- ---------------------------------------------
Richard W. Boelhke
* Director July 5, 1996
- ---------------------------------------------
Gene E. Burleson
* Director July 5, 1996
- ---------------------------------------------
Robert Haveman
* Director July 5, 1996
- ---------------------------------------------
Ronald G. Kenny
* Director July 5, 1996
- ---------------------------------------------
Jerry L. Tubergen
By: /s/ JOHN W. KNEEN
-----------------------------------------
John W. Kneen,
as Attorney-in-Fact
</TABLE>
II-8
<PAGE> 157
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE NO.
------- ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.+ .......................................
3.1 -- Restated Certificate of Incorporation of Registrant. ...................
3.2 -- Restated Bylaws of Registrant. .........................................
4.1 -- See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven of the
Company's Restated Certificate of Incorporation filed as Exhibit 3.1 to
this Registration Statement and Articles 2, 3, 5, 7 and 8 of the
Company's Restated Bylaws filed as Exhibit 3.2 to this Registration
Statement. .............................................................
4.2 -- Form of Common Stock certificate.+ .....................................
5.1 -- Opinion and Consent of Rogers & Hardin.* ...............................
10.1 -- Stock Purchase Agreement dated as of May 22, 1996 by and between
Assisted Living Equity Investors and the Company.* .....................
10.2 -- Services Agreement effective as of January 1, 1996 by and between Petty,
Kneen & Company, L.L.C. and the Company. ...............................
10.3 -- Purchase Agreement dated as of May 22, 1996 by and between Petty, Kneen
& Company, L.L.C. and the Company. .....................................
10.4 -- Agreement and Plan of Merger among the Company, ALS Acquisition Corp.,
Alternative Living Services-Midwest Inc. and the shareholders of
Alternative Living Services-Midwest Inc. dated as of May 20, 1996. .....
10.5 -- Limited Partner Interest Purchase Agreement by and among the Company,
Alternative Living Services-Midwest Inc., Lionel S. Margolick and the
Limited Partners referenced herein dated as of May 20, 1996. ...........
10.6 -- Agreement and Plan of Merger dated as of May 22, 1996 between the
Company, New Crossings International Corporation and Capital
Consultants, Inc.* .....................................................
10.7 -- Services Agreement by and between Richard W. Boelhke and the Company
dated as of May 23, 1996. ..............................................
10.8 -- Employment Agreement by and between D. Lee Field and the Company dated
as of May 23, 1996. ....................................................
10.9 -- Employment Agreement by and between David M. Boitano and the Company
dated as of May 23, 1996. ..............................................
10.10 -- Amended and Restated Alternative Living Services, Inc. 1995 Incentive
Compensation Plan.* ....................................................
10.11 -- Employment Agreement by and between G. Faye Godwin and the Company dated
as of May 23, 1996......................................................
10.12 -- Employment Agreement by and between Douglas A. Hennig and the Company
dated as of January 25, 1996, as amended................................
10.13 -- Employment Agreement by and between William F. Lasky and the Company
dated as of December 14, 1993, as amended...............................
10.14 -- Recapitalization Agreement dated as of May 23, 1995 by and among the
Company, Evergreen Healthcare, Inc., Care Living Centers, Inc., William
F. Lasky, David Burr, Kraig E. Lorenzen and Alternative Living
Investors, L.L.C........................................................
10.15 -- Stock Purchase Agreement among Heartland Retirement Services, Inc., the
shareholders of Heartland Retirement Services, Inc. and the Company
dated as of January 25, 1996.*..........................................
</TABLE>
<PAGE> 158
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE NO.
------- ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
10.16 -- Loan Agreement dated as of January 25, 1996 by and among RDV Capital
Management L.P. and the Company.*.......................................
10.17 -- Lease Agreement between Healthcare REIT, Inc. and the Company dated as
of January 22, 1996 (Clare Bridge of Bradenton).........................
10.18 -- Lease Agreement between Healthcare REIT, Inc. and the Company dated as
of January 22, 1996 (Clare Bridge of Sarasota)..........................
10.19 -- Loan Agreement by and between ALS-Stonefield, Inc. and Healthcare
Capital Finance, Inc. dated as of August 10, 1995.......................
10.20 -- Loan Agreement by and between SouthTrust Bank of Alabama, National
Association and the Company dated as of June 19, 1995...................
10.21 -- Reimbursement Agreement dated as of March 29, 1995 by and between
Evergreen Healthcare, Inc. and the Company.*............................
10.22 -- Joint Venture Agreement dated as of November 15, 1995 by and between
Days Development Company, LC and the Company............................
10.23 -- Acquisition Agreement dated as of September 20, 1994 by and between
CCCI/Northampton Limited Partnership, Continuing Care Concepts, Inc. and
the Company, as amended.................................................
10.24 -- Construction Loan and Security Agreement between Clare Bridge of
Montgomery and Main Line Federal Savings Bank dated as of March 8,
1996....................................................................
10.25 -- Loan Agreement dated as of April 30, 1996 by and between North
Pointe-Utica Limited Partnership and GMAC Commercial Mortgage
Corporation.............................................................
10.26 -- Loan Agreement dated as of April 30, 1996 by and between Six Mile/Abby
Limited Partnership and GMAC Commercial Mortgage Corporation............
10.27 -- Construction Loan and Security Agreement between Clare Bridge of
Lower Makefield and Main Line Federal Savings Bank dated as of November
20, 1995................................................................
10.28 -- Lease Agreement by and between Badger II Limited Partnership and the
Company dated as of December 19, 1994, as amended.*.....................
10.29 -- Mortgage and Security Agreement between CCCI/Northampton Limited
Partnership and Main Line Federal Savings Bank dated as of June 30,
1995....................................................................
10.30 -- Building Loan Agreement by and between Wynwood of Chapel Hill, LLC and
Wachovia Bank of North Carolina, N.A. dated as of February 29, 1996.....
10.31 -- Lease dated as of February 27, 1996 by and between George Gialamas and
the Company.............................................................
10.32 -- Assisted Living Consultant and Management Services Agreement by and
between Alternative Living Services and the Company dated as of December
14, 1993................................................................
10.33 -- Purchase and Sale Agreement dated as of December 15, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International
Corporation.*...........................................................
10.34 -- Schedule of Purchase and Sale Agreements substantially similar to
exhibit 10.33.*.........................................................
10.35 -- Lease and Security Agreement by and between Nationwide Health
Properties, Inc. and New Crossings International Corporation dated as of
December 15, 1995 (the Atrium)..........................................
</TABLE>
<PAGE> 159
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE NO.
------- ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
10.36 -- Schedule of Lease and Security Agreements by and between Nationwide
Health Properties, Inc. and New Crossings International Corporation
substantially similar to exhibit 10.35..................................
10.37 -- Loan Agreement dated as of October 31, 1988 by and between Forest Grove
Residential Center Limited Partnership and Oregon Housing Agency, State
of Oregon, together with Amendment to Loan Agreement for Forest Grove
Residential Center dated as of August 20, 1995 by and between Oregon
Housing Agency, State of Oregon and New Crossings International
Corporation.*...........................................................
10.38 -- Purchase and Sale Agreement dated as of December 15, 1995 by and among
Crossing International Corporation, New Crossings International
Corporation, 2010 Union Limited Partnership and Nationwide Health
Properties, Inc.*.......................................................
10.39 -- Assumption Agreement dated as of July 23, 1990 between Albany
Residential Center, Beaulieu-Draper Limited, the Oregon Housing Agency,
State of Oregon and Crossings International Corporation.*...............
10.40 -- Oregon Housing Agency, State of Oregon, Loan Agreement dated as of
October 31, 1988, between Forest Grove Residential Center Limited
Partnership and the State of Oregon.*...................................
10.41 -- Oregon Housing Agency, State of Oregon, Loan Agreement dated March 22,
1991, between McMinnville Residential Estates Limited Partnership and
the State of Oregon, Oregon Housing Authority.*.........................
10.42 -- Loan Agreement by and between Nationwide Health Properties, Inc. and
2010 Union Limited Partnership dated as of December 15, 1995, as
amended.................................................................
10.43 -- Sublease and Security Agreement by and between 2010 Union Limited
Partnership and New Crossings International Corporation dated as of
December 15, 1995.......................................................
10.44 -- Operating Lease dated as of January 1, 1991 by and between Capital
Consultants, Inc. and Crossings International Corporation as
amended.*...............................................................
10.45 -- Lease dated as of January 10, 1996 between Capital Consultants, Inc. and
Crossing International Corporation.*....................................
10.46 -- Loan Agreement dated as of June 13, 1991 as amended by and between
Capital Consultants, Inc. and Crossings International Corporation.*.....
10.47 -- Real Estate Purchase and Sale Agreement by and between C.J. Case and
R.W. Case, II and New Crossings International Corporation dated April 2,
1996.*..................................................................
10.48 -- Lease and Security Agreement by and between National Health Properties,
Inc. and New Crossings International Corporation dated March 27,
1996.*..................................................................
10.49 -- Lease Agreement by and between Wild West Post No. 91 Veterans of Foreign
Wars and 2010 Union Limited Partnership dated December 2, 1985 and
amended on April 15, 1993 and December 1995.*...........................
10.50 -- Sublease Agreement between Franciscan Health Services Northwest and
Crossings International Corporation dated October 1, 1994.*.............
10.51 -- Assumption Agreement dated August 30, 1990 by and between Forest Grove
Residential Center Limited Partnership, Robert Cook and Larry Draper,
the Oregon Housing Agency and Crossings International Corporation.*.....
10.52 -- Assumption Agreement dated July 29, 1991 by and between McMinnville
Residential Estates Limited Partnership, the Oregon Housing Agency and
McMinnville Residential Center Limited Partnership.*....................
</TABLE>
<PAGE> 160
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE NO.
------- ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
10.53 -- Assumption Agreement dated December 18, 1995 by and between Crossings
International Corporation, New Crossings International Corporation,
Oregon Housing Agency and National Health Properties, Inc. (Albany
Residential).*..........................................................
10.54 -- Schedule of Assumption Agreements substantially similar to exhibit
10.53.*.................................................................
10.55 -- Lease Approval Agreement dated December 18, 1995 by and between National
Health Properties, Inc., New Crossings International Corporation and
Oregon Housing Agency (Albany Residential).*............................
10.56 -- Schedule of Lease Approval Agreements substantially similar to exhibit
10.55.*.................................................................
10.57 -- Side Letter Agreement dated December 18, 1995 by Oregon Housing Agency
accepted and agreed to by National Health Properties, Inc. and New
Crossings International Corporation (Albany Residential).*..............
10.58 -- Schedule of Side Letter Agreements substantially similar to exhibit
10.57.*.................................................................
10.59 -- Management Agreement dated August 30, 1990 by and between Housing
Division, State of Oregon and Crossings International Corporation
(Albany Residential).*..................................................
10.60 -- Management Agreement dated July 29, 1991 by and between Housing
Division, State of Oregon, McMinnville Limited Partnership and Crossings
International Corporation (McMinnville).*...............................
10.61 -- Consent Agreement dated December 1995 by and among Legacy Health
Systems, Crossings International Corporation and National Health
Properties, Inc.*.......................................................
10.62 -- Sublease and Security Agreement by and between Nationwide Health
Properties, Inc. and New Crossings International Corporation dated as of
December 15, 1995.......................................................
10.63 -- Employment Agreement by and between Thomas E. Komula and the Company
dated as of July 3, 1996.*..............................................
11.1 -- Statement re Computation of Per Share Earnings.*........................
21.1 -- Subsidiaries of the Registrant.+........................................
23.1 -- Consent of Rogers & Hardin (included in Exhibit 5.1)....................
23.2 -- Consents of KPMG Peat Marwick LLP.*.....................................
23.3 -- Consent of Arthur Andersen LLP.*........................................
24.1 -- Power of Attorney.......................................................
27.1 -- Financial Data Schedule (for SEC use only)..............................
</TABLE>
- ---------------
+ To be filed by amendment.
* Filed herewith.
<PAGE> 1
[The following text appears as letterhead:
Rogers & Hardin
Attorneys at Law
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 522-4700
TELEX: 54-2335
TELECOPIER: (404) 525-2224]
July 5, 1996
ALTERNATIVE LIVING SERVICES, INC.
450 North Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Gentlemen:
We have acted as counsel to Alternative Living Services, Inc. (the
"Company") in connection with the registration by the Company on Form S-1
(hereinafter referred to, together with any amendments thereto, as the
"Registration Statement") under the Securities Act of 1933, as amended, of an
aggregate of 6,900,000 shares of common stock, $.01 par value per share, of the
Company (the "Shares"), of which (a) 6,000,000 shares will be purchased by
certain underwriters (the "Underwriters") from the Company and certain selling
stockholders of the Company and (b) up to 900,000 additional shares will be
purchased by the Underwriters from the Company and certain selling stockholders
of the Company if the Underwriters exercise the option granted to them by the
Company and such stockholders solely to cover over-allotments, if any.
In connection with this opinion, we have examined such corporate records
and documents and have made such examinations of law as we have deemed
necessary. In rendering this opinion, we have relied, without investigation,
upon various certificates of public officials and of officers and
representatives of the Company. In our examination of documents, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies.
<PAGE> 2
Alternative Living Services, Inc.
July 5, 1996
Page 2
Based upon the foregoing and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that the
Shares have been duly authorized and, when sold as contemplated in the
Registration Statement and in the Underwriting Agreement to be entered into
among the Company, the selling stockholders and NatWest Securities Limited,
McDonald & Company Securities, Inc. and The Chicago Corporation, as
representatives of the several Underwriters, will be legally issued, fully paid
and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and as an exhibit to applications to the securities
commissioners of the various states and other jurisdictions of the United States
for registration or qualification of the Shares in such states and other
jurisdictions. We further consent to the reference to our firm under the
caption "Legal Matters" in the Prospectus which is a part of the Registration
Statement.
Very truly yours,
/s/ Rogers & Hardin
ROGERS & HARDIN
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
May 22, 1996, by and between ASSISTED LIVING EQUITY INVESTORS, a New York
general partnership ("Purchaser"), and ALTERNATIVE LIVING SERVICES, INC., a
Delaware corporation ("ALS").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of this
Agreement, Purchaser desires to purchase from ALS, and ALS desires to sell to
Purchaser, shares of the common stock, without par value, of ALS (the "Common
Stock"); and
WHEREAS, the parties hereto desire to set forth their mutual
agreement and understanding with respect to the purchase and sale of the Common
Stock as more particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, the parties hereto, intending to be legally bound, do
hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF COMMON STOCK; PAYMENT; CLOSING; ADMISSION
AMENDMENT.
1.1 Purchase and Sale of Common Stock. Subject to the terms
and conditions of this Agreement, at the Closing (as hereinafter defined), ALS
shall sell, transfer, assign, convey and deliver to Purchaser, and Purchaser
shall purchase from ALS, 322,706 shares of Common Stock (hereinafter referred
to as the "Purchased Stock") at a per share purchase price of $4.65 ("Share
Purchase Price"), resulting in an aggregate purchase price of ONE MILLION FIVE
HUNDRED THOUSAND FIVE HUNDRED AND EIGHTY-TWO AND 90/100 DOLLARS ($1,500,582.90)
(the "Purchase Price").
1.2 Payment. The Purchase Price shall be paid by Purchaser
at the Closing by delivery to ALS of one or more certified or bank cashier's
checks of immediately available federal funds payable to the order of ALS or by
wire transfer at the Closing of immediately available federal funds to an
account designated by ALS.
<PAGE> 2
1.3 Closing; Effective Time. The consummation of the
transactions contemplated by this Agreement (the "Closing") shall take place at
10:00 a.m., at the offices of Rogers & Hardin, on May 23, 1996, provided that
the conditions set forth in this Agreement shall have been fulfilled or waived
and, if not, as soon as practicable following the date on which the last of the
conditions set forth in this Agreement is fulfilled or waived, or at such other
time and/or place as the parties hereto shall agree upon in writing. The time
of Closing is sometimes referred to herein as the "Effective Time".
1.4 Admission Amendment. Pursuant to Section 7.7 of the
Amended and Restated Shareholders Agreement of ALS dated as of January 15,
1996, by and among ALS and all the stockholders of ALS, as amended, a copy of
which is attached as Exhibit A hereto (the "ALS Stockholders' Agreement"),
effective at the Effective Time, the ALS Stockholders' Agreement is hereby
amended to include Purchaser as a party thereto and Purchaser hereby agrees to
be bound by the terms of the ALS Stockholders' Agreement.
SECTION 2. RIGHT TO RESCIND.
2.1 Initial Rescission Right. If, by June 30, 1996, Assisted
Living Equities LLC, a New York limited liability company ("ALE") has not
entered into a definitive joint venture agreement (the "Purchaser J.V.
Agreement") with ALS in substantially the form of Exhibit B hereto (subject to
such changes thereto as the parties mutually agree), together with such of the
agreements ancillary thereto as are to be executed simultaneously with the
Purchaser J.V. Agreement (the "Ancillary Agreements"), then ALS shall have the
right to rescind this Agreement by giving notice to the Purchaser of such
rescission and, upon delivery to ALS of the Purchased Stock, returning to
Purchaser the Purchase Price paid by Purchaser in accordance with the terms of
Section 1.1 of this Agreement (hereinafter referred to as the "Initial
Rescission Right"), which Initial Rescission Right shall be exercisable by ALS
at any time during the month of July 1996. If ALS shall elect to exercise the
Initial Rescission Right, Purchaser shall deliver the Purchased Stock to ALS,
and ALS shall deliver the Purchase Price to Purchaser, at a closing held on
August 15, 1996 at 10:00 a.m., local time, at the offices of Rogers & Hardin,
2700 Cain Tower, 229 Peachtree Street, NE, Atlanta, Georgia 30303.
2.2 Additional Rescission Right; Rescission Tranches. In
addition to the Initial Rescission Right, ALS may rescind this Agreement as to,
and rescind the purchase by Purchaser of up to 258,164 shares of the Purchased
Stock (the "Additional Rescission Right"), which Additional Rescission Right
shall be exercisable in four (4) tranches of 64,541 shares of Purchased Stock
each, referred to herein as "Rescission Tranches". If the Additional
Rescission Right shall become exercisable in accordance herewith with respect
to a Rescission Tranche, ALS shall have the right to rescind this Agreement as
to, and to rescind the purchase by Purchaser of the shares of Common Stock that
comprised, such Rescission Tranche by giving notice to Purchaser of such
rescission and, upon delivery to ALS of share certificates comprising
2
<PAGE> 3
such Rescission Tranche, returning to Purchaser a price per share equal to the
Share Purchase Price to the shares comprising such Rescission Tranche and so
returned. If the Additional Rescission Right shall become exercisable in
accordance herewith with respect to a Rescission Tranche, such Additional
Rescission Right may be exercised by ALS by giving written notice thereof to
Purchaser at any time during the thirty (30) day period following the date upon
which such Additional Rescission Right shall become exercisable with respect to
such Rescission Tranche (the "Rescission Notice"). Unless otherwise agreed by
ALS and Purchaser, the closing of the rescission transaction pursuant to the
exercise of an Additional Rescission Right shall be held at the offices of
Rogers & Hardin at 10:00 a.m., local time, on a date designated by ALS in its
Rescission Notice to Purchaser, which date shall not be less than ten (10) nor
more than thirty (30) days after the date of such Rescission Notice. The
Additional Rescission Right shall become exercisable with respect to each of
the Rescission Tranches as follows:
(i) the Additional Rescission Right for the first Rescission Tranche
shall become exercisable only if, prior to the first to occur of (a)
January 1, 1997, or (b) the forty-fifth day after the date upon which
ALS first sells shares of its common stock in a public offering that
has been registered under the Securities Act of 1933, as amended (the
"Act"), but in no event later than July 31, 1996 (such date as is
first to occur, the "IPO Date"), both of the following statements are
true: (x) one (1) Project Entity has not been formed and initially
funded by the equity owners thereof in accordance with the terms of
the Purchaser J.V. Agreement and the applicable Ancillary Agreements
and shall have secured all building permits required to commence with
the construction of the first Facility ("Project Entity" and
"Facility," when used herein, shall be as defined in the Purchaser
J.V. Agreement) (the satisfaction of such standard with respect to a
Project Entity is referred to herein as the "Project Entity Standard")
and (y) the land for one (1) Facility located in the State of New York
has not been acquired by a real estate limited liability company (a
"RE LLC") jointly owned by ALE and ALS and such RE LLC has not
obtained all approvals required to obtain all building permits
necessary to commence construction (such standard with respect to a
Facility in New York is referred to as the "New York Facility
Standard"; provided, however, that the achievement of the "New York
Facility Standard" for the first and second Rescission Tranches shall
not fail if all building permits, approvals and other actions
necessary to commence construction have been obtained by the IPO Date,
other than the approval of the New York Department of Social Services
("DSS Approval"), so long as such DSS Approval for such Facility shall
be obtained on or before August 30, 1996);
(ii) the Additional Rescission Right for the second Rescission Tranche
shall become exercisable only if, prior to the first to occur
of (a) January 1, 1997, or (b) the IPO Date, all three of the
following statements are true: (x) the Project Entity Standard has not
been satisfied as to two (2) Project Entities (including the Project
Entity referred to in (i) above), and (y) the Project Entity Standard
has not been satisfied for one (1) Project Entity and the New York
Facility Standard, subject to the terms of (i) above, has
3
<PAGE> 4
not been satisfied for one (1) additional Facility (including the
Project Entity or Facility referenced in (i) above) and (z) the New
York Facility Standard has not been satisfied for two (2) Facilities
(including the Facility referenced in (i) above);
(iii) the Additional Rescission Right for the third Rescission Tranche
shall become exercisable only if, prior to January 1, 1997, the
Project Entity Standard and/or the New York Facility Standard have not
been satisfied as to a total of three (3) Project Entities and/or
Facilities (including the Project Entities and Facilities referred to
in (i) and (ii) above); and
(iv) the Additional Rescission Right for the fourth Rescission Tranche
shall become exercisable only if, prior to January 1, 1997, the
Project Entity Standard and/or the New York Facility Standard have not
been satisfied as to a total of four (4) Project Entities and/or
Facilities (including the Project Entities and Facilities referred to
in (i), (ii) and (iii) above.
2.3 Payment for Shares Rescinded. Subject to the terms of
Section 2.4 of this Agreement, upon the exercise by ALS of any right to rescind
the purchase of the Purchased Stock pursuant to Section 2 of this Agreement,
ALS shall pay to Purchaser the Share Purchase Price for each share of the
Purchased Stock as to which this Agreement is rescinded, such payment to be
made in cash or by certified or bank cashier's check or by wire transfer of
immediately available federal funds to an account designated by Purchaser.
Said sum shall represent the entire consideration payable by ALS to Purchaser
for any shares of the Purchased Stock as to which this Agreement is rescinded
by ALS, and no other payments or obligations shall be owed by ALS to Purchaser
by virtue of such rescission by ALS. If this Agreement and the purchase of the
Purchased Shares are rescinded only in part, this Agreement shall remain in
effect as to the Purchased Shares not affected by such rescission.
2.4 Adjustments to Purchased Stock. If ALS shall, at any
time after the Effective Time but before the expiration of any right to rescind
the purchase of the Purchased Stock hereunder, (i) declare or pay a dividend in
shares of the Common Stock or make a distribution to its shareholders in shares
of Common Stock; (ii) subdivide its outstanding shares of the Common Stock;
(iii) combine its outstanding shares of the Common Stock into a smaller number
of shares of the Common Stock; or (iv) issue any shares of its capital stock in
a reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company or another
company is the continuing entity) (hereinafter referred to collectively as an
"Adjustment Event"), then the number of shares of the Purchased Stock or
Rescission Tranche, as the case may be, as to which this Agreement may be
rescinded upon the exercise by ALS of any rescission right set forth in this
Section 2 shall be adjusted so that ALS shall thereafter be entitled to rescind
this Agreement as to the kind and number of Purchased Shares and other
securities that Purchaser is entitled to receive by virtue of the happening of
any Adjustment Event in respect of such Purchased Stock or Rescission Tranche,
as the case may
4
<PAGE> 5
be, and the Share Purchase Price shall be adjusted accordingly. An adjustment
made pursuant to this subsection 2.4 shall become effective immediately after
the effective date of an Adjustment Event.
2.5 Right to Effect Rescission. Payment of the Share
Purchase Price for each share of Purchased Stock or Rescission Tranche, as the
case may be, as to which this Agreement is rescinded by ALS pursuant to the
terms of Section 2 of this Agreement shall be made only upon surrender by
Purchaser of shares certificates representing such shares of Purchased Stock or
Rescission Tranche, as the case may be, as to which this Agreement is rescinded
in accordance with this Section 2. If Purchaser fails to deliver such share
certificates to ALS on the date of the closing of such rescission as provided
in this Section 2, then ALS shall be entitled to cancel such shares of
Purchased Stock or Rescission Tranche, as the case may be, on the books of ALS
and ALS shall have no further obligation to Purchaser with respect to such
shares other than to pay the aggregate Share Purchase Price for such shares to
Purchaser, without interest, upon the surrender of the share certificates to
ALS (or an appropriate lost certificate indemnity agreement). ALS shall have
no right to rescind this Agreement except to the extent expressly provided
herein.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to ALS that the statements contained in this Section 3 are true,
correct and complete as of the date of this Agreement and will be correct and
complete as of the Effective Time (as though then made).
3.1 Organization and Authorization of Purchaser. Purchaser
is a general partnership residing, duly organized, validly existing, and in
good standing under the laws of the State of New York. Purchaser has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed by or on behalf
of Purchaser and constitutes the valid and legally binding obligation of
Purchaser, enforceable in accordance with its terms (except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and except as to the availability of equitable remedies).
3.2 No Violation. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will violate any provision of its charter, bylaws or other governing documents,
or constitutes a breach on the part of Purchaser under any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Purchaser is subject.
3.3 Brokers' Fees. Purchaser has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which ALS could become
liable or obligated.
5
<PAGE> 6
3.4 Representations Concerning Purchaser's Investment.
Purchaser hereby represents, warrants and agrees that, except as may be
required by the terms of this Agreement:
3.4.1 The Purchased Stock is being purchased by
Purchaser and not by any other person or entity, using the capital of
Purchaser, and for the account of Purchaser, not as a nominee or agent
and not for the account of any other person or entity. Purchaser is
not obligated to transfer shares of the Purchased Stock to any other
person nor does Purchaser have any agreement or understanding to do
so. Purchaser is purchasing the Purchased Stock for investment for an
indefinite period and not with a view to the sale or distribution of
any part or all thereof by public or private sale or other
disposition. Purchaser has no intention of selling, granting any
participation in or otherwise distributing or disposing of any shares
of the Purchased Stock. Purchaser does not intend to subdivide the
purchase of the Purchased Stock with any person or entity.
3.4.2 Purchaser has been advised that the shares of
Purchased Stock have not been registered under the Securities Act of
1933, as amended (the "Act"), or registered or qualified under any
state securities law, on the ground, among others, that no
distribution or public offering of the Purchased Stock is to be
effected and the Purchased Stock will be issued by ALS in connection
with a transaction that does not involve any public offering within
the meaning of Section 4(2) of the Act or under the rules and
regulations of the Securities and Exchange Commission (the "SEC") with
respect to the Act, including Rule 506, and under all applicable state
securities laws. Purchaser understands that ALS is relying in part on
the representations of Purchaser as set forth herein for purposes of
claiming such exemptions and that the basis for such exemptions may
not be present if, notwithstanding the representations of Purchaser,
Purchaser intends to acquire shares of the Purchased Stock for resale
on the occurrence or non-occurrence of some predetermined event.
Purchaser has no such intention.
3.4.3 Purchaser acknowledges receipt of a disclosure
memorandum (the "Disclosure Memorandum") and acknowledges that
Purchaser has been furnished with such financial and other information
concerning ALS, the officers, directors and the business of ALS, as
Purchaser considers necessary in connection with the investment by
Purchaser in the Purchased Stock. Purchaser has carefully reviewed
the Disclosure Memorandum, and has discussed with the officers or
directors of ALS any questions Purchaser may have had with respect
thereto. Assuming that the matters referenced in (a), (b) and (c)
below have been fully and correctly described in the Disclosure
Memorandum in accordance with the representations and warranties of
ALS herein, Purchaser understands:
(a) the risks involved in this
offering, including the highly speculative nature of
the investment;
6
<PAGE> 7
(b) the financial hazards involved in
this offering, including the risk of losing the
entire investment made by Purchaser;
(c) the lack of liquidity and
restrictions on transfers of the shares of the
Purchased Stock; and
(d) the tax consequences of this
investment.
Purchaser has consulted with legal, accounting, tax, investment and
other advisers to Purchaser with respect to the tax treatment of an
investment by Purchaser in shares of the Purchased Stock and the
merits and risks of an investment in the Purchased Stock.
3.4.4 Purchaser: (i) is an "accredited investor" as
defined in Regulation D, promulgated by the SEC under the authority of
the Act ("Regulation D"); (ii) has adequate means of providing for the
current needs and possible contingencies of Purchaser, apart from any
income that Purchaser might earn from an investment in ALS; (iii) has
no need for liquidity of the investment made by Purchaser in ALS; and
(iv) can bear the economic risk of losing the entire investment of
Purchaser therein.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ALS. ALS represents and warrants
to Purchaser that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing (as though then made).
4.1 Corporate. ALS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to carry on its business as it is now being
conducted, to enter into this Agreement and to carry out the transactions
contemplated hereby.
4.2 Authority. The execution and delivery of this Agreement
and any other documents, instruments or certificates to be executed and
delivered by ALS pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of ALS. No other corporate act or proceeding on the part of ALS or
its stockholders is necessary to authorize this Agreement, the other documents,
instruments or certificates to be executed and delivered by ALS pursuant hereto
or the transactions contemplated hereby or thereby, including the transfer by
ALS of the Purchased Stock to Purchaser. This Agreement constitutes, and when
executed and delivered any other documents, instruments and certificates to be
executed and delivered by ALS pursuant hereto will constitute, the legal, valid
and binding agreements of ALS, enforceable against ALS in accordance with their
respective terms (except insofar as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and except as to the availability of
equitable remedies).
7
<PAGE> 8
4.3 No Violation. Neither the execution, delivery and
performance of this Agreement or any other documents, instruments or
certificates to be executed and delivered by ALS pursuant hereto, nor the
consummation by ALS of the transactions contemplated hereby or thereby, (a)
will violate any statute, law, rule, regulation, order, writ, injunction or
decree of any court or governmental authority by which ALS is bound, or (b)
will violate or conflict with or constitute a default under any term or
provision of the Certificate of Incorporation or Bylaws of ALS or any material
contract, agreement or instrument to which ALS or any of its subsidiaries is a
party or by which their properties are bound.
4.4 Valid Issuance of Purchased Stock. The Purchased Stock,
when issued and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully
paid, and nonassessable shares of the Common Stock, shall have the rights and
privileges set forth in the Certificate of Incorporation of ALS and will be
free of any and all liens, claims, encumbrances and restrictions on transfer
other than restrictions on transfer contained in the ALS Stockholders'
Agreement (as hereinafter defined) and under the Securities Act and applicable
state securities laws.
4.5 Disclosure. The Disclosure Memorandum does not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading.
SECTION 5. COVENANTS OF PURCHASER.
5.1 Agreement to Refrain from Resales. Without in any way
limiting the representations and warranties contained herein, Purchaser
covenants and agrees that Purchaser shall in no event pledge, hypothecate,
sell, transfer, assign or otherwise dispose of any shares of Purchased Stock,
nor shall Purchaser receive any consideration for the shares of Purchased Stock
from any person, (i) at any time that such Purchased Stock is subject to the
Company's rescission rights under Section 2 hereof and (ii) at all times
thereafter, unless and until prior to any proposed pledge, hypothecation, sale,
transfer, assignment or other disposition:
(a) A registration statement on Form S-1 under the
Act (or any other form appropriate for the purpose under the Act or
any form replacing any such form) with respect to the shares of
Purchased Stock shall be then effective and such disposition shall
have been appropriately qualified in accordance with the Act,
applicable state securities or blue sky laws and any other applicable
Federal or state law; or
(b) Purchaser shall have furnished ALS with (i) a
detailed explanation of the proposed disposition; and (ii) an opinion
of counsel to Purchaser in form and substance satisfactory to ALS to
the effect that such disposition will not require registration of such
shares of Purchased Stock under the Act or qualification of such
8
<PAGE> 9
shares of Purchased Stock under any other Federal or state securities
law, and counsel for ALS shall have concurred in such opinion and ALS
shall have advised Purchaser of such concurrence.
5.2 Compliance with Provisions. Purchaser hereby covenants
and agrees that each of the covenants, agreements, representations and
warranties made by Purchaser contained in this Agreement and the statements
contained in any other document, instrument, certificate or writing delivered
by Purchaser to ALS shall be true in all material respects when made and at and
as of the Effective Time as though such representations and warranties were
made at and as of such date, except as consented to by ALS in writing.
SECTION 6. COVENANTS OF ALS. ALS hereby covenants and agrees that each of the
covenants, agreements, representations and warranties made by ALS contained in
this Agreement and the statements contained in any other document, instrument,
certificate or writing delivered by ALS to Purchaser shall be true in all
material respects when made and at and as of the Effective Time as though such
representations and warranties were made at and as of such date, except as
consented to by Purchaser in writing.
SECTION 7. CERTIFICATES TO CONTAIN LEGENDS. Purchaser understands and agrees
that any certificate or certificates representing the shares of Purchased Stock
shall bear such legends as ALS may consider necessary or advisable to
facilitate compliance with the Act, the applicable state securities laws and
any other securities law including without limitation, legends stating that the
shares of Purchased Stock have not been registered under the Act or qualified
under the state securities laws and setting forth the limitations on
dispositions imposed hereby. In addition, such certificate or certificates
representing the shares of Purchased shall bear a legend stating that the
shares represented by such certificate or certificates is subject to the terms
of the ALS Stockholders' Agreement as well as the covenants, terms and
conditions of this Agreement, including, without limitation, the Company's
rescission rights pursuant to Section 2 hereof.
SECTION 8. PURCHASED STOCK WILL BE RESTRICTED SECURITIES. Purchaser
understands and agrees that the shares of Purchased Stock will be "restricted
securities" as that term is defined in Rule 144, promulgated by the SEC under
the authority of the Act, and, accordingly, that the Purchased Stock must be
held indefinitely unless the shares are subsequently registered under the Act
and qualified under applicable state securities law or exemptions from such
registration and qualification are available. Purchaser understands that ALS
is under no obligation so to register the Purchased Stock under the Act, to
qualify the Purchased Stock under applicable state securities laws, or to
comply with Regulation A or any other exemption under the Act, applicable Law
or any other law. Purchaser understands that Rule 144 is not currently
available for any sale of the Purchased Stock.
9
<PAGE> 10
SECTION 9. INDEMNIFICATION. Purchaser hereby agrees to indemnify and defend
ALS, and hold ALS harmless from and against any and all liability, damage, cost
or expense incurred on account of or arising out of:
9.1 Any breach of or inaccuracy in the representations, warranties or
agreements of Purchaser herein, including, without limitation, the defense of
any claim based on any allegation of fact inconsistent with any of said
representations, warranties or agreements;
9.2 Any disposition of any of the shares of the Purchased Stock
contrary to any of said representations, warranties or agreements; and
9.3 Any action, suit or proceeding based on (a) a claim that any of
said representations, warranties or agreements were inaccurate or misleading,
or (b) any cause of action for damages or redress from ALS or any of them under
the Act, or (c) any disposition of any shares of the Purchased Stock.
SECTION 10. TERMINATION, AMENDMENT AND WAIVER.
10.1 Termination of Agreement. Time is of the essence
hereof. This Agreement may be terminated in its entirety at any time prior to
the Effective Time:
(a) without liability of any party, by mutual agreement of all the
parties hereto;
(b) by ALS, if there has been a material violation or breach by
Purchaser of any of its covenants, agreements, representations or
warranties contained in this Agreement which has not been waived in
writing by ALS; and
(c) by Purchaser, if there has been a material violation or breach by
ALS of any of its covenants, agreements, representations or warranties
contained in this Agreement which has not been waived in writing by
Purchaser; and
(d) by Purchaser, if ALS has not consummated the sale of the
Purchased Shares to Purchaser by May 31, 1996.
10.2 Amendment, Extension and Waiver. At any time prior
to the Effective Time, ALS and Purchaser may, by an instrument in writing
signed by both parties hereto, (a) amend this Agreement, (b) extend the time
for the performance of any of the obligations or other acts of the parties
hereto, (c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (d) waive
compliance with any of the agreements or conditions contained herein.
10
<PAGE> 11
SECTION 11. MISCELLANEOUS.
11.1 Survival of Representations and Warranties. All of the
representations and warranties and covenants of the parties contained in this
Agreement shall survive the Closing hereunder (even if the damaged party knew
or had reason to know of any misrepresentation or breach of warranty at the
time of Closing).
11.2 Expenses, Taxes, Etc. Purchaser will pay all
professional fees and expenses incurred by Purchaser in connection with this
Agreement and the transactions contemplated hereby. ALS will pay all
professional fees and expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby.
11.3 Further Assurances. Each of the parties to this
Agreement hereby covenants and agrees that, from time to time, it will make,
execute and deliver any and all such other instruments and documents and will
do and perform any and all such further acts as shall be or become necessary,
proper or convenient to carry out or effectuate the respective covenants,
promises and undertakings contained in this Agreement.
11.4 Successors and Assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other parties.
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and the successors and permitted assigns of such party.
11.5 Severability. If any provision, clause, or part of
this Agreement, or the application thereof under certain circumstances, is held
invalid, the remainder of this Agreement, or the application of such provision,
clause or part under other circumstances, shall not be affected thereby.
11.6 Entire Agreement. This Agreement and other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior agreements and
understandings between the parties on such matters.
11.7 Headings. The Section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
11.8 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder will be in writing and will be
deemed to have been duly given if (i) personally delivered; (ii) sent by
telecopy, facsimile transmission or other electronic means of transmitting
written documents (if confirmation of such transmission is received); or (iii)
sent to the parties at their respective addresses indicated herein by
registered or certified mail,
11
<PAGE> 12
postage prepaid, return receipt requested, or by private overnight mail courier
service. The respective addresses to be used for all such notices, demands or
requests are as follows:
If to a Purchaser, to:
250 South Clinton Street
Syracuse, New York 13202-1258
Attention: Legal Department
Facsimile: (315) 471-1154
With a copy to:
Kalkines, Arky, Zall & Bernstein LLP
1675 Broadway
New York, New York 10019-5809
Attention: Peter F. Olberg, Esq.
Facsimile: (212) 541-9250
If to ALS, to:
Alternative Living Services, Inc.
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attention: William F. Lasky
Facsimile: (414) 789-9592
with a copy to:
Rogers & Hardin
2700 Cain Tower
229 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attention: Alan C. Leet, Esq.
Facsimile: (404) 525-2224
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
12
<PAGE> 13
11.9 Law Governing. This Agreement will be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Wisconsin without regard to its conflicts of law rules.
11.10 Counterparts/Telecopies. This Agreement may be
executed simultaneously in counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument. Facsimile and telecopy versions of signed documents shall be
deemed to be original documents for purposes of the Closing.
11.11 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties hereto and
their respective successors and permitted assigns.
11.12 Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. In the event
that the rescission rights granted to ALS in Section 2 of this Agreement are
held to be in any way unenforceable, the parties hereto agree that ALS shall
have a right of repurchase with respect to such Purchased Shares on the same
terms and conditions (except for the terms and conditions specific to a right
of rescission) as set forth in Section 2 hereof.
11.13 Number; Gender. Whenever the singular number is
used in this Agreement and when required by the context, the same shall include
the plural and vice versa, and the masculine gender shall include the feminine
and neuter genders and vice versa.
13
<PAGE> 14
IN WITNESS WHEREOF, the each of the parties hereto have caused
this Agreement to be executed and delivered to the other party hereto as of the
date and year first above written.
ASSISTED LIVING EQUITY INVESTORS, a New
York General Partnership
By:
--------------------------------
Its:
-------------------------------
ALTERNATIVE LIVING SERVICES, INC.
By:
--------------------------------
Its:
-------------------------------
14
<PAGE> 15
EXHIBIT A
STOCK PURCHASE AGREEMENT
<PAGE> 16
EXHIBIT B
STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.6
AGREEMENT AND PLAN OF MERGER
dated as of
May 22, 1996
between
ALTERNATIVE LIVING SERVICES, INC.
NEW CROSSINGS INTERNATIONAL CORPORATION
and
CAPITAL CONSULTANTS, INC.
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is entered into as of May
22, 1996, between ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation
("ALS"), whose address is 450 N. Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005, NEW CROSSINGS INTERNATIONAL CORPORATION, a Nevada corporation
("Crossings"), whose address is 1201 Pacific Avenue, Suite 1800, Tacoma,
Washington 98402, and CAPITAL CONSULTANTS, INC., an Oregon corporation ("CCI"),
whose address is 2300 Southwest Yamhill Street, Suite 8000, Portland, Oregon
97204-1383, with respect to the following facts:
A. ALS and the ALS Subsidiary Companies (as defined
below) are in the business of owning and operating assisted
living or dementia care facilities (the "ALS Facilities")
serving the frail and elderly (the "ALS Business").
B. Crossings and the Crossings Subsidiary Companies (as
defined below) are also in the business of owning and
operating assisted living facilities (the "Crossings
Facilities") serving the frail and elderly (the "Crossings
Business").
C. Crossings and ALS wish to merge Crossings with and
into ALS in a transaction intended to qualify as a
reorganization within Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
D. CCI is the agent and investment manager for certain
of Crossings' shareholders.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
(a) ALS and Crossings agree that at the Effective Time, Crossings
shall be merged (the "Merger") with and into ALS in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law") and the General
Corporation Law of
<PAGE> 3
Nevada ("Nevada Law"), whereupon the separate existence of Crossings shall
cease, and ALS shall be the surviving corporation (the "Surviving Corporation")
and shall continue to exist under Delaware Law.
(b) Following the approval of the Merger by the shareholders
of ALS (the "ALS Shareholders") and by the shareholders of Crossings (the
"Crossings Shareholders"), and following the satisfaction or waiver in
accordance herewith of all the conditions to the Merger set forth in Article
IX, and provided that this Agreement shall not have been terminated as provided
in Article X, the parties hereto shall cause a Certificate of Merger meeting
the requirements of Delaware Law (the "Certificate of Merger") and Articles of
Merger meeting the requirements of Nevada Law (the "Articles of Merger") to be
properly executed and filed in accordance with such requirements on the Closing
Date. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware (the
"Effective Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of Crossings and
ALS, all as provided under Delaware Law and Nevada Law.
SECTION 1.02. Conversion of Shares. At the Effective Time:
(a) each issued and outstanding share of common stock, no par
value, of ALS (the "ALS Common Stock") shall continue to be an
identical issued and outstanding share of ALS Common Stock;
(b) each share of common stock, $.001 par value, of Crossings
(the "Crossings Common Stock"), shall be converted into the right to
receive 5.21140873 (the "Common Share Factor") shares of ALS Common
Stock (the "Merger Consideration"); provided, that, if any fractional
share results when multiplying the number of shares of Crossings
Common Stock held by any shareholder of Crossings prior to the Merger
by the Common Share Factor, the total number of shares of ALS Common
Stock delivered to such Crossings shareholder at the Closing will be
rounded up or down to the nearest whole number. Pursuant to the
foregoing, the Crossings Shareholders shall be entitled to receive in
the aggregate 2,007,049 shares of ALS Common Stock.
<PAGE> 4
SECTION 1.03. Surrender of Crossings Common Stock and Issuance
of ALS Common Stock. (a) At the Closing each of the Crossings Shareholders,
individually or, in the case of Crossings Shareholders for which CCI acts as
agent, through CCI, shall tender the certificates representing its respective
shares of Crossings Common Stock, together with assignments separate from
certificate or a properly completed letter of transmittal covering such shares,
and ALS shall tender to each of the Crossings Shareholders certificates
representing the number of shares of ALS Common Stock calculated in accordance
with Section 1.02.
(b) Each holder of shares of Crossings Common Stock that have
been converted into a right to receive the Merger Consideration, upon surrender
to ALS of a certificate or certificates representing such shares, will be
entitled to receive its Merger Consideration issuable in respect of such
shares. Until so surrendered, each such certificate shall, after the Effective
Time, represent for all purposes, only the right to receive such Merger
Consideration.
SECTION 1.04. Dissenter's Rights. It shall be a condition
precedent to the obligations of ALS and Crossings to consummate the Merger that
all of the Crossings Shareholders and the ALS Shareholders shall have waived
their right to exercise dissenter's rights with respect to the Merger.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01. Certificate of Incorporation. The certificate of
incorporation of ALS in effect at the Effective Time shall be the certificate
of incorporation of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 2.02. Bylaws. The bylaws of ALS in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended
in accordance with applicable law.
SECTION 2.03. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of ALS at the Effective Time
and Richard W. Boehlke shall be the directors of the Surviving Corporation, and
(ii) the officers of ALS at the Effective Time shall be the officers of the
Surviving Corporation and, immediately prior to the Effective Time, the Board
of Directors of ALS shall take all action necessary to elect D. Lee Field as
Senior Vice President and David M. Boitano as Vice President of the Surviving
Corporation effective as of the Effective Time.
<PAGE> 5
ARTICLE III
THE CLOSING
SECTION 3.01. Closing. Upon the terms and subject to the
satisfaction of the conditions contained herein, the closing of the
transactions contemplated by this Agreement (the "Closing"), will take place at
the offices of Rogers & Hardin, at 10:00 a.m., Atlanta, Georgia time, on May
23, 1996 or at such other place or time as the parties hereto may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
SECTION 3.02. Deliveries by Crossings. At the Closing,
Crossings shall deliver to ALS the following:
(a) The certificates and other documents required to be
delivered by the Crossings Shareholders at Closing pursuant to Section
1.03 hereof;
(b) The officers certificate contemplated by Section
9.02(i);
(c) The Bogle & Gates P.L.L.C. opinion as contemplated by
Section 9.02(iv);
(d) The Woodburn & Wedge opinion as contemplated by
Section 9.02(v);
(e) The Bogle & Gates P.L.L.C. opinion as to certain tax
matters as contemplated by Section 9.02(vi);
(f) The Restricted Stock Agreements duly executed by each
of the Crossings Shareholders or their agent as contemplated by
Section 9.02(vii);
(g) Purchaser representation letters and questionnaires
as contemplate by Section 9.02(viii); and
(h) All other documents, instruments and writings
required to be delivered by Crossings or the Crossings Shareholders at
or prior to the Closing Date pursuant to this Agreement or otherwise
required in connection herewith.
SECTION 3.03. Deliveries by ALS. At the Closing ALS shall
deliver (unless previously delivered) the following:
<PAGE> 6
(a) To the Crossings Shareholders (in care of Bogle &
Gates, P.L.L.C.), the shares of ALS Common Stock representing the
Merger Consideration.
(b) The officers certificate contemplated by Section
9.03(i) hereto;
(c) The Rogers & Hardin opinion contemplated by Section
9.03(iv) hereto;
(d) The Rogers & Hardin opinion as to certain tax matters
as contemplated by Section 9.03(v);
(e) The Amendment to Stockholders' Agreement dated as of May
22, 1996, executed by ALS Shareholders holding not fewer than 87% of
the shares of ALS Common Stock prior to giving effect to the Merger
and the ALS Restructuring Transactions; and
(f) All other documents, instruments and writings required to
be delivered by ALS at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CROSSINGS
All representations and warranties set forth below are subject to and
qualified by those matters set forth in the disclosure schedule of Crossings
delivered to ALS in connection with the execution of this Agreement (the
"Crossings Disclosure Schedule"). Each of the following representations are
correct and complete as of the date of this Agreement. Where any
representation or warranty is made to "Crossings' actual knowledge", to "the
knowledge of Crossings", to "Crossings' knowledge" or subject to a similar
knowledge limitation, such representation or warranty is made only to the
knowledge and belief of Richard W. Boehlke, D. Lee Field and David M. Boitano,
or any of them, without any obligation to conduct any inquiry or investigation
other than such inquiry as the principal executive officer of Crossings most
likely to have knowledge of such matter may conclude is reasonable in the
circumstances, and the actual or imputed knowledge of CCI, the CCI Holders, the
other officers, agents or employees of Crossings who are not among the
above-listed executive officers of Crossings shall not be imputed to Crossings.
For purposes of this Agreement, the term material adverse effect on Crossings
or the Crossings Business shall mean any change in, or effect on, Crossings, a
Crossings Subsidiary Company (as defined below), or the Crossings Business
which
<PAGE> 7
results in, or could reasonably be expected to result in, Crossings or a
Crossings Subsidiary Company suffering a diminution of value or incurring costs
or expenses or becoming liable for any amount in excess of $50,000. All
references to "Crossings" in Section 4.04 and Sections 4.06 through 4.27 shall
mean, except where the context otherwise requires, each of Crossings and the
Crossings Subsidiary Companies. An item contained in the Crossings Disclosure
Schedule is deemed disclosed with respect to all representations and warranties.
Disclosure of items that are not strictly called for by this Agreement shall not
imply that such information is material or that the inclusion establishes or
implies a standard of materiality.
SECTION 4.01. Corporate.
(a) Crossings is a corporation duly organized and validly existing
under the laws of the State of Nevada, and has the corporate power and authority
to carry on its business as and where it is presently conducted, to enter into
this Agreement and the other documents and instruments to be executed and
delivered by Crossings pursuant hereto (such other documents and instruments are
sometimes referred to herein as the "Crossings Ancillary Instruments") and to
carry out the transactions contemplated hereby and thereby. Each Crossings
Subsidiary Company (as defined below) is duly organized and validly existing as
a corporation, partnership, limited partnership or limited liability company, as
applicable, under the laws of the jurisdiction identified on the Crossings
Disclosure Schedule, and has the power and authority to carry on its business as
and where it is presently conducted. For purposes of this Agreement, "Crossings
Subsidiary Company" shall mean each corporation, limited liability company,
partnership or limited partnership in which Crossings has a direct or indirect
ownership interest and which directly or indirectly owns, leases or operates or
intends to own, lease or operate all or any percentage interest in one or more
Crossings Facilities or is otherwise material to the Crossings Business.
(b) Crossings is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction wherein the character
of the properties owned or leased by it or the nature of the Crossings Business
makes such licensing or qualification necessary, except where the failure to be
so qualified would not have a material adverse effect on the Crossings Business
or the operations of Crossings as a whole. Each Crossings Subsidiary Company is
duly licensed or qualified to do business and is in good standing in each
jurisdiction wherein the character of the properties owned or leased by it or
the nature of the business conducted by it makes such licensing or qualification
necessary, except where the failure to be so
<PAGE> 8
licensed or qualified would not have a material adverse effect on the Crossings
Business or the operations of such entity.
(c) Crossings does not own any interest in any corporation, partnership
or other entity, except as set forth in the Crossings Disclosure Schedule. The
identity and ownership interest of each equity owner of each Crossings
Subsidiary Company are as set forth on the Crossings Disclosure Schedule.
(d) The authorized capital stock of Crossings (the "Crossings Stock")
consists entirely of (x) 40,000,000 shares of Crossings Common Stock, of which
385,126 shares will be issued and outstanding as of the Effective Time, and (y)
5,000,000 shares of preferred stock, par value of 1/10 of $.01 per share, none
of which will be issued and outstanding as of the Effective Time. The record
owners of the Crossings Stock as of the Effective Time are set forth on the
Crossings Disclosure Schedule. All such shares of Crossings Stock at the
Effective Time will be validly issued, fully paid and nonassessable. Other than
under this Agreement or as set forth in the Crossings Disclosure Schedule, there
are no options, warrants, conversions, subscription or other rights, agreements,
contracts or commitments of any kind obligating Crossings, contingently or
otherwise, to issue or sell any shares of capital stock or other securities of
Crossings or any securities convertible into or exchangeable for capital stock
or other securities of Crossings, or to repurchase or redeem any capital stock
or other securities of Crossings. At the Closing, the Crossings Stock will not
be subject to any contractual restrictions relating to its disposition or
conversion pursuant to Section 1.02 hereof.
SECTION 4.02. Shareholders. Each of the Crossings Shareholders
has, and will have at the Closing, good and marketable title to the Crossings
Stock held by such Crossings Shareholder and identified on the Crossings
Disclosure Schedule, free and clear of all Liens, claims and encumbrances and
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act of 1933 and applicable state securities laws). Other than the
agreements to be terminated at or immediately prior to Closing, none of the
Crossings Shareholders are parties to any option, warrant, purchase right or
other contract or commitment that could require them to sell, transfer or
otherwise dispose of any Crossings Stock nor are they parties to any voting
trust, proxy or other agreement or understanding with respect to the voting of
the Crossings Stock. The state of residence of each of the Crossings
Shareholders is set forth on the Crossings Disclosure Schedule.
SECTION 4.03. Authority. The execution and delivery of this
Agreement and the Crossings Ancillary Instruments and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of
<PAGE> 9
Directors of Crossings. Other than the approval of the Crossings Shareholders,
no other corporate act or proceeding on the part of Crossings is necessary to
authorize this Agreement, the Crossings Ancillary Instruments or the
transactions contemplated hereby or thereby. This Agreement constitutes, and
when executed and delivered, the Crossings Ancillary Instruments will
constitute, legal, valid and binding agreements of Crossings enforceable in
accordance with their respective terms (except insofar as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and except as to the
availability of equitable remedies).
SECTION 4.04. No Violation or Conflict.
(a) No Violation. Neither the execution or delivery of this
Agreement or the Crossings Ancillary Instruments, nor the consummation by
Crossings of the transactions contemplated hereby or thereby will violate any
statute, law, rule, regulation, order, writ, injunction or decree of any court
or governmental authority applicable to Crossings, which violation would have a
material adverse effect on the Crossings Business. To Crossings' knowledge,
except as disclosed in the Crossings Disclosure Schedule no consent, approval,
authorization or action by any governmental agency, instrumentality, commission,
authority, board or body (collectively, a "Governmental Agency") is required in
connection with the execution and delivery by Crossings of this Agreement, the
Crossings Ancillary Instruments or the consummation by Crossings of the
transactions contemplated herein or therein. Except as set forth in the
Crossings Disclosure Schedule, Crossings is not required, to its knowledge, to
submit any notice, report or other filing to any Governmental Agency in
connection with the execution or delivery of this Agreement and the consummation
of the transactions contemplated hereby.
(b) No Conflict. Subject to obtaining the consents identified on
the Crossings Disclosure Schedule (the "Required Crossings Consents"), neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will, to Crossings' actual knowledge, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate or
modify, cancel, or require any notice under any agreement, contract, lease or
other arrangement (including, without limitation, any agreement, contract,
lease, or other arrangement relating to indebtedness) to which Crossings is a
party or by which Crossings is bound which would have a material adverse effect
on Crossings or the Crossings Business.
SECTION 4.05. Financial Statements. Included in the Crossings
Disclosure Schedule are true and complete copies of financial statements of
Crossings consisting of (i) balance
<PAGE> 10
sheets of Crossings as of December 31, 1995, and December 31, 1994, and the
related statements of income, stockholders' equity and cash flows for the years
then ended (including the notes contained therein), which financial statements
(the "Crossings Audited Financial Statements") have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis and
have been audited and reported on, and are accompanied by, the signed,
unqualified opinions of KPMG Peat Marwick LLP, independent public accountants
for Crossings and (ii) an unaudited consolidated balance sheet of Crossings as
of March 31, 1996 (the "Crossings Recent Balance Sheet"), and the related
unaudited consolidated statement of operations for the three months then ended.
All of such financial statements (including all notes and schedules contained
therein or annexed thereto) have been derived from the financial books and
records of Crossings and accurately present, in all material respects, the
assets, liabilities and financial position and the results of operations of
Crossings as of the dates and for the years and periods indicated.
SECTION 4.06. No Undisclosed Liabilities. To Crossings' actual
knowledge, Crossings has no liabilities or obligations except (i) to the extent
reflected or reserved for on the Crossings Recent Balance Sheet; (ii)
liabilities or obligations arising or incurred in the ordinary course of
business since the date of the Crossings Recent Balance Sheet; (iii) liabilities
and obligations which, under generally accepted accounting principles, would not
be required to be disclosed on the Crossings Recent Balance Sheet or in the
accompanying footnotes thereto; or (iv) liabilities or obligations disclosed in
the Crossings Disclosure Schedule or pursuant to or in any section of this
Agreement.
SECTION 4.07. Absence of Certain Material Changes. Except as
disclosed in the Crossings Disclosure Schedule, since the date of the Crossings
Recent Balance Sheet, Crossings has conducted the Crossings Business in the
ordinary and usual course of business, consistent with past practice, except as
contemplated by this Agreement, and Crossings has not:
(a) suffered any damage, destruction or loss to its property
or assets, whether covered by insurance or not, having, or reasonably
expected to have, a material adverse effect upon Crossings or the
Crossings Business;
(b) experienced any strike or labor disturbance, other than
routine individual grievances which have not had, and are not
reasonably expected to have, a material adverse effect upon Crossings;
<PAGE> 11
(c) entered into any commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in
the ordinary course of business consistent with past practice and its
current business plan, as disclosed to ALS;
(d) entered into any employment agreement, bonus, stock option
or arrangement respecting employee benefits or granted any increase in
the compensation of employees of Crossings (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment), or any
increase in any such compensation payable or to become payable to any
officer or employee thereof;
(e) made, declared, paid or become obligated to make, declare
or pay any dividend or distribution to its equity owners;
(f) terminated, modified or cancelled any material agreement,
contract, lease or license (or series of related agreements, contracts,
leases and licenses) to which Crossings is a party or bound;
(g) made any capital investment in, any loan to or any
acquisition of the securities or assets of any other entity;
(h) incurred any indebtedness or increased or accelerated its
obligations under any indebtedness; or
(i) taken any other action or become subject to any liability
outside of the ordinary course of business.
SECTION 4.08. Real Property. The Crossings Disclosure Schedule
sets forth all of the material real property (the "Crossings Properties") owned,
leased, used or occupied by Crossings to operate the Crossings Business as
currently operated, including all land, easements or rights of way of record
granted to it, and all buildings or warehouses located thereon. To the knowledge
of Crossings, no fact or condition exists which would prohibit or materially
adversely affect the ordinary rights of access to and from any of the Crossings
Properties from and to the existing highways and roads and Crossings has not
received notice of any pending or threatened restriction or denial, governmental
or otherwise, upon such ingress and egress. All improvements and structures
located on the Crossings Properties are located within the applicable boundaries
of the Crossings Properties and within all applicable setback requirements and
do not encroach upon any adjacent
<PAGE> 12
properties and there are no encroachments on the Crossings Properties from any
adjacent properties, except for such matters as would not materially adversely
affect Crossings or the Crossings Business.
SECTION 4.09. Leases. The Crossings Disclosure Schedule
contains a complete list of all leases (including all amendments thereof and
modifications thereto) (the "Crossings Leases") material to the Crossings
Business pursuant to which Crossings leases real or personal property as lessor
or lessee (whether capital, operating or otherwise), true copies of which
Crossings Leases have been delivered to ALS. To Crossings' knowledge, no party
is in default, or with notice or lapse of time would be in default, with respect
to any of the Crossings Leases.
SECTION 4.10. Title to Properties. Crossings has, to its
knowledge, good, valid and marketable title to all of its assets and properties
reflected in the books and records of Crossings as being owned, free and clear
of all Liens, except Crossings Permitted Liens.
"Liens" shall mean any mortgages, pledges, title defects or objections,
liens, claims, security interests, conditional and installment sale agreements,
encumbrances or charges of any kind. "Crossings Permitted Liens" shall mean (i)
the liens disclosed in the title report(s) provided prior to the date of this
Agreement to ALS, if any, none of which individually or in the aggregate
materially impair (or are expected to impair in the future) the use, occupancy
or value of the assets and properties of Crossings or otherwise materially
impair (or are expected to impair in the future) its business operations, (ii)
statutory liens for real or personal property taxes not yet delinquent or
payable subsequent to the Closing Date, and statutory or common law liens
securing the payment or performance of any obligation of Crossings, the payment
or performance of which is not delinquent, or which are payable or performable
subsequent to such date; (iii) the statutory rights of customers of Crossings
with respect to inventory under orders or contracts entered into by Crossings in
the ordinary course of business; (iv) such imperfections or irregularities of
title, liens, easements, charges or encumbrances as do not materially impair the
use, occupancy or value of the assets and properties of Crossings, or otherwise
materially impair business operations; (v) building, zoning and other laws
applicable to Crossings' assets and properties, none of which individually or in
the aggregate materially impair (or are expected to impair in the future) the
use, occupancy or value of the assets and properties of Crossings or otherwise
materially impair (or are expected to impair in the future) its business
operations; and (vi) any liens disclosed in the Crossings Disclosure Schedule.
<PAGE> 13
SECTION 4.11. Condition of Crossings Properties. To Crossings'
knowledge, except in each case for normal wear and tear and except as reflected
on the Crossings Disclosure Schedule, all structures owned or utilized by
Crossings are structurally sound with no material defects which impair the use
of such structures in the manner in which they are currently being used, and all
machinery and equipment owned or utilized by Crossings are in good and normal
operating condition and repair.
SECTION 4.12. Patents, Trademarks, Trade Names, Etc. The
Crossings Disclosure Schedule contains an accurate and complete description of
all material trademark and service mark registrations, trademark and service
mark applications, trade names, copyright applications and registrations,
software programs (exclusive of common commercially available software), patents
and patent applications owned or held by Crossings, or under which Crossings
owns or holds any license or other interest, all registered or assumed names
under which Crossings is carrying on the Crossings Business and all licenses,
agreements or other arrangements under which Crossings has the right to use any
of the foregoing (collectively, the "Crossings Rights"). Except as indicated in
the Crossings Disclosure Schedule, all such patents, trademarks and copyrights
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office or the United States Registrar of Copyrights, and have been
properly maintained and renewed in accordance with all applicable laws and
regulations. Crossings owns (or possesses adequate licenses or other rights to
use) all Crossings Rights and all inventions, processes and other technical
know-how or other proprietary rights used in and necessary to the conduct of the
Crossings Business. Except as set forth in the Crossings Disclosure Schedule, no
notice of conflict with the asserted rights of others with respect to the
foregoing has been received, and such Crossings Rights are adequate, in
Crossings' judgment, for the conduct of the Crossings Business. Crossings has
not granted any licenses or sublicenses thereunder to others except as set forth
in the Crossings Disclosure Schedule. To the knowledge of Crossings, except as
disclosed in the Crossings Disclosure Schedule, none of the Crossings Rights are
subject to any claim that (i) any of the Crossings Rights are invalid or subject
to a claim of patent misuse, (ii) Crossings is infringing any patents,
trademarks, trade names or copyrights of others, (iii) Crossings is violating
any secrecy rights of any person, or (iv) any Crossings Rights are being used
contrary in any respect to the provisions of any license or other agreement
relating to the use of the Crossings Rights. Crossings does not know of any
claims of third parties to the use or title of any Crossings Rights inconsistent
with the rights of ownership or use set forth in the Crossings Disclosure
Schedule. Except as disclosed in the Crossings Disclosure Schedule, to the
knowledge of Crossings, none of the Crossings Rights is being infringed by a
third party. To Crossings'
<PAGE> 14
knowledge, Crossings has not interfered with, infringed upon or misappropriated
any trademark, trade name, copyright or patent of any third party.
SECTION 4.13. Litigation. Except as set forth in the Crossings
Disclosure Schedule, there are no claims, actions, suits, proceedings or
investigations pending or, to Crossings' knowledge, threatened by or against
Crossings or the Crossings Business or the transactions contemplated hereby,
which might individually or in the aggregate materially adversely affect
Crossings' financial condition or the conduct of the Crossings Business as
presently conducted, nor is there any judgment, decree, injunction or order
outstanding against Crossings which individually or in the aggregate has or is
likely to have such an effect.
SECTION 4.14. Insurance. The Crossings Disclosure Schedule sets
forth a complete and accurate list and description, including but not limited to
deductibles thereunder, of all material policies of fire, liability, product
liability, workmen's compensation, health and other forms of insurance presently
in effect with respect to the Crossings Business. To Crossings' knowledge, all
such policies are in full force and effect, are sufficient for all applicable
requirements of law and will not be effected by or terminated or lapsed by
reason of the consummation of the transactions contemplated by this Agreement.
SECTION 4.15. Employees. The Crossings Disclosure Schedule
contains a summary representative list of all employees of Crossings as of May
14, 1996. Except as indicated on the Crossings Disclosure Schedule, all
Crossings' employees are terminable at will.
SECTION 4.16. Employee Benefit Plans; ERISA.
(a) Except for the employee plans, benefits and materials described in
the Crossings Disclosure Schedule (the "Crossings Plans"), Crossings does not
have bonus, deferred compensation, incentive compensation, severance or
termination pay, hospitalization or other medical, stock purchase, stock option,
pension, life or other insurance, profit-sharing or retirement plan, agreement
or arrangement, or other employee benefit plan or arrangement, whether formal or
informal, and whether legally binding or not, maintained or contributed to by
Crossings with respect to its employees.
(b) Crossings has never been a party to a "multiemployer plan" as that
term is defined in Section 3(37) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
<PAGE> 15
(c) With respect to each Crossings Plan, to Crossings' knowledge, (i)
all payments due from Crossings to date with respect to any such Crossings Plan
have been made and all amounts properly accrued to date as liabilities of
Crossings Plan which have not been paid have been properly recorded on the books
of Crossings and are reflected in the Crossings Recent Balance Sheet; (ii) all
reports and information relating to such Crossings Plan required to be filed
with any governmental entity have been timely filed except where the failure to
do so would not result in material liability to Crossings; (iii) there are no
actions, suits or claims pending (other than routine claims for benefits) with
respect to such Plan or against the assets of such Crossings Plan; (iv) no
Crossings Plan is a plan which is established and maintained outside the United
States primarily for the benefit of individuals substantially all of whom are
nonresident aliens.
SECTION 4.17. Compliance with Laws. To the knowledge of
Crossings, Crossings is in compliance with all laws, regulations, ordinances,
permits and licenses relating to the ownership or use of Crossings' properties
and assets or related to the conduct of the Crossings Business the enforcement
of which would materially adversely affect Crossings or the Crossings Business
as currently conducted by Crossings.
SECTION 4.18. No Condemnation or Expropriation. Crossings has
not received a notice that either the whole or any portion of the Crossings
Properties or any other of its assets is subject to any governmental decree or
order to be sold or is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, or that any
such condemnation, expropriation or taking has been proposed.
SECTION 4.19. Tax Matters.
(a) The provision made for taxes on the Crossings Recent Balance Sheet
is, in Crossings' judgment, sufficient for payment of all federal, state,
foreign, local and other income, excise, profits, franchise, occupation,
property, payroll, sales, use, gross receipts and other taxes and assessments,
whether or not disputed at the date of the Crossings Recent Balance Sheet, and
for all years and periods prior thereto, except in each case where a failure to
make such a provision would not have a material adverse effect on the Crossings
Business or the operations of Crossings as a whole. Since the date of the
Crossings Recent Balance Sheet, Crossings has not incurred any taxes material to
the Crossings Business or operations of Crossings as a whole, other than taxes
incurred in the ordinary course of business.
<PAGE> 16
(b) Except as disclosed in the Crossings Disclosure Schedule, to
Crossings' knowledge, (i) Crossings has filed when due all federal, state, local
and foreign tax returns required by applicable law to be filed by it and has
paid all taxes (including all deficiency assessments, additions to taxes,
penalties and interest, of which notice has been received) to the extent that
such amounts have become due or are claimed to be due from any federal, state,
local or foreign taxing authorities; (ii) there is no agreement, waiver or
consent providing for an extension of time with respect to the assessment of any
tax or deficiency against Crossings and no power of attorney granted by
Crossings with respect to any tax matter is currently in force; (iii) there is
no action, suit, proceeding, investigation, audit or claim pending against or
with respect to Crossings in respect of any tax or assessment, nor has any claim
for additional tax or assessment being asserted by any such authority; and (iv)
Crossings has not filed any agreement or consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"). None of the Crossings
Shareholders nor Crossings is a "foreign person," as that term is defined in
Section 1445(f) of the Code.
(c) Except for the possibility of the sale of the CCI Shares (as
defined below) as contemplated or permitted in Sections 7.08 and 7.09 below and
other than in a transaction registered or otherwise exempt from registration
under the Securities Act (as defined below) and all applicable state securities
laws, to the knowledge of Crossings, there is no plan or intention on the part
of the Crossings Shareholders to sell, exchange or otherwise dispose of any ALS
Common Stock received in connection with the Merger.
(d) Crossings is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(e) There is no intercorporate indebtedness existing between Crossings
and ALS that was issued, acquired or will be settled at a discount.
(f) The fair market value of the ALS Common Stock and any
additional consideration provided hereunder to the Crossings Shareholders will
be approximately equal to the fair market value of the Crossings Common Stock of
the Crossings Shareholders.
(g) Crossings is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
SECTION 4.20. Contracts and Commitments. Except for (i)
liabilities or obligations disclosed in the Crossings Disclosure Schedule or
(ii) liabilities or obligations disclosed
<PAGE> 17
pursuant to or in any section of this Agreement, to Crossings' knowledge:
(a) Crossings does not have any (i) collective bargaining
agreements in effect or being negotiated, (ii) agreements to which it
is a party that contain any severance or termination pay liabilities or
obligations, (iii) employment or consulting agreements for employees in
effect or being negotiated;
(b) Crossings has not given any power of attorney (revocable or
irrevocable) to any person, firm or corporation for any purpose
whatsoever that is currently in force;
(c) Crossings is not a party to any agreement which contains
covenants limiting the freedom of Crossings (or ALS after Closing) to
compete in any line of business or market or with any person;
(d) Crossings is not a party to any agreement that provides
for payments to or by Crossings in an aggregate amount of $50,000 or
more and requires performance by Crossings for a term of more than six
(6) months from the date hereof and that is not terminable within six
(6) months by Crossings without material cost, liability or penalty;
(e) Crossings is not a party to any agreement establishing or
providing for any joint venture, partnership or similar arrangement
with any other person or entity related to the Crossings Business; and
(f) Crossings has no reason to believe that any material
contract or commitment to which Crossings is a party is not in full
force and effect in accordance with the terms thereof (except in each
case insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and except as to the availability of
equitable remedies). To Crossings' actual knowledge, no party is in
default with respect to any such contracts, except where the aggregate
effect of such defaults would not have a material adverse effect on the
Crossings Business or the operations of Crossings as a whole.
SECTION 4.21. Labor Disagreements. Crossings has not
experienced any material labor disputes, union organization attempts or any work
stoppage due to labor disagreements. Except as set forth on the Crossings
Disclosure Statement, Crossings has not received a notice that there is any
unfair labor practice,
<PAGE> 18
charge or complaint pending or threatened against it before the National Labor
Relations Board or any comparable state agency or authority. To Crossings'
knowledge, there is no labor strike, dispute, request for representation,
slowdown or stoppage actually pending or threatened against or affecting
Crossings. To Crossings' knowledge, no question concerning representation has
been raised or is threatened respecting Crossings' employees. No grievance which
might have a material adverse effect on the Crossings Business and the
operations of Crossings as a whole is pending.
SECTION 4.22. Environmental Matters.
(a) To Crossings' actual knowledge, except as set forth in the
Crossings Disclosure Schedule, (i) each facility and property owned, operated or
leased by Crossings has been and is now owned, operated or leased in compliance
with all applicable Environmental Laws (as hereinafter defined) the
noncompliance with which could materially adversely affect the Crossings
Business as currently conducted by Crossings and (ii) there are no circumstances
that may prevent or interfere with such compliance in the future.
(b) There are no pending or, to Crossings' actual knowledge, threatened
suits, actions, claims, complaints, notices or requests for information received
by Crossings with respect to any alleged violation of any Environmental Law
except for: (i) matters set forth in the Crossings Disclosure Schedule and (ii)
matters which, if adversely decided or resolved, individually or in the
aggregate would not have a material adverse effect on the Crossings Business as
currently conducted by Crossings.
(c) Crossings holds such permits, certificates, approvals, licenses,
exemptions, variances, waivers, permits-by-rule, or other authorizations
("Crossings Environmental Permits") issued by any governmental authority, or
otherwise granted or conferred by operation of any Environmental Law, for the
operation of its facilities or the Crossings Business as are sufficient, in
Crossings' knowledge, to avoid a breach of the representation in Section 4.22(a)
hereof. All such Crossings Environmental Permits held by Crossings are
identified in the Crossings Disclosure Schedule.
(d) To Crossings' knowledge, no property currently or previously owned,
operated or leased by Crossings is listed or is proposed for listing on the
National Priorities List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), or the Comprehensive
Environmental Response, Compensation and Liability Information System List
("CERCLIS") or on any similar state or foreign list of sites requiring
investigation or cleanup; and Crossings has
<PAGE> 19
not received notice, nor is aware, of any lien filed against either the personal
or real property of Crossings under any Environmental Law.
(e) To Crossings' knowledge, Crossings has not been required by any
Environmental Law to place any notice or restriction relating to the presence of
any hazardous materials in any deed to any facility or property owned, operated
or leased by Crossings where the failure to so place any such notice has, or may
reasonably be expected to have, a material adverse effect on the Crossings
Business.
(f) For purposes of this Agreement, "Environmental Law" shall mean any
law, regulation, rule, ordinance, order or decree now existing relating to (i)
pollution or protection of the environment, including natural resources, (ii)
exposure of persons to hazardous materials, (iii) protection of the public
health or welfare from the effects of products, by-products, wastes, emissions,
discharges or releases of hazardous materials, or (iv) regulation of the
manufacture, use or introduction into commerce of hazardous materials, including
their manufacture, formulation, packaging, labeling, distribution,
transportation, handling, storage or disposal.
SECTION 4.23. Affiliates' Relationships.
(a) All leases, contracts or other arrangements between Crossings and
any Crossings Affiliate (as hereinafter defined) are set forth in the Crossings
Disclosure Schedule.
(b) Other than as set forth in the Crossings Disclosure Schedule, no
Crossings Affiliate has any material direct or indirect interest in (i) any
entity which does business with Crossings or is competitive with the Crossings
Business or (ii) any property, asset or right which is used by Crossings in the
conduct of the Crossings Business.
(c) For purposes of this Agreement, "Crossings Affiliate" shall mean
and include all Crossings Shareholders, directors and officers of Crossings; the
spouse, parent or child of any such director or officer; and any entity in which
any of the foregoing has a direct or indirect interest, except through ownership
of less than 5% of the outstanding shares of any such entity.
SECTION 4.24. No Brokers or Finders. Neither Crossings nor any
of its directors, officers, employees, Crossings Shareholders or agents have
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof
other than Crossings' retention of National Westminster Bank Plc, New York
Branch ("NatWest") pursuant to that certain engagement
<PAGE> 20
letter dated March 5, 1996, between Crossings and NatWest, a copy of which has
been provided to ALS.
SECTION 4.25. Management Agreements. The Crossings Disclosure
Schedule contains a complete list of all management, consulting or development
agreements (the "Crossings Management Agreements") to which Crossings is a party
and which relate to the management, consulting or development of one or more
Crossings Facilities. To Crossings' knowledge, no party is in default, or with
notice of lapse of time would be in default, with respect to any of the
Crossings Management Agreements.
SECTION 4.26. Licenses and Permits.
(a) The Crossings Disclosure Statement contains a true and complete
list of licenses, permits, certificates, approvals, resolutions, consents and
other authorizations necessary to own, lease or operate each of the Crossings
Facilities or to conduct the Crossings Business in compliance with applicable
law ("Crossings Permits") and, with respect to each Crossings Permit, the name
of the licensor or grantor, a description of the subject matter, the termination
date, and the terms of any renewal option.
(b) Crossings lawfully obtained and currently possesses the
respective Crossings Permits and has fulfilled and performed its obligations
under each of the Crossings Permits. No event has occurred and no condition or
state of facts exists which constitutes or, after notice or lapse of time or
both, would constitute a breach or default under any of the Crossings Permits or
would allow revocation or termination of any of the Crossings Permits, or which
might adversely affect the rights of Crossings under any of the Crossings
Permits. No notice of cancellation, of default of any dispute concerning any of
the Crossings Permits, or of any event, condition or state of facts described in
the preceding sentence, has been received by, or is known to, Crossings or its
officers, directors or employees. Except as set forth in the Crossings
Disclosure Statement, each of the Crossings Permits is valid, subsisting and in
full force and effect, and will continue in full force and effect after the
Merger, in each case without (i) the occurrence of any breach, default or
forfeiture of rights thereunder, or (ii) the consent, approval or act of, or the
making of any filing with, any governmental body, regulatory commission or other
person.
(c) The Crossings Permits include all applicable environmental,
land use and growth management obligations required by any federal, state,
local, foreign or other governmental body, regulatory commission or other
person.
SECTION 4.27. Other Information. None of the representations
or warranties to ALS contained herein and no
<PAGE> 21
statements contained in the Crossings Disclosure Schedule hereto contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading.
ARTICLE IV(A)
REPRESENTATIONS AND WARRANTIES OF CCI
Each of the following representations are correct and complete as of
the date of this Agreement.
SECTION 4A.01. Corporate. CCI is a corporation duly organized
and validly existing under the laws of the State of Oregon, and has the
corporate power and authority to carry on its business as and where it is
presently conducted, and has a limited power of attorney that authorizes it as
agent for the CCI Holders to enter into this Agreement and the other documents
and instruments to be executed and delivered by CCI pursuant hereto (such other
documents and instruments are sometimes referred to herein as the "CCI Ancillary
Instruments") and has the power and authority to carry out the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the CCI Ancillary Instruments will constitute, legal, valid and
binding agreements of CCI, as agent for the CCI Holders, enforceable in
accordance with their respective terms (except insofar as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and except as to the
availability of equitable remedies).
SECTION 4A.02. Control Issues. With respect to the shares of
Crossings Common Stock held by CCI, as agent for each of the Crossings
Shareholders identified on Schedule 4A.02 attached hereto (the "CCI Holders"),
CCI represents and warrants to ALS and Crossings that:
(a) CCI does not hold the shares of Crossings Stock of the CCI
Holders through a trust, partnership or other entity;
(b) under the terms of the account agreements between CCI and the
CCI Holders, as amended, CCI has the discretionary authority to vote and dispose
of the shares of Crossings Stock held by the CCI Holders;
(c) CCI does not have the right to share in the appreciation of the
value of the shares of Crossings Stock of the CCI Holders, except that CCI
receives a management fee based on the overall value of the account;
<PAGE> 22
(d) CCI does not have the right to share in any dividends declared
on the shares of Crossings Stock of the CCI Holders; and
(e) the CCI Holders have the authority to terminate the agency of
CCI with respect to the shares of Crossings Stock of the CCI Holders on
thirty-days notice.
SECTION 4A.03. Authority. CCI represents and warrants to ALS
and Crossings that CCI:
(a) has all necessary power and authority as agent on behalf of the
CCI Holders to vote the shares of Crossings Stock of the CCI Holders in favor of
the Merger and to waive the rights of the CCI Holders to assert dissenters'
rights with respect to the Merger;
(b) has all necessary power and authority as agent on behalf of the
CCI Holders to take all actions necessary to tender the shares of Crossings
Stock held by the CCI Holders in connection with the Merger;
(c) has sufficient knowledge to make the representations and
warranties and has all necessary power and authority as agent on behalf of the
CCI Holders to make the undertakings and agreements on behalf of the CCI
Holders pursuant to the terms of the Restricted Stock Agreement.
SECTION 4A.04. Holder Status. Each of the CCI Holders (as
defined below) is either (i) an "accredited investor," as such term is defined
in Rule 501(a) of Regulation D ("Regulation D") promulgated under the Securities
Act (as defined below), or (ii) has designated CCI as such CCI Holder's
"purchaser representative," as such term is defined in Rule 501(h) of Regulation
D (such CCI Holders are referred to as "Nonaccredited Investors"). Of the CCI
Holders, only three are Nonaccredited Investors. The CCI Holders' states of
residence are as set forth on Schedule 4A.02.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ALS
All representations and warranties set forth below are subject to and
qualified by those matters set forth in the disclosure schedule of ALS delivered
to Crossings in connection with the execution of this Agreement, including
without limitation the confidential private placement memorandum, as amended and
supplemented as of the date hereof (the "Confidential Memorandum") of ALS
provided to Crossings and the Crossings
<PAGE> 23
Shareholders (collectively, the "ALS Disclosure Schedule"). Each of the
following representations are correct and complete as of the date of this
Agreement. Where any representation or warranty is made to "ALS's actual
knowledge", to "the knowledge of ALS", to "ALS's knowledge" or subject to a
similar knowledge limitation, such representation or warranty is made only to
the knowledge and belief of William G. Petty, Jr., William F. Lasky, Mary Lou
Austin or John W. Kneen, or any of them, without any obligation to conduct any
inquiry or investigation other than such inquiry as the principal executive
officer of ALS most likely to have knowledge of such matter may conclude is
reasonable in the circumstances, and the actual or imputed knowledge of the
other officers, agents or employees of ALS who are not among the above-listed
executive officers of ALS shall not be imputed to ALS. For purposes of this
Agreement, the term material adverse effect on ALS or the ALS Business shall
mean any change in, or effect on, ALS, a ALS Subsidiary Company (as defined
below), or the ALS Business which results in, or could reasonably be expected to
result in, ALS or a ALS Subsidiary Company suffering a diminution of value or
incurring costs or expenses or becoming liable for any amount in excess of
$100,000. All references to "ALS" in Section 5.04 and Sections 5.06 through 5.27
shall mean, except where the context otherwise requires, each of ALS and the ALS
Subsidiary Companies. An item contained in the ALS Disclosure Schedule is deemed
disclosed with respect to all representations and warranties. Disclosure of
items that are not strictly called for by this Agreement shall not imply that
such information is material or that the inclusion establishes or implies a
standard of materiality.
SECTION 5.01. Corporate.
(a) ALS is a corporation duly organized and validly existing under the
laws of the State of Delaware, and has the corporate power and authority to
carry on its business as and where it is presently conducted, to enter into this
Agreement and the other documents and instruments to be executed and delivered
by ALS pursuant hereto (such other documents and instruments are sometimes
referred to herein as the "ALS Ancillary Instruments"; the Crossings Ancillary
Instruments and the ALS Ancillary Instruments are sometimes referred to herein
collectively as the "Ancillary Instruments") and to carry out the transactions
contemplated hereby and thereby. Each ALS Subsidiary Company (as defined below)
is duly organized and validly existing as a corporation, partnership, limited
partnership or limited liability company, as applicable, under the laws of the
jurisdiction identified on the ALS Disclosure Schedule, and has the power and
authority to carry on its business as and where it is presently conducted. For
purposes of this Agreement, "ALS Subsidiary Company" shall mean each
corporation, limited liability company, partnership or limited partnership in
which ALS has a direct or indirect ownership interest and which
<PAGE> 24
directly or indirectly owns, leases or operates or intends to own, lease or
operate all or any percentage interest in one or more ALS Facilities or is
otherwise material to the ALS Business.
(b) ALS is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction wherein the character
of the properties owned or leased by it or the nature of the ALS Business makes
such licensing or qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the ALS Business or the
operations of ALS as a whole. Each ALS Subsidiary Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction wherein
the character of the properties owned or leased by it or the nature of the
business conducted by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
material adverse effect on the ALS Business or the operations of such entity.
(c) ALS does not own any interest as of the Effective Time in any
corporation, partnership or other entity, except as set forth in the ALS
Disclosure Schedule. The identity and ownership interest of each equity owner of
each ALS Subsidiary Company as of the Effective Time are as set forth on the ALS
Disclosure Schedule.
(d) The authorized capital stock of ALS consists entirely of (A)
30,000,000 shares of common stock ("ALS Common Stock"), $.01 par value per
share, of which (i) 6,913,484 shares are issued and outstanding as of the date
hereof and (ii) 9,523,350 shares will be issued and outstanding after giving
effect to the Merger and upon completion of the ALS Restructuring Transactions
(as defined below) and (B) 5,000,000 shares of preferred stock, none of which is
issued and outstanding. The owners of the ALS Common Stock are set forth on the
ALS Disclosure Schedule. All such shares of ALS Common Stock are, and at Closing
will be, validly issued, fully paid and nonassessable. Other than under this
Agreement or as set forth in the ALS Disclosure Schedule, there are no options,
warrants, conversions, subscription or other rights, agreements, contracts or
commitments of any kind obligating ALS, contingently or otherwise, to issue or
sell any shares of capital stock or other securities of ALS or any securities
convertible into or exchangeable for capital stock or other securities of ALS,
or to repurchase or redeem any capital stock or other securities of ALS. At the
Closing, except as indicated on the ALS Disclosure Statement, the ALS Common
Stock will not be subject to any contractual restrictions relating to its
disposition.
SECTION 5.02. Confidential Memorandum. The Confidential
Memorandum does not contain any untrue statement of material fact with respect
to ALS or the ALS Business or omit to
<PAGE> 25
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 5.03. Authority. The execution and delivery of this
Agreement and the ALS Ancillary Instruments and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of ALS. Other than the approval of the shareholders of ALS,
no other corporate act or proceeding on the part of ALS is necessary to
authorize this Agreement, the ALS Ancillary Instruments or the transactions
contemplated hereby or thereby. This Agreement constitutes, and when executed
and delivered, the ALS Ancillary Instruments will constitute, legal, valid and
binding agreements of ALS enforceable in accordance with their respective terms
(except insofar as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and except as to the availability of equitable remedies).
SECTION 5.04. No Violation or Conflict.
(a) No Violation. Neither the execution or delivery of this
Agreement or the ALS Ancillary Instruments, nor the consummation by ALS of the
transactions contemplated hereby or thereby will violate any statute, law, rule,
regulation, order, writ, injunction or decree of any court or governmental
authority applicable to ALS, which violation would have a material adverse
effect on the ALS Business. To ALS's knowledge, except as disclosed in the ALS
Disclosure Schedule, no consent, approval, authorization or action by any
Governmental Agency is required in connection with the execution and delivery by
ALS of this Agreement, the ALS Ancillary Instruments or the consummation by ALS
of the transactions contemplated herein or therein. Except as set forth in the
ALS Disclosure Schedule, ALS is not required, to its knowledge, to submit any
notice, report or other filing to any Governmental Agency in connection with the
execution or delivery of this Agreement and the consummation of the transactions
contemplated hereby.
(b) No Conflict. Subject to obtaining the consents identified on
the ALS Disclosure Schedule, neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will, to
ALS's actual knowledge, conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate or modify, cancel, or require any notice under any
agreement, contract, lease or other arrangement (including, without limitation,
any agreement, contract, lease, or other arrangement relating to indebtedness)
to which ALS is a party or by which ALS is bound which would have a material
adverse effect on ALS or the ALS Business.
<PAGE> 26
SECTION 5.05. Financial Statements. Included in the ALS
Disclosure Schedule are true and complete copies of the financial statements of
ALS consisting of (i) balance sheets of ALS as of December 31, 1995 and December
31, 1994, and the related statements of income, stockholders' equity and cash
flows for the years then ended (including the notes contained therein), which
financial statements (the "ALS Audited Financial Statements") have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis and have been audited and reported on, and are accompanied by,
the signed, unqualified opinions of KPMG Peat Marwick LLP, independent public
accountants for ALS, and (ii) an unaudited consolidated balance sheet of ALS as
of March 31, 1996 (the "ALS Recent Balance Sheet"), and the related unaudited
consolidated statement of operations for the three months then ended. All of
such financial statements (including all notes and schedules contained therein
or annexed thereto) have been derived from the financial books and records of
ALS and accurately present, in all material respects, the assets, liabilities
and financial position and results of operations of ALS as of the dates and for
the years and periods indicated.
SECTION 5.06. No Undisclosed Liabilities. To ALS's actual
knowledge, ALS has no liabilities or obligations except (i) to the extent
reflected or reserved for on the ALS Recent Balance Sheet; (ii) liabilities or
obligations arising or incurred in the ordinary course of business since the
date of the ALS Recent Balance Sheet; (iii) liabilities and obligations which,
under generally accepted accounting principles, would not be required to be
disclosed on the ALS Recent Balance Sheet or in the accompanying footnotes
thereto; or (iv) liabilities or obligations disclosed in the ALS Disclosure
Schedule or pursuant to or in any section of this Agreement.
SECTION 5.07. Absence of Certain Material Changes. Except as
disclosed in the ALS Disclosure Schedule, since the date of the ALS Recent
Balance Sheet, ALS has conducted the ALS Business in the ordinary and usual
course of business, consistent with past practice, except as contemplated by
this Agreement, and ALS has not:
(a) suffered any damage, destruction or loss to its property
or assets, whether covered by insurance or not, having, or reasonably
expected to have, a material adverse effect upon ALS or the ALS
Business;
(b) experienced any strike or labor disturbance, other than
routine individual grievances which have not had, and are not
reasonably expected to have, a material adverse effect upon ALS;
<PAGE> 27
(c) entered into any commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice and
its current business plan, as disclosed to Crossings;
(d) entered into any employment agreement, bonus, stock option
or arrangement respecting employee benefits or granted any increase in
the compensation of employees of ALS (including, without limitation,
any increase or change pursuant to any bonus, pension, profit-sharing,
retirement or other plan or commitment), or any increase in any such
compensation payable or to become payable to any officer or employee
thereof;
(e) made, declared, paid or become obligated to make, declare
or pay any dividend or distribution to its equity owners;
(f) terminated, modified or cancelled any material agreement,
contract, lease or license (or series of related agreements,
contracts, leases and licenses) to which ALS is a party or bound;
(g) made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other entity (other
than such matters as are described in (c) above);
(h) incurred any indebtedness or increased or accelerated its
obligations under any indebtedness (other than such matters as are
described in (c) above); or
(i) taken any other action or become subject to any liability
outside of the ordinary course of business.
SECTION 5.08. Real Property. The ALS Disclosure Schedule sets
forth a list by either city and state or legal description of all of the
material real property (the "ALS Properties") owned, leased, used or occupied
by ALS or any ALS Subsidiary Company to operate the ALS Business as currently
operated, together with the name of ALS or the ALS Subsidiary Company owing,
leasing, using or operating each respective property. To the knowledge of ALS,
no fact or condition exists which would prohibit or materially adversely affect
the ordinary rights of access to and from any of the ALS Properties from and to
the existing highways and roads and ALS has not received notice of any pending
or threatened restriction or denial, governmental or otherwise, upon such
ingress and egress. To the
<PAGE> 28
knowledge of ALS, all improvements and structures located on the ALS Properties
are located within the applicable boundaries of the ALS Properties and within
all applicable setback requirements and do not encroach upon any adjacent
properties and there are no encroachments on the ALS Properties from any
adjacent properties, except for such matters as would not materially adversely
affect ALS or the ALS Business.
SECTION 5.09. Leases. The ALS Disclosure Schedule contains a
complete list of all leases (including all amendments thereof and modifications
thereto) (the "ALS Leases") material to the ALS Business and requiring payments
in excess of $30,000 per year pursuant to which ALS leases real or personal
property as lessor or lessee (whether capital, operating or otherwise), true
copies of which ALS Leases have been made available to Crossings. To ALS's
actual knowledge, no party is in default, or with notice or lapse of time would
be in default, with respect to any of the ALS Leases.
SECTION 5.10. Title to Properties. ALS has, to its knowledge,
good, valid and marketable title to all of its assets and properties reflected
in the books and records of ALS as being owned, free and clear of all Liens,
except ALS Permitted Liens.
"Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or charges of any kind. "ALS Permitted Liens" shall
mean (i) the liens disclosed in the title report(s) provided prior to the date
of this Agreement to Crossings, if any, none of which individually or in the
aggregate materially impair (or are expected to impair in the future) the use,
occupancy or value of the assets and properties of ALS or otherwise materially
impair (or are expected to impair in the future) its business operations, (ii)
statutory liens for real or personal property taxes not yet delinquent or
payable subsequent to the Closing Date, and statutory or common law liens
securing the payment or performance of any obligation of ALS, the payment or
performance of which is not delinquent, or which are payable or performable
subsequent to such date; (iii) the statutory rights of customers of ALS with
respect to inventory under orders or contracts entered into by ALS in the
ordinary course of business; (iv) such imperfections or irregularities of
title, liens, easements, charges or encumbrances as do not materially impair
the use, occupancy or value of the assets and properties of ALS, or otherwise
materially impair business operations; (v) building, zoning and other laws
applicable to ALS's assets and properties, none of which individually or in the
aggregate materially impair (or are expected to impair in the future) the use,
occupancy or value of the assets and properties of ALS or otherwise materially
impair (or are expected to impair in the future) its business
<PAGE> 29
operations; and (vi) any liens disclosed in the ALS Disclosure Schedule.
SECTION 5.11. Condition of ALS Properties. To ALS's knowledge,
except in each case for normal wear and tear and except as reflected on the ALS
Disclosure Schedule, all structures owned or utilized by ALS are structurally
sound with no material defects which impair the use of such structures in the
manner in which they are currently being used, and all machinery and equipment
owned or utilized by ALS are in good and normal operating condition and repair.
SECTION 5.12. Patents, Trademarks, Trade Names, Etc. The ALS
Disclosure Schedule contains an accurate and complete description of all
material trademark and service mark registrations, trademark and service mark
applications, trade names, copyright applications and registrations, software
programs (exclusive of common commercially available software), patents and
patent applications owned or held by ALS, or under which ALS owns or holds any
license or other interest, all registered or assumed names under which ALS is
carrying on the ALS Business and all licenses, agreements or other arrangements
under which ALS has the right to use any of the foregoing (collectively, the
"ALS Rights"). Except as indicated in the ALS Disclosure Schedule, all such
patents, trademarks and copyrights have been duly registered in, filed in or
issued by the United States Patent and Trademark Office or the United States
Registrar of Copyrights, and have been properly maintained and renewed in
accordance with all applicable laws and regulations. ALS owns (or possesses
adequate licenses or other rights to use) all ALS Rights and all inventions,
processes and other technical know-how or other proprietary rights used in and
necessary to the conduct of the ALS Business. Except as set forth in the ALS
Disclosure Schedule, no notice of conflict with the asserted rights of others
with respect to the foregoing has been received, and such ALS Rights are
adequate, in ALS's judgment, for the conduct of the ALS Business. ALS has not
granted any licenses or sublicenses thereunder to others except as set forth in
the ALS Disclosure Schedule. To the knowledge of ALS, except as disclosed in
the ALS Disclosure Schedule, none of the ALS Rights are subject to any claim
that (i) any of the ALS Rights are invalid are subject to a claim of patent
misuse, (ii) ALS is infringing any patents, trademarks, trade names or
copyrights of others, (iii) ALS is violating any secrecy rights of any person,
or (iv) any ALS Rights are being used contrary in any respect to the provisions
of any license or other agreement relating to the use of the ALS Rights. ALS
does not know of any claims of third parties to the use or title of any ALS
Rights inconsistent with the rights of ownership or use set forth in the ALS
Disclosure Schedule. Except as disclosed in the ALS Disclosure Schedule, to the
knowledge of ALS, none of the ALS Rights is being infringed by a third party.
To ALS's knowledge, ALS has not interfered
<PAGE> 30
with, infringed upon or misappropriated any trademark, trade name, copyright or
patent of any third party.
SECTION 5.13. Litigation. Except as set forth in the ALS
Disclosure Schedule, there are no claims, actions, suits, proceedings or
investigations pending or, to ALS's knowledge, threatened by or against ALS or
the ALS Business or the transactions contemplated hereby, which might
individually or in the aggregate materially adversely affect ALS's financial
condition or the conduct of the ALS Business as presently conducted, nor is
there any judgment, decree, injunction or order outstanding against ALS which
individually or in the aggregate has or is likely to have such an effect.
SECTION 5.14. Reserved.
SECTION 5.15. Reserved.
SECTION 5.16. Employee Benefit Plans; ERISA.
(a) Except for the employee plans, benefits and materials described in
the ALS Disclosure Schedule (the "ALS Plans"), ALS does not have bonus,
deferred compensation, incentive compensation, severance or termination pay,
hospitalization or other medical, stock purchase, stock option, pension, life
or other insurance, profit-sharing or retirement plan, agreement or
arrangement, or other employee benefit plan or arrangement, whether formal or
informal, and whether legally binding or not, maintained or contributed to by
ALS with respect to its employees.
(b) ALS has never been a party to a "multiemployer plan" as that term
is defined in Section 3(37) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
(c) With respect to each ALS Plan, to ALS's knowledge, (i) all
payments due from ALS to date with respect to any such ALS Plan have been made
and all amounts properly accrued to date as liabilities of ALS Plan which have
not been paid have been properly recorded on the books of ALS and are reflected
in the ALS Recent Balance Sheet; (ii) all reports and information relating to
such ALS Plan required to be filed with any governmental entity have been
timely filed except where the failure to do so would not result in material
liability to ALS; (iii) there are no actions, suits or claims pending (other
than routine claims for benefits) with respect to such Plan or against the
assets of such ALS Plan; (iv) no ALS Plan is a plan which is established and
maintained outside the United States primarily for the benefit of individuals
substantially all of whom are nonresident aliens.
<PAGE> 31
SECTION 5.17. Compliance with Laws. To the knowledge of ALS,
ALS is in compliance with all laws, regulations, ordinances, permits and
licenses relating to the ownership or use of ALS's properties and assets or
related to the conduct of the ALS Business the enforcement of which would
materially adversely affect ALS or the ALS Business as currently conducted by
ALS.
SECTION 5.18. No Condemnation or Expropriation. ALS has not
received a notice that either the whole or any portion of the ALS Properties or
any other of its assets is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, or that any such
condemnation, expropriation or taking has been proposed.
SECTION 5.19. Tax Matters.
(a) The provision made for taxes on the ALS Recent Balance Sheet is,
in ALS's judgment, sufficient for payment of all federal, state, foreign, local
and other income, excise, profits, franchise, occupation, property, payroll,
sales, use, gross receipts and other taxes and assessments, whether or not
disputed at the date of the ALS Recent Balance Sheet, and for all years and
periods prior thereto, except in each case where a failure to make such a
provision would not have a material adverse effect on the ALS Business or the
operations of ALS as a whole. Since the date of the ALS Recent Balance Sheet,
ALS has not incurred any taxes material to the ALS Business or operations of
ALS as a whole, other than taxes incurred in the ordinary course of business.
(b) Except as disclosed in the ALS Disclosure Schedule, to ALS's
knowledge, (i) ALS has filed when due all federal, state, local and foreign tax
returns required by applicable law to be filed by it and has paid all taxes
(including all deficiency assessments, additions to taxes, penalties and
interest, of which notice has been received) to the extent that such amounts
have become due or are claimed to be due from any federal, state, local or
foreign taxing authorities; (ii) there is no agreement, waiver or consent
providing for an extension of time with respect to the assessment of any tax or
deficiency against ALS and no power of attorney granted by ALS with respect to
any tax matter is currently in force; (iii) there is no action, suit,
proceeding, investigation, audit or claim pending against or with respect to
ALS in respect of any tax or assessment, nor has any claim for additional tax
or assessment being asserted by any such authority; and (iv) ALS has not filed
any agreement or consent under Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code").
<PAGE> 32
(c) ALS has no plan or intention to reacquire any of its stock
issued in the Merger.
(d) ALS has no plan or intention to sell or otherwise dispose of
any of the assets of Crossings acquired in the Merger, except for dispositions
made in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
(e) ALS has no plan or intention to discontinue the historic
business of Crossings as such term is defined in Treasury Regulations Section
1.368-1(d).
(f) There is no intercorporate indebtedness existing between Crossings
and ALS that was issued, acquired or will be settled at a discount.
(g) The fair market value of the ALS Common Stock and any
additional consideration provided hereunder to the Crossings Shareholders will
be approximately equal to the fair market value of the Crossings Common Stock
of the Crossings Shareholders.
(h) ALS is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
SECTION 5.20. Contracts and Commitments. Except for (i)
liabilities or obligations disclosed in the ALS Disclosure Schedule or (ii)
liabilities or obligations disclosed pursuant to or in any section of this
Agreement, to ALS's knowledge:
(a) ALS does not have any (i) collective bargaining agreements
in effect or being negotiated, (ii) agreements to which it is a party that
contain any severance or termination pay liabilities or obligations, (iii)
employment or consulting agreements for employees in effect or being
negotiated;
(b) ALS is not a party to any agreement which contains
covenants limiting the freedom of ALS to compete in any line of
business or market or with any person;
(c) ALS is not a party to any agreement that provides for
payments to or by ALS in an aggregate amount of $100,000 or more and
requires performance by ALS for a term of more than six (6) months
from the date hereof and that is not terminable within six (6) months
by ALS without material cost, liability or penalty;
(d) ALS is not a party to any agreement establishing or
providing for any material joint
<PAGE> 33
venture, partnership or similar arrangement with any other person or
entity related to the ALS Business; and
(e) ALS has no reason to believe that any material contract or
commitment to which ALS is a party is not in full force and effect in
accordance with the terms thereof (except in each case insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and except as to the availability of equitable remedies). To
ALS's actual knowledge, no party is in default with respect to any
such contracts, except where the aggregate effect of such defaults
would not have a material adverse effect on the ALS Business or the
operations of ALS as a whole.
SECTION 5.21. Labor Disagreements. ALS has not experienced any
material labor disputes, union organization attempts or any work stoppage due
to labor disagreements. Except as set forth on the ALS Disclosure Statement,
ALS has not received a notice that there is any unfair labor practice, charge
or complaint pending or threatened against it before the National Labor
Relations Board or any comparable state agency or authority. To ALS's
knowledge, there is no labor strike, dispute, request for representation,
slowdown or stoppage actually pending or threatened against or affecting ALS.
To ALS's knowledge, no question concerning representation has been raised or is
threatened respecting ALS's employees. No grievance which might have a material
adverse effect on the ALS Business and the operations of ALS as a whole is
pending.
SECTION 5.22. Environmental Matters.
(a) To ALS's actual knowledge, except as set forth in the ALS
Disclosure Schedule, (i) each facility and property owned, operated or leased
by ALS has been and is now owned, operated or leased in compliance with all
applicable Environmental Laws the noncompliance with which could materially
adversely affect the ALS Business as currently conducted by ALS and (ii) there
are no circumstances that may prevent or interfere with such compliance in the
future.
(b) There are no pending or, to ALS's actual knowledge, threatened
suits, actions, claims, complaints, notices or requests for information
received by ALS with respect to any alleged violation of any Environmental Law
except for: (i) matters set forth in the ALS Disclosure Schedule and (ii)
matters which, if adversely decided or resolved, individually or in the
aggregate would not have a material adverse effect on the ALS Business as
currently conducted by ALS.
<PAGE> 34
(c) ALS holds such permits, certificates, approvals, licenses,
exemptions, variances, waivers, permits-by-rule, or other authorizations ("ALS
Environmental Permits") issued by any governmental authority, or otherwise
granted or conferred by operation of any Environmental Law, for the operation
of its facilities or the ALS Business as are sufficient, in ALS's knowledge, to
avoid a breach of the representation in Section 5.22(a) hereof. All such ALS
Environmental Permits held by ALS are identified in the ALS Disclosure
Schedule.
(d) To ALS's knowledge, no property currently or previously owned,
operated or leased by ALS is listed or is proposed for listing on the National
Priorities List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), or the Comprehensive
Environmental Response, Compensation and Liability Information System List
("CERCLIS") or on any similar state or foreign list of sites requiring
investigation or cleanup; and ALS has not received notice, nor is aware, of any
lien filed against either the personal or real property of ALS under any
Environmental Law.
(e) To ALS's knowledge, ALS has not been required by any Environmental
Law to place any notice or restriction relating to the presence of any
hazardous materials in any deed to any facility or property owned, operated or
leased by ALS where the failure to so place any such notice has, or may
reasonably be expected to have, a material adverse effect on the ALS Business.
SECTION 5.23. Affiliates' Relationships.
(a) All leases, contracts or other arrangements between ALS and any
Affiliate (as hereinafter defined) are set forth in the ALS Disclosure
Schedule.
(b) Other than as set forth in the ALS Disclosure Schedule, no ALS
Affiliate has any material direct or indirect interest in (i) any entity which
does business with ALS or is competitive with the ALS Business or (ii) any
property, asset or right which is used by ALS in the conduct of the ALS
Business.
(c) For purposes of this Agreement, "ALS Affiliate" shall mean and
include all ALS Shareholders, directors and officers of ALS; the spouse, parent
or child of any such director or officer; and any entity in which any of the
foregoing has a direct or indirect interest, except through ownership of less
than 5% of the outstanding shares of any such entity.
SECTION 5.24. No Brokers or Finders. Neither ALS nor any of
its directors, officers, employees, ALS Shareholders or agents have retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof.
<PAGE> 35
SECTION 5.25. Management Agreements. The ALS Disclosure
Schedule contains a description of all material management, consulting or
development agreements (the "ALS Management Agreements") to which ALS is a
party and which relate to the management, consulting or development of one or
more ALS Facilities. To ALS's knowledge, no party is in default, or with notice
of lapse of time would be in default, with respect to any of the ALS Management
Agreements.
SECTION 5.26. Licenses and Permits.
(a) The ALS Disclosure Statement contains summary description of
all licenses, permits, certificates, approvals, resolutions, consents and other
authorizations necessary to own, lease or operate each of the ALS Facilities or
to conduct the ALS Business in compliance with applicable law ("ALS Permits").
(b) ALS lawfully obtained and currently possesses the respective
ALS Permits and has fulfilled and performed its obligations under each of the
ALS Permits. No event has occurred and no condition or state of facts exists
which constitutes or, after notice or lapse of time or both, would constitute a
breach or default under any of the ALS Permits or would allow revocation or
termination of any of the ALS Permits, or which might adversely affect the
rights of ALS under any of the ALS Permits. No notice of cancellation, of
default of any dispute concerning any of the ALS Permits, or of any event,
condition or state of facts described in the preceding sentence, has been
received by, or is known to, ALS or its officers, directors or employees. Except
as set forth in the ALS Disclosure Statement, each of the ALS Permits is valid,
subsisting and in full force and effect, and will continue in full force and
effect after the Merger, in each case without (i) the occurrence of any breach,
default or forfeiture of rights thereunder, or (ii) the consent, approval or act
of, or the making of any filing with, any governmental body, regulatory
commission or other person.
(c) The ALS Permits include all applicable environmental, land use
and growth management obligations required by any federal, state, local,
foreign or other governmental body, regulatory commission or other person.
SECTION 5.27. Other Information. None of the representations
or warranties to Crossings contained herein and no statements contained in the
ALS Disclosure Schedule hereto contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained therein not misleading.
<PAGE> 36
ARTICLE VI
COVENANTS OF Crossings
Crossings agrees that:
SECTION 6.01. Conduct of Crossings. From the date hereof until
the Effective Time, Crossings and the Crossings Subsidiary Companies shall
conduct their business in the ordinary course consistent with past practice and
shall use their best efforts to preserve intact their business organizations
and relationships with third parties and to keep available the services of
their present officers and employees. Except for actions otherwise contemplated
herein, without limiting the generality of the foregoing, from the date hereof
until the Effective Time:
(a) Crossings will not adopt or propose any change in its
articles of incorporation or bylaws;
(b) Crossings will not, and will not permit any Crossings
Subsidiary Company to, merge or consolidate with any other Person (as
defined below) or acquire a material amount of assets of any other
Person;
(c) Crossings will not, and will not permit any Crossings
Subsidiary Company to, sell, lease, license or otherwise dispose of any
material assets or property except (i) pursuant to existing contracts
or commitments described in the Crossings Disclosure Schedule and (ii)
in the ordinary course consistent with past practice;
(d) Neither Crossings nor any Crossings Subsidiary
Company shall (i) declare, set aside or pay any dividend or other
distribution or payment in cash, securities or property in respect of
shares of the Crossings Common Stock, (ii) make any direct or indirect
redemption, retirement, purchase or other acquisition of any of its
capital stock, or (iii) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly any of
its outstanding shares of capital stock (provided, that, nothing
contained herein shall restrict Crossings' ability to convert or
exchange preferred stock of Crossings into Crossings Common Stock);
(e) Neither Crossings nor any Crossings Subsidiary Company
shall, directly or indirectly, (i) issue, grant, sell or pledge or
agree or propose to issue, grant, sell or pledge any shares of, or
rights
<PAGE> 37
or securities of any kind to acquire any shares of, the capital stock
of Crossings (provided, that, nothing contained herein shall restrict
Crossings' ability to convert or exchange preferred stock of Crossings
into Crossings Common Stock), (ii) incur any material indebtedness for
borrowed money, (iii) waive, release, grant or transfer any rights of
material value (iv) adopt a plan of liquidation or dissolution or (v)
change any accounting principles or methods except insofar as may be
required by changes in generally accepted accounting principles;
(f) Neither Crossings nor any Crossings Subsidiary Company
will, directly or indirectly, (i) increase the cash compensation
payable or to become payable by it to any of its employees (other than
with respect to raises in the ordinary course of business for hourly
employees), officers, consultants or directors, (ii) enter into, adopt
or amend any stock option, stock purchase, profit sharing, pension,
retirement, deferred compensation, restricted stock or severance plan,
agreement or arrangement for the benefit of employees, officers,
directors or consultants of Crossings or any Crossings Subsidiary
Company, (iii) enter into or amend any employment or consulting
agreement, except in the ordinary course of business, or (iv) make any
loan or advance to, or enter into any written contract, lease or
commitment with, any officer, employee, consultant or director of
Crossings or any Crossings Subsidiary Company, except for travel
advances in the ordinary course of business;
(g) Neither Crossings nor any Crossings Subsidiary
Company shall, directly or indirectly, assume, guarantee, endorse or
otherwise become responsible for the obligations of any other
individual, corporation or other entity, or make any loans or advances
to any individual, corporation or other entity except in the ordinary
course of business and consistent with past practices;
(h) Crossings will not, and will not permit any Crossings
Subsidiary Company to (i) take or agree or commit to take any action
that would make any representation and warranty of Crossings hereunder
inaccurate in any respect at, or as of any time prior to, the Effective
Time or (ii) omit or agree or commit to omit to take any action
necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time; and
<PAGE> 38
(i) Crossings will not, and will not permit any Crossings
Subsidiary Company to, agree or commit to do any of the foregoing.
For purposes of this Agreement, "Person" means an individual, a
corporation, a partnership, a limited liability company, an association, a
trust or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
SECTION 6.02. Crossings Shareholder Meeting. Crossings shall
cause a meeting of the Crossings Shareholders (the "Crossings Shareholders
Meeting") to be duly called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of this Agreement and the Merger.
In lieu of a live meeting of shareholders, approval and adoption of this
Agreement and the Merger may be accomplished by the unanimous written consent of
the Crossings Shareholders in accordance with Nevada Law and Crossings' articles
of incorporation and bylaws. The Directors of Crossings shall, subject to their
fiduciary duties as advised by counsel, recommend approval and adoption of this
Agreement and the Merger by the Crossings Shareholders. In connection with such
meeting, Crossings (i) will use its best efforts to obtain the necessary
approvals by the Crossings Shareholders of this Agreement and the transactions
contemplated hereby and (ii) will otherwise comply with all legal requirements
applicable to such meeting.
SECTION 6.03. Access to Information. From the date hereof until
the Effective Time, Crossings will give ALS, its counsel, financial advisors,
auditors and other authorized representatives full access to the offices,
properties, books and records of Crossings and the Crossings Subsidiary
Companies, will furnish to ALS, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct Crossings'
employees, counsel and financial advisors to cooperate with ALS in its
investigation of the business of Crossings and the Crossings Subsidiary
Companies; provided that no investigation pursuant to this Section shall affect
any representation or warranty given by Crossings to ALS hereunder.
SECTION 6.04. Notices of Certain Events. Crossings shall
promptly notify ALS of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
<PAGE> 39
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting Crossings or
any Crossings Subsidiary Company which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 4.13 or which relate to the consummation of the transactions
contemplated by this Agreement.
SECTION 6.05. Confidentiality. Prior to the Effective Time and
after any termination of this Agreement Crossings will hold, and will use its
best efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning ALS and the ALS Subsidiary
Companies furnished to Crossings in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by
Crossings, (ii) in the public domain through no fault of Crossings or (iii)
later lawfully acquired by Crossings from sources other than ALS; provided that
Crossings may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement, on a need-to-know basis, so long as
such Persons are informed by Crossings of the confidential nature of such
information and are directed by Crossings to treat such information
confidentially; and provided, further, that in accordance with the
Confidentiality Agreement entered into between ALS and CCI, Crossings may
disclose such information to CCI and its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement. Crossings' obligation to hold any
such information in confidence shall be satisfied if it exercises the same care
with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is terminated,
Crossings will, and will use its best efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to, destroy or
deliver to ALS, upon request, all documents and other materials, and all copies
thereof, obtained by Crossings or on its behalf from ALS in connection with this
Agreement that are subject to such confidence.
<PAGE> 40
ARTICLE VII
COVENANTS OF ALS
ALS agrees that:
SECTION 7.01. Conduct of ALS. From the date hereof until the
Effective Time, ALS and the ALS Subsidiary Companies shall conduct their
business in the ordinary course consistent with past practice and shall use
their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Except for actions otherwise contemplated herein
or described in the ALS Disclosure Statement, without limiting the generality of
the foregoing, from the date hereof until the Effective Time:
(a) ALS will not adopt or propose any change in its certificate
of incorporation or bylaws;
(b) ALS will not, and will not permit any ALS Subsidiary
Company to, merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(c) ALS will not, and will not permit any ALS Subsidiary
Company to, sell, lease, license or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or
commitments described in the ALS Disclosure Schedule and (ii) in the
ordinary course consistent with past practice;
(d) Except in connection with any of the ALS Restructuring
Transactions, neither ALS nor any ALS Subsidiary Company shall (i)
declare, set aside or pay any dividend or other distribution or payment
in cash, securities or property in respect of shares of the ALS Common
Stock, (ii) make any direct or indirect redemption, retirement,
purchase or other acquisition of any of its capital stock, or (iii)
reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly any of its outstanding shares of
capital stock;
(e) Except in connection with any of the ALS Restructuring
Transactions, neither ALS nor any ALS Subsidiary Company shall,
directly or indirectly, (i) issue, grant, sell or pledge or agree or
propose to issue, grant, sell or pledge any shares of, or rights or
securities of any kind to acquire any shares of, the
<PAGE> 41
capital stock of ALS, (ii) incur any material indebtedness for
borrowed money, (iii) waive, release, grant or transfer any rights of
material value (iv) adopt a plan of liquidation or dissolution or (v)
change any accounting principles or methods except insofar as may be
required by changes in generally accepted accounting principles;
(f) Except in connection with any of the ALS Restructuring
Transactions, neither ALS nor any ALS Subsidiary Company will, directly
or indirectly, (i) increase the cash compensation payable or to become
payable by it to any of its officers, consultants or directors, (ii)
enter into, adopt or amend any stock option, stock purchase, profit
sharing, pension, retirement, deferred compensation, restricted stock
or severance plan, agreement or arrangement for the benefit of
employees, officers, directors or consultants of ALS or any ALS
Subsidiary Company, (iii) enter into or amend any employment or
consulting agreement, except in the ordinary course of business, or
(iv) make any loan or advance to, or enter into any written contract,
lease or commitment with, any officer, employee, consultant or director
of ALS or any ALS Subsidiary Company, except for travel advances in the
ordinary course of business;
(g) Except in connection with any of the ALS Restructuring
Transactions, neither ALS nor any ALS Subsidiary Company shall,
directly or indirectly, assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, corporation or
other entity, or make any loans or advances to any individual,
corporation or other entity except in the ordinary course of business
and consistent with past practices;
(h) ALS will not, and will not permit any ALS Subsidiary
Company to (i) take or agree or commit to take any action that would
make any representation and warranty of ALS hereunder inaccurate in any
respect at, or as of any time prior to, the Effective Time or (ii) omit
or agree or commit to omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any respect at
any such time; or
(i) ALS will not, and will not permit any ALS Subsidiary
Company to, agree or commit to do any of the foregoing.
<PAGE> 42
SECTION 7.02. ALS Shareholder Meeting. ALS shall cause a
meeting of the ALS Shareholders (the "ALS Shareholders Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval and adoption of this Agreement and the Merger. In lieu of a live
meeting of shareholders, approval and adoption of this Agreement and the Merger
may be accomplished by the unanimous written consent of the ALS Shareholders in
accordance with Delaware Law and ALS's certificate of incorporation and bylaws.
The Directors of ALS shall, subject to their fiduciary duties as advised by
counsel, recommend approval and adoption of this Agreement and the Merger by
the ALS Shareholders. In connection with such meeting, ALS (i) will use its
best efforts to obtain the necessary approvals by the ALS Shareholders of this
Agreement and the transactions contemplated hereby and (ii) will otherwise
comply with all legal requirements applicable to such meeting.
SECTION 7.03. Access to Information. From the date hereof until
the Effective Time, ALS will give Crossings, CCI, the CCI Holders and their
respective counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of ALS
and the ALS Subsidiary Companies, will furnish to Crossings, CCI, the CCI
Holders and their respective counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct ALS's
employees, counsel and financial advisors to cooperate with Crossings in its
investigation of the business of ALS and the ALS Subsidiary Companies; provided
that no investigation pursuant to this Section shall affect any representation
or warranty given by ALS to Crossings hereunder.
SECTION 7.04. Notices of Certain Events. ALS shall promptly
notify Crossings of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting ALS or any
ALS Subsidiary Company which, if pending on the date of this
Agreement, would have been required to have been
<PAGE> 43
disclosed pursuant to Section 5.13 or which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 7.05. Confidentiality. Prior to the Effective Time and
after any termination of this Agreement ALS will hold, and will use its best
efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning Crossings, the Crossings
Shareholders and the Crossings Subsidiary Companies furnished to ALS in
connection with the transactions contemplated by this Agreement, except to the
extent that such information can be shown to have been (i) previously known on a
nonconfidential basis by ALS, (ii) in the public domain through no fault of ALS
or (iii) later lawfully acquired by ALS from sources other than Crossings;
provided that ALS may disclose such information to its officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement on a need-to-know basis so
long as such Persons are informed by ALS of the confidential nature of such
information and are directed by ALS to treat such information confidentially.
ALS' obligation to hold any such information in confidence shall be satisfied if
it exercises the same care with respect to such information as it would take to
preserve the confidentiality of its own similar information. If this Agreement
is terminated, ALS will, and will use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
destroy or deliver to Crossings, upon request, all documents and other
materials, and all copies thereof, obtained by ALS or on its behalf from
Crossings in connection with this Agreement that are subject to such confidence.
SECTION 7.06. Director and Officer Liability. For three years
after the Effective Time, ALS will cause the Surviving Corporation to indemnify
and hold harmless the present and former officers and directors of Crossings and
Crossings International Corporation, a Washington corporation ("Old Crossings"),
in respect of acts or omissions occurring prior to the Effective Time to the
extent provided under Crossings' and Old Crossings' articles of incorporation
and bylaws in effect on the date hereof with respect to present officers and
directors and in effect as of the time of such act or omission with respect to
former officer and directors; provided that such indemnification shall be
subject to any limitation imposed from time to time under applicable law.
SECTION 7.07. ALS Restructuring Transactions. ALS shall use its
best efforts to consummate on or prior to the Closing Date the restructuring
transactions specifically
<PAGE> 44
described on Schedule 7.07 attached hereto (collectively, the "ALS Restructuring
Transactions").
SECTION 7.08. IPO Registration Rights.
(a) Certain Other Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"CCI Holders" shall have the meaning set forth in Section 4A.02 above.
"CCI Shares" shall mean the shares of ALS Common Stock issued to the
CCI Holders pursuant to Section 1.02 hereof.
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"IPO Right" shall mean the right of the CCI Holders to include the CCI
Shares, as selling shareholders, in the Public Offering in accordance with this
Section 7.08.
"Public Offering" shall mean the first offer and sale by ALS of shares
of ALS Common Stock in a public offering registered pursuant to the Securities
Act.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" shall mean the CCI Shares identified as
"Registrable Securities" on Schedule 4A.02 for so long as they are held by the
CCI Holders, or any transferee for which CCI acts as agent.
"Registration Expenses" shall mean all expenses incurred by ALS in
connection with the Public Offering and in complying with Section 7.08 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for ALS, blue sky fees and
expenses, and accountants' expenses including without limitation any special
audits or "comfort" letters incident to or required by any such registration,
and any fees and disbursements of underwriters customarily paid by issuers, but
excluding underwriting discounts and commissions.
"Securities Act" shall mean the Securities Act of 1933, as amended.
<PAGE> 45
(b) IPO Right. In the event ALS effects a Public Offering
after the Effective Time, the CCI Holders, and each of them, shall be entitled
to include in such registration all of the Registrable Securities held by them
and to sell such Registrable Securities in the Public Offering (such shares
referred to herein as the "Included Shares"), as selling shareholders, subject
to the terms, conditions and limitations hereof. By electing to include Included
Shares in the Public Offering, a CCI Holder shall agree to sell such Included
Shares at the price and on the terms agreed to by ALS with respect to the
primary shares of ALS Common Stock to be sold in the Public Offering. The IPO
Right shall not be assignable by the CCI Holders except to transferees for which
CCI acts as agent.
(c) Exercise of IPO Right.
(1) Notice of Exercise. If ALS shall determine to
effect a Public Offering, ALS will:
(i) promptly give written notice thereof
to each CCI Holder, which notice briefly describes the CCI
Holders' rights under this Section 7.08 (including notice
deadlines); and
(ii) include in such registration (and any
related filing or qualification under applicable blue sky
laws), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or
requests, made by any CCI Holder and received by ALS within ten
(10) business days after the written notice from ALS described
in clause (i) above is delivered by ALS. Such written request
may specify all or a part of a Holder's Registrable Securities.
(2) Registration Statement Form. The Public
Offering shall be effected by the filing of a registration statement on
any form which ALS is eligible to use, such form to be selected by ALS.
(3) Expenses. Except as otherwise provided herein
or prohibited by applicable law, ALS will pay all Registration Expenses
in connection with the registration of Included Shares pursuant to this
Section 7.08. Any underwriter's discount or commission payable with
respect to Included Shares and the fees and expenses of legal counsel
to the CCI Holders participating in such registration shall be paid by
the CCI Holder selling such Included Shares.
(4) Information from CCI Holder. Each CCI Holder
electing to sell Registrable Securities pursuant
<PAGE> 46
to the IPO Right shall furnish to ALS such information regarding such
CCI Holder as ALS may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification,
or compliance referred to in this Section 7.08. Any such information
shall be subject to the confidentiality provisions contained in Section
7.05.
(5) IPO Right Nonexclusive. ALS may register
securities for sale for the account of any person in the Public
Offering (including shares to be registered by or on behalf of ALS).
(d) Underwritten Public Offering. If the Public Offering
is an underwritten offering of Registrable Securities, ALS will enter into an
underwriting agreement reasonably acceptable to ALS with such underwriters for
such offering, such agreement to contain such representations and warranties by
ALS and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities similar in scope to those provided in Section
7.08(h). The holders of Included Shares shall be parties to any such
underwriting agreement and ancillary selling shareholder agreements (which as to
the selling shareholders shall be in such form as is reasonable and customary in
the circumstances) and shall be responsible for bearing the underwriter's
discount and commission applicable to such Included Shares. The representations
and warranties by, and the other arrangements on the part of, ALS to and for the
benefit of such underwriters, shall also be made to and for the benefit of such
holders of Included Shares. Such holders of Included Shares shall not be
required by ALS to make any representations or warranties to or agreements with
ALS or the underwriters other than customary and reasonable representations,
warranties or agreements (including indemnity agreements customary in secondary
offerings which, assuming the underwriter is Natwest Securities Limited, would
be similar in scope to indemnities contained in Section 7.08(h) below) regarding
such holder and such holder's Registrable Securities.
(e) Preparation; Reasonable Investigation. In connection
with the preparation and filing of a registration statement registering Included
Shares under the Securities Act, ALS will give the holders of Included Shares
and their respective counsel and accountants, the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the Commission and each amendment thereof or supplement thereto,
and will give each of them such reasonable access to its books and records and
such opportunities to discuss the business of ALS with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary in the opinion of such holders
<PAGE> 47
to conduct a reasonable investigation within the meaning of the Securities Act.
(f) Blue Sky Registration. In the event of any
registration of any Registrable Securities under the Securities Act, ALS agrees
to use its best efforts to register and qualify the securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdiction as shall be reasonably requested by the holders of Included Shares;
provided, however, that ALS shall not be required in connection therewith or as
a condition thereto to qualify to do business or to file a general consent to
service of process in any such states of jurisdictions.
(g) Reports under the Act. With a view to making
available to the CCI Holders the benefits of Rule 144 under the Securities Act
during the two year period following a Public Offering (but only so long as ALS
shall be subject to the periodic reporting obligations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), ALS agrees to use its
best efforts to:
(i) make and keep public information regarding ALS
available as those terms are understood and defined in Rule
144 under the Securities Act, at all times from and after
ninety (90) days following the effective date of the first
registration under the Securities Act filed by ALS for an
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all
reports and other documents required of ALS under the
Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements;
(iii) so long as a CCI Holder owns any restricted securities,
furnish to the holder forthwith upon written request a written
statement by ALS as to its compliance with the reporting
requirements of Rule 144 (at any time from and after ninety
(90) days following the effective date of the first
registration statement filed by ALS for an offering of its
securities to the general public), and of the Securities Act
and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent
annual or quarterly report of ALS, and such other reports and
documents so filed as a CCI Holder may reasonably request in
availing itself of any rule
<PAGE> 48
or regulation of the Commission allowing a holder to sell any
such securities without registration.
(h) Indemnification.
(1) Indemnification by ALS. In the event of any
registration of any Registrable Securities under the Securities Act
pursuant to the IPO Right, ALS will, and hereby does, indemnify and
hold harmless, in the case of any registration statement filed in
connection therewith, the seller of any Included Shares covered by such
registration statement (the "CCI Seller(s)"), its directors, trustees
and officers, and each other person, if any, who controls such CCI
Seller or any such underwriter within the meaning of the Securities
Act, and in each case, against any losses, claims, damages, liabilities
or expenses (including attorneys' fees), joint or several, to which
such seller or any such director or officer or participating or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings in respect thereof) arise out of or
are based upon (x) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which
such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (y) any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
ALS will reimburse such seller, and each such director, trustee,
officer, participating person and controlling person for any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that ALS shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or expense (or
action or proceeding in respect thereof) arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to ALS through an instrument duly executed by such seller or
any such director, trustee, officer, participating person or
controlling person specifically stating that it is for use in the
preparation thereof. Such
<PAGE> 49
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, participating person or controlling person and shall survive
the transfer of such securities by such CCI Seller. ALS shall agree to
provide provision for contribution relating to such indemnity as shall
be reasonably requested by any CCI Seller or the underwriters.
(2) Indemnification by CCI Seller. ALS may
require, as a condition to including any Registrable Securities in any
registration statement filed to effect the Public Offering, that ALS
shall have received an undertaking satisfactory to it from each CCI
Seller, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in subdivision (1) of this Section 7.08(h))
ALS, each director of ALS, each officer of ALS who shall sign such
registration statement and each other person, if any, who controls ALS
within the meaning of the Securities Act, with respect to (x) any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any document incorporated by
reference therein, or (y) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with written
information furnished to ALS through an instrument duly executed by
such CCI Seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement;
provided, that, the maximum liability of any CCI Seller to ALS under
this Section 7.08(h)(2) shall be limited to the net proceeds received
by such CCI Seller in the Public Offering. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of ALS or any such director, officer or controlling person and
shall survive the transfer of such Registrable Securities by such CCI
Seller. The CCI Sellers shall also agree to provide provision for
contribution relating to such indemnity as shall be reasonably
requested by ALS or the underwriters.
<PAGE> 50
(3) Notice of Claims, etc. Promptly after receipt
by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions
of this Section 7.08(h), such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 7.08(h).
In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any
other indemnified party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
SECTION 7.09. Other Exit Rights of CCI Holders. Until the
first to occur of (i) the date upon which the CCI Holders shall no longer own
in the aggregate more than 26% of the CCI Shares or (ii) the date upon which
the CCI Holders are entitled to sell Registrable Securities pursuant to Section
7.08 hereof (such earlier date, the "Ending Date"), ALS shall use its best
efforts to afford the CCI Holders, with respect to the CCI Shares, the right to
participate on a pro rata basis in any Liquidity Transaction (hereinafter
defined) that ALS facilitates or approves. For purposes hereof, "Liquidity
Transaction" shall mean any transaction that allows any holders of ALS Common
Stock to sell their ALS Common Stock other than (a) any "Transfer" made by any
such other holder of ALS Common Stock in accordance with the ALS Amended and
Restated Stockholders' Agreement dated as of January 15, 1996, as amended, or
(b) any sale of ALS Common Stock which, together with all related sales of ALS
Common Stock, does not exceed 1% of the then outstanding ALS Common Stock or
(c) any
<PAGE> 51
sale of ALS Common Stock in the Public Offering or (d) any purchase by ALS of
ALS Common Stock pursuant to the exercise of put options by other holders of ALS
Common Stock pursuant to any of (x) the Stock Purchase Agreement among Heartland
Retirement Services, Inc., the shareholders of Heartland Retirement Services,
Inc. and ALS dated as of January 25, 1996; (y) the Limited Partner Interest
Purchase Agreement between ALS, Alternative Living Services-Midwest Inc., Lionel
S. Margolick and the limited partners referenced therein dated as of May 20,
1996; and (z) the Agreement and Plan of Merger among ALS, ALS Acquisition Corp.,
Alternative Living Services-Midwest Inc. and the shareholders of Alternative
Living Services-Midwest, Inc. dated as of May 20, 1996, or (e) any purchase by
ALS of ALS Common Stock pursuant to the exercise by ALS of a right to repurchase
(m) the "Hennig Stock" as defined and described under the caption "Management --
Employment and Services Agreements --Employment Agreements with G. Faye Godwin
and Douglas A. Hennig" in the draft Preliminary Prospectus included in the
Confidential Memorandum; (n) the "Pioneer Shares" as defined and described in
"Business -- Joint Ventures and Strategic Alliances -- Proposed Joint Venture
with Pioneer Development Company, Inc." in the draft Preliminary Prospectus
included in the Confidential Memorandum or (n) shares received upon the exercise
of options granted under the 1995 Incentive Compensation Plan of ALS pursuant to
the repurchase rights set forth in Section 15 of such plan.
SECTION 7.10. CCI Right to Attend Board Meetings. At all times
subsequent to July 31, 1996 and prior to the Ending Date, CCI, as investment
advisor to the CCI Holders, shall have the right to receive timely notice of,
and have an opportunity to attend, all regular and special meetings of the Board
of Directors of ALS and shall be entitled to receive copies of all
correspondence from ALS to its Board of Directors and from the Board of
Directors to ALS. Timely notice for purposes of this Section 7.09 shall mean
such notice as is provided to the Board of Directors via the same delivery means
used to deliver such notice to the Board of Directors.
SECTION 7.11. Stockholder Approval of Certain Transactions. At
all such times as CCI is entitled to attend meetings of the Board of Directors
of ALS pursuant to Section 7.10 hereof, ALS will not take any of the following
actions without approval of the holders of a majority of the outstanding shares
of ALS Common Stock, following notice of such proposed action to the ALS
Shareholders as required by Delaware Law and the Restated Bylaws of ALS:
(i) effect a corporate combination (excluding any merger,
consolidation or combination not requiring stockholder
approval under Delaware Law) or otherwise sell,
<PAGE> 52
convey, lease or dispose of all or substantially all of its
property or business;
(ii) alter or change the rights, preferences or privileges of the
shares of ALS Common Stock so as to effect adversely the ALS
Common Stock;
(iii) increase the authorized number of shares of ALS Common
Stock;
(iv) create any new class or series of capital stock or any other
securities convertible into capital stock of ALS; or
(v) declare or pay any dividends on the ALS Common Stock other
than dividends payable solely in cash or shares of common
stock.
SECTION 7.12. Intended Beneficiary. The provisions of
Sections 7.08, 7.09, 7.10 and 7.11 hereof are intended to be for the benefit of
the CCI Holders, and each of CCI and each of the CCI Holders shall be entitled
to enforce the provisions of these sections for the CCI Holders.
SECTION 7.13. Certain Tax Matters.
(a) Following the Closing, ALS will continue the historic
business of Crossings or use a significant portion of Crossings historic
business assets in a business within the meaning of Treasury Regulations
Section 1.368- 1(d).
(b) ALS shall not, for a period of two years following the
Effective Date, reacquire any of the ALS Common Stock issued in connection with
the Merger.
SECTION 7.14. Certain Severance Benefits. Subject to
completion of the Merger, ALS shall provide the severance benefits described on
Schedule 7.14 attached hereto to the employees of Crossings designated on
Schedule 7.14. This covenant is intended to be for the benefit of such
Crossings' employees, and each of such Crossings' employees shall be entitled
to enforce these covenants as if they were parties hereto.
ARTICLE VIII
COVENANTS OF ALS AND CROSSINGS
The parties hereto agree that:
SECTION 8.01. Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its best
<PAGE> 53
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
SECTION 8.02. Certain Filings. Crossings and ALS shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency or official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(b) in seeking any such actions, consents, approvals or waivers or making any
such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
SECTION 8.03. Public Announcements. ALS and Crossings will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law, will not issue any
such press release or make any such public statement prior to such
consultation.
SECTION 8.04. Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of Crossings, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of Crossings, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
Crossings acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
SECTION 8.05. Exclusive Dealing.
(a) During the period commencing April 6, 1996 and ending on the date
upon which this Agreement is terminated pursuant to Section 10.1 below, each
party hereto shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, such party
or any of its subsidiaries to (i) solicit or initiate, or encourage the
submission of, any Acquisition Proposal (as hereinafter defined) or (ii)
participate in any substantive discussions or negotiations regarding, or
knowingly furnish to any person any information with respect to, or take any
other action to knowingly facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
<PAGE> 54
to, any Acquisition Proposal. For purposes of this Agreement "Acquisition
Proposal" means an inquiry about or proposal for the acquisition or purchase of
25% or more of the assets of such party and its subsidiaries, taken as a whole,
or any acquisition or purchase, or any tender offer or exchange offer that if
consummated would result in any person beneficially owning, any equity
securities of such party representing in excess of 25% of the voting capital
stock of such party or any equity securities of any material subsidiary of such
party, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving such party or any of
its material subsidiaries (or the equity securities thereof) other than (i) the
Merger, (ii) in the case of ALS, the ALS Restructuring Transactions, or (iii)
in the case of Crossings, any exchange or conversion of currently outstanding
equity securities of Crossings into Crossings Common Stock.
(b) During the Exclusive Period, neither party, its
subsidiaries nor the respective Boards of Directors of such party and its
subsidiaries or any committee thereof, shall (i) approve or recommend, propose
to approve or recommend, consider or evaluate, or cause to be considered or
evaluated, any Acquisition Proposal or (ii) enter into any agreement or
understanding with respect to any Acquisition Proposal.
(c) (i) If either party hereto shall breach this Section
8.05 and the Merger shall not be consummated, such party shall be obligated to
immediately pay the other party, in same day funds, all of the costs and
expenses incurred by the other party in connection with proposed Merger and the
negotiation and documentation of this Agreement, including without limitation
the fees and expenses of its financial consultants, accountants and counsel and
the time (on a reasonable per diem rate basis) and expenses incurred by
personnel of the other party in connection therewith (the "Expenses"), plus the
sum of $1,500,000 (the "Termination Fee"), or (ii) if an Acquisition Proposal
shall have been made to a party during the Exclusive Period and within six
months following the termination of such Exclusive Period such party or its
shareholders enter into an agreement with respect to, or approves or recommends
or takes any action to knowingly facilitate such Acquisition Proposal, such
party shall be obligated to immediately pay the other party, in same day funds
upon demand, the Expenses and the Termination Fee; provided, that, if a party
instructs its advisors and representatives to abide by the terms of this
Section 8.05 and any of its advisors or representatives (other than any of such
party's officers, directors or employees) violates the terms of this Section
8.05 without the approval or participation of such party, such party shall not
be liable for the Termination Fee, but shall remain liable for the other
party's Expenses. The parties hereto agree that damages in the event of a
breach by either party of this Section 8.05 would be difficult to determine and
that the
<PAGE> 55
liquidated damages provided for by this Section 8.05 represent the parties'
reasonable and good faith estimate thereof and are not intended as a penalty.
SECTION 8.06. Tax Matters.
(a) ALS and Crossings shall report for all purposes that the Merger is
a tax-free reorganization under Section 368(a) of the Code. ALS and Crossings
shall not take any position to the contrary, and shall not take any action to
disqualify the Merger as a reorganization under Section 368(a) of the Code.
(b) Except for the payment of up to $40,000.00 of the expenses of CCI
in connection with the transactions contemplated by this Agreement by the
Surviving Company if the Merger is consummated (or by Crossings if the Merger is
not consummated), ALS, Crossings and CCI shall pay their respective expenses
incurred in connection with such transactions and neither ALS nor Crossings
shall pay the expenses of any of the Crossings Shareholders. Except as
specifically addressed in this Section 8.06, responsibility for the expenses of
ALS and Crossings shall be governed by Section 11.04 below.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of Each Party.
The obligations of Crossings and ALS to consummate the Merger are subject to
the satisfaction of the following conditions:
(i) this Agreement and the consummation of the Merger shall
have been adopted and approved by the Crossings Shareholders in
accordance with Nevada Law;
(ii) this Agreement and the consummation of the Merger shall
have been adopted and approved by the shareholders of ALS in
accordance with Delaware Law;
(iii) all of the ALS Shareholders and the Crossings
Shareholders shall have waived their right to exercise dissenter's
rights in connection with the Merger;
(iv) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, relating to the
Merger shall have expired;
(v) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Merger;
<PAGE> 56
(vi) ALS and each of Richard W. Boehlke, D. Lee Field and
David M. Boitano shall have entered into and delivered to each other
Services or Employment Agreements in form and substance satisfactory
to ALS and each such person, respectively;
(vii) Crossings shall have obtained all Required Crossings
Consents;
(viii) all actions by or in respect of or filings with any
governmental body, agency, official, or authority required to permit
the consummation of the Merger shall have been obtained.
SECTION 9.02. Conditions to the Obligations of ALS. The
obligation of ALS to consummate the Merger is subject to the satisfaction of
the following further conditions:
(i) Crossings shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, the representations and warranties of
Crossings contained in this Agreement and in any certificate or other
writing delivered by Crossings pursuant hereto shall be true in all
material respects at and as of the Effective Time as if made at and as
of such time (except with respect to the actions taken by Crossings and
the Crossings Shareholders contemplated herein) and ALS shall have
received a certificate signed by the Vice President and Chief Financial
Officer of Crossings to the foregoing effect;
(ii) no court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any
statute, rule or regulation, restraining or prohibiting the
consummation of the Merger or the effective operation of the business
of Crossings and the Crossings Subsidiary Companies after the Effective
Time, and no proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Merger shall have been instituted by any Person
before any court, arbitrator or governmental body, agency or official
and be pending;
(iii) ALS shall have received all documents it may reasonably
request relating to the existence of Crossings and the Crossings
Subsidiary Companies and the authority of Crossings to enter into and
perform this Agreement, all in form and substance satisfactory to ALS;
(iv) ALS shall have received an opinion of Bogle & Gates
P.L.L.C., counsel to Crossings, in the form of Exhibit 9.02(iv)
attached hereto, dated as of the Closing;
<PAGE> 57
(v) ALS shall have received an opinion of Woodburn &
Wedge, special Nevada counsel to Crossings, in the form of Exhibit
9.02(v) attached hereto, dated as of the Closing;
(vi) ALS shall have received an opinion of Bogle & Gates
P.L.L.C., counsel to Crossings, as to certain tax matters, in the form
of Exhibit 9.02(vi) attached hereto, dated as of the Closing;
(vii) ALS shall have received from each of the Crossings
Shareholders a fully signed Restricted Stock Agreement, in the form of
Exhibit 9.02(vii) attached hereto, dated as of the Closing;
(viii) ALS shall have received purchaser representative
letters and questionnaires in form and substance satisfactory to ALS
from each of the Crossings Shareholders (other than CCI Holders) that
is not an "accredited investor" as defined by Rule 501 of Regulation
D;
(ix) All state securities laws or "blue sky" permits and
authorizations (or shall otherwise have available an exemption from
the requirements of such laws) necessary to issue the Merger
Consideration pursuant to the Merger and the transactions contemplated
hereby shall have been received; and
(x) From the date hereof through the Effective Time,
there shall have been no material adverse change (or development
involving a prospective change) in the financial condition, results of
operations, properties, business, or prospects of Crossings and the
Crossings Subsidiary Companies taken as a whole.
SECTION 9.03. Conditions to the Obligations of Crossings.
The obligation of Crossings to consummate the Merger is subject to the
satisfaction of the following further conditions:
(i) ALS shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior
to the Effective Time, the representations and warranties of ALS
contained in this Agreement and in any certificate or other writing
delivered by ALS pursuant hereto shall be true in all material
respects at and as of the Effective Time as if made at and as of such
time (except with respect to the actions taken by ALS and the ALS
Shareholders contemplated herein) and Crossings shall have received a
certificate signed by the President of ALS to the foregoing effect;
<PAGE> 58
(ii) no court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any
statute, rule or regulation, restraining or prohibiting the
consummation of the Merger or the effective operation of the business
of ALS and the ALS Subsidiary Companies after the Effective Time, and
no proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Merger shall have been instituted by any Person
before any court, arbitrator or governmental body, agency or official
and be pending;
(iii) Crossings shall have received all documents it may
reasonably request relating to the existence of ALS and the ALS
Subsidiary Companies and the authority of ALS to enter into and
perform this Agreement, all in form and substance satisfactory to
Crossings;
(iv) Crossings shall have received an opinion of Rogers &
Hardin, counsel to ALS, in the form of Exhibit 9.03(iv) attached
hereto, dated as of the Closing;
(v) Crossings shall have received an opinion of Rogers &
Hardin, counsel to ALS, as to certain tax matters, in the form of
Exhibit 9.03(v) attached hereto, dated as of the Closing;
(vi) CCI shall have received the Amendment to Stockholders'
Agreement dated as of May 22, 1996, executed by ALS Shareholders
holding not fewer than 87% of the shares of ALS Common Stock prior to
giving effect to the Merger and the ALS Restructuring Transactions;
and
(vii) From the date hereof through the Effective Time, there
shall have been no material adverse change (or development involving a
prospective change) in the financial condition, results of operations,
properties, business, or prospects of ALS and the ALS Subsidiary
Companies taken as a whole.
ARTICLE X
TERMINATION
SECTION 10.01. Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of
Crossings):
(i) by mutual written consent of Crossings and ALS;
<PAGE> 59
(ii) by either Crossings or ALS, if the Merger has not been
consummated by May 31, 1996; or
(iii) by either Crossings or ALS, if there shall be any law
or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining ALS or Crossings from consummating the Merger is entered and
such judgment, injunction, order or decree shall become final and
nonappealable.
SECTION 10.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become void and of
no effect with no liability on the part of any party hereto, except that the
agreements contained in Sections 6.05, 7.05, 8.03, 8.05, 8.06, 10.02 and 11.04
shall survive the termination hereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. Except as otherwise required by
applicable law, all notices, approvals, consents and other communications to
ALS or Crossings under or in connection with this Agreement shall be in writing
and shall be sent via telephone facsimile transmission, via personal delivery
or via express courier or delivery service, addressed to such party at such
party's address or telephone facsimile number set forth below or at such other
address or telephone facsimile number as shall be designated by such party in a
written notice given to the other party complying as to delivery with the terms
of this Section:
if to ALS, to:
Alternative Living Services, Inc.
184 Shuman Boulevard
Naperville, Illinois 60563
Attn: William G. Petty, Jr.
Facsimile No. (708) 357-4020
and to:
Alternative Living Services, Inc.
450 Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: William F. Lasky
Facsimile No. (414) 789-9592
<PAGE> 60
with a copy to:
Roger & Hardin
2700 Cain Tower
229 Peachtree Street
Atlanta, Georgia 30303
Attn: Alan C. Leet
Facsimile No. (404) 525-2224
if to Crossings, to:
Crossings International Corporation
1201 Pacific Avenue
Suite 1800
Tacoma, Washington 98402
Attn: Richard W. Boehlke
Facsimile No. (206) 383-9979
with a copy to:
Bogle & Gates P.L.L.C.
4700 Two Union Square
601 Union Street
Seattle, Washington 98101-2322
Attn: Kyle B. Lukins
Facsimile No. (206) 621-2660
if to CCI, to:
Capital Consultants, Inc.
2300 Southwest Yamhill Street
Suite 8000
Portland, Oregon 97204-1383
Attn: Carol Hardie
Facsimile No. (503) 241-0448
with a copy to:
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071-2899
Attn: Kathryn A. Sanders
Facsimile No. (213) 669-6407
All such notices, approvals, consents and other communications shall
be deemed given (i) when given and receipted for (or upon the date of attempted
delivery when delivery is refused), if sent via personal delivery or via
express courier or delivery service or (ii) when received, if sent via
telephone facsimile (confirmation of such receipt via confirmed telephone
facsimile being deemed receipt).
<PAGE> 61
SECTION 11.02. Survival of Representations, Warranties and
Certain Agreements. The representations and warranties and agreements contained
herein and in any certificate or other writing delivered pursuant hereto shall
not survive the Effective Time or the termination of this Agreement except for
the agreements set forth in Sections 6.05, 7.05, 7.06, 7.08, 7.09, 7.10, 7.11,
7.12, 7.13, 7.14, 8.03, 8.05, 8.06, 10.02, 11.02, 11.03 and 11.04. Nothing
contained in this Section 11.02 shall relieve any Person from liability for
actual fraud in connection with any representations or warranties contained in
this Agreement or the Ancillary Instruments.
SECTION 11.03. Amendments; No Waivers. (a) Except as set
forth in the first proviso below, any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Crossings and ALS or in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
with respect to Sections 7.08, 7.09, 7.10, 7.11 and 7.12, and Articles IV(A)
and XI of this Agreement, any provision may be amended or waived only if such
amendment or waiver is in writing and signed, in the case of an amendment, by
Crossings, ALS and CCI or in the case of a waiver, by the party against who the
waiver is to be effective; and, provided, further, that after the adoption of
this Agreement by the Crossings Shareholders, no such amendment or waiver
shall, without the further approval of the Crossings Shareholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any shares of Crossings Stock, (ii) any term of the certificate of
incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of this Agreement if such alteration or change would adversely
affect the Crossings Shareholders.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 11.04. Expenses. Except for the payment of up to
$40,000.00 of the expenses of CCI in accordance with Section 8.06, all costs
and expenses incurred in connection with this Agreement and the Merger shall be
paid by the party incurring such cost or expense; provided that if the Merger
is consummated the Surviving Corporation shall bear all such costs and expenses
of Crossings.
SECTION 11.05. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors
<PAGE> 62
and assigns, provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of
the other parties hereto.
SECTION 11.06. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of the State of Delaware.
SECTION 11.07. Counterparts; Effectiveness; Facsimile
Signatures. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all of
the other parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement or of the signature page of any of the ALS Ancillary
Instruments, Crossings Ancillary Instruments or CCI Ancillary Instruments via
telephone facsimile transmission shall be effective as delivery of a manually
executed counterpart of this Agreement or of any such document.
SECTION 11.08. Entire Agreement. Except for the
Confidentiality Agreement entered into between ALS and CCI in April, 1996,
which shall remain in full force and effect in accordance with its terms, this
Agreement, the Exhibits and Schedules hereto, and each of the Crossings
Ancillary Instruments, the ALS Ancillary Instruments and the CCI Ancillary
Instruments constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties
with respect to the subject matter of this Agreement, the Crossings Ancillary
Instruments, ALS Ancillary Instruments and the CCI Ancillary Instruments.
Except as specifically set forth herein, neither this Agreement nor any
provision hereof is intended to confer upon any person other than the parties
hereto any rights or remedies hereunder. The terms of this Agreement have been
the subject of careful consideration and negotiation by the parties hereto, and
in construing any particular provision of this Agreement, no consideration
shall be given to which party
<PAGE> 63
prepared or suggested the particular words employed in such provision.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ALTERNATIVE LIVING SERVICES, INC.
By /s/ William F. Lasky
---------------------------------------
Title: President
-----------------------------------
NEW CROSSINGS INTERNATIONAL CORPORATION
By /s/ Richard W. Boehlke
---------------------------------------
Title: President
-----------------------------------
CAPITAL CONSULTANTS, INC.
By /s/ Jeffrey L. Grayson
---------------------------------------
Title: Chief Executive Officer
-----------------------------------
<PAGE> 64
SCHEDULE 7.14
CROSSINGS EMPLOYEES
SEVERANCE PAY SCHEDULE
The following Severance Pay programs for the identified employees of Crossings
will be made available by ALS following the Effective Time of Merger.
PLAN A
Qualified Employees:
Dennis Rattie
Lisa Knoepfel-Culbert
Eligibility:
Employees will be eligible for severance pay if terminated by ALS for
any reason other than misconduct.
Severance Pay schedule:
During the first year of employment with ALS, severance pay will be
calculated as follows based on months employed with ALS:
<TABLE>
<CAPTION>
FORMULA TIME FROM DATE
- ------- --------------
OF MERGER
---------
<S> <C>
Number of total years worked for Crossings and ALS
X monthly salary Month 1
Number of total years worked for Crossings and ALS
X monthly salary Less one month salary Month 2
Number of total years worked for Crossings and ALS
X monthly salary Less two months salary Month 3
Number of total years worked for Crossings and ALS
X monthly salary Less three months salary Month 4
Number of total years worked for Crossings and ALS
X monthly salary Less four months salary Month 5
Number of total years worked for Crossings and ALS
X monthly salary Less five months salary Month 6,7,8,9,10
Number of total years worked for Crossings and ALS
X monthly salary Two months salary Month 12
</TABLE>
(For purposes of determining severance payments, the reference above to
"Crossings" shall mean Crossings International Corporation and New Crossings
International Corporation.)
<PAGE> 65
Schedule 7.14 (Cont.)
PLAN B
Qualified employees:
<TABLE>
<CAPTION>
Name Title Payment
---- ----- -------
<S> <C> <C>
Ann Zaback Controller $25,000
Cherie Marletti Accounting Manager $10,000
Tony Martinez Payroll Rep. $ 6,000
Becca Murdock Accounts Payable Rep. $ 6,500
Ann Marie Dobrovoisky Accounts Payable Rep. $ 6,000
</TABLE>
Eligibility:
Employees will be eligible for severance pay at the end of their
employment period as determined by ALS based on satisfactory
performance in their current position.
<PAGE> 1
EXHIBIT 10.10
AMENDED AND RESTATED ALTERNATIVE LIVING SERVICES, INC.
1995 INCENTIVE COMPENSATION PLAN
SECTION 1. Title and Purpose. The plan described herein shall be
known as the Amended and Restated 1995 Incentive Compensation Plan (the "Plan").
The purpose of this Plan is to advance the interests of ALTERNATIVE LIVING
SERVICES, INC. ("ALS"), any subsidiary corporation of ALS, and any partnership
which is owned entirely by ALS (referred to collectively as the "Company",
except that with respect to incentive stock options the "Company" shall not
include any such partnerships) by strengthening the Company's ability to attract
and retain individuals of training, experience and ability in the employ or
service of the Company and to furnish additional incentive to the Company's
valued employees, directors, officers, independent contractors and agents to
promote the Company's financial success. This Plan will be effected through the
granting of stock options, stock appreciation rights ("SARs") or restricted
stock ("Restricted Stock") awards as herein provided. Stock options granted
hereunder may, if so designated, constitute "incentive stock options" ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or, if so designated, may be options which do not
constitute ISOs or other qualified options ("NSOs") (ISOs and NSOs being
collectively referred to as "Stock Options"), as specified by a Committee
(hereafter defined) of the Board of Directors of the Company (the "Board").
Stock Options granted under this Plan may be accompanied by SARs as hereinafter
set forth. As used herein, "subsidiary corporation" shall have the meaning given
such terms in Code Section 424.
SECTION 2. Shares of Stock Subject to the Plan. Stock which may be
issued pursuant to Stock Options, SARs and Restricted Stock granted from time to
time under this Plan shall not exceed in the aggregate 1,425,000 shares of ALS
common stock (including fractional shares thereof), without par value (the
"Common Stock") (as adjusted for the 1,812.55-for-one stock split on May 17,
1996), subject to further adjustment as provided in Sections 16 and 17 hereof).
It is contemplated that the shares to be issued upon the exercise of Stock
Options or SARs or as Restricted Stock granted under this Plan will be approved
for listing by each securities exchange on which shares of Common Stock are then
listed.
In the event that the number of shares underlying any Stock Option or
SAR granted under the Plan is reduced for any reason, or any Stock Option or
SAR under the Plan can no longer be exercised in part or in whole (other than
due to the exercise of a related SAR or a related Stock Option, as the case may
be), or shares awarded as Restricted Stock are forfeited, the number of shares
no longer subject to such Stock Option or SAR or so forfeited are thereupon
deemed released and are thereafter available for subsequent awards under the
Plan (unless the Plan shall have been terminated).
SECTION 3. Eligibility. Stock Options, SARs and Restricted Stock may
be granted to directors, officers, employees, independent contractors and agents
of the Company by the Board;
<PAGE> 2
provided, however, that ISOs may only be granted to employees of the Company. In
determining the persons to whom Stock Options, SARs and Restricted Stock will be
granted and the number of shares to be covered by each, the Board shall take
into account the duties of the respective persons, their present and potential
contributions to the success of the Company, the anticipated number of years of
effective service remaining, and such other factors as they shall deem relevant
in connection with accomplishing the purposes of the Plan. Stock Options, SARs
and Restricted Stock may not be granted to an individual under this Plan at a
time when such individual is serving as a member of the Committee or during any
other period which would have the effect of disqualifying such individual from
being a "disinterested person" under Subsection (c)(2)(i) of Rule 16b-3 (or any
successor provision thereto) promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3"). An employee owning stock possessing more than
10 percent of the total combined voting power or value of all classes of stock
of ALS or any parent or subsidiary corporation ("Ten Percent Shareholder") is
not eligible to receive an ISO unless the option price is at least 110 percent
of the fair market value of the Common Stock at the time the ISO is granted and
the ISO by its terms is not exercisable more than five (5) years from the date
it is granted. Restricted Stock and any Common Stock which any employee may
receive under outstanding Stock Options or SARs shall be treated as stock owned
by such employee for purposes of this calculation.
SECTION 4. Administration of the Plan. This Plan shall be
administered by the Compensation Committee (the "Committee") consisting of two
or more directors, all of whom shall be "disinterested persons" as defined in
Rule 16b- 3(c)(2)(i) (or any successor provision thereto), appointed by and to
serve at the pleasure of the Board of ALS. No individual may be appointed to
the Committee who is not a director of ALS at the time of such appointment or
who shall within one year prior to such individual's service on the Committee
have been granted any award under this Plan or any other plan of the Company or
any of its affiliated entities unless permitted by Rule 16b-3(c)(2) (or any
successor provision thereto). An individual's membership on the Committee shall
terminate automatically at the time such individual ceases to be a director of
ALS. The Committee shall select one of its members as its chairman and shall
hold its meetings at such times and places as it shall deem advisable. A
majority of its members shall constitute a quorum. All action of the Committee
shall be taken by a majority of its members. Any action may be taken by a
written instrument signed by a majority of the members and any action so taken
shall be fully effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held. The Committee may appoint a
secretary, keep minutes of its meetings, and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
SECTION 5. Powers of the Committee. The Committee shall have full
power and authority to determine those persons to whom Stock Options, SARs or
Restricted Stock shall be granted, the number of shares to be covered by such
awards, the term of each, the time or times at which Stock Options, SARs or
Restricted Stock shall be granted, provided, with respect to ISOs, the term and
the time are permitted by Section 422 of the Code. Except as otherwise
expressly provided in this Plan, the Committee shall also have the power to
determine, at the time of the grant of each Stock Option, SAR or Restricted
Stock award, all terms and conditions
2
<PAGE> 3
governing the rights and obligations of the participant with respect to such
award, including but not limited to: (a) the exercise price of any Stock Option
or SAR or the method by which the exercise price shall be determined; (b) the
length of the period during which the Stock Option or SAR may be exercised and
any limitations on the number of shares purchasable with the Stock Option or
with respect to which an SAR is exercisable at any given time during such
period; (c) the time at which the Stock Option or SAR may be exercised; (d) the
length of the restriction period for Restricted Stock awards (the "Restriction
Period"); (e) any conditions precedent to be satisfied before the Stock Option
or SAR may be exercised; (f) whether to accelerate any Restriction Period
expiration date or Stock Option or SAR vesting schedule, if any; (g) any
restrictions on resale of any shares received under the Plan; and (h) the terms
of any financing extended to a Stock Option grantee. Notwithstanding the
foregoing, the Committee shall not have the power (absent a revision to Rule
16b-3 permitting the same) to establish a Restriction Period shorter than six
months from the date of grant or permit the exercise of Stock Options or SARs
prior to the expiration of six months from the date of grant. The Committee
shall also have full and final authority: (i) to prescribe the form of each
Incentive Compensation Agreement evidencing Stock Options, SARs and Restricted
Stock awards, which agreements need not be identical for each participant or
grant, but shall each be consistent with this Plan; (ii) to adopt, amend and
rescind such rules and regulations as may be advisable in the opinion of the
Committee to administer this Plan; (iii) to correct any defect or supply any
omission or reconcile any inconsistency in this Plan, including any correction
or amendment which in the judgment of the Committee is necessary to ensure
compliance with the requirements of the Code or the requirements of Rule 16b-3
and any future rules promulgated in substitution therefor under the Securities
Exchange Act of 1934, as amended; and (iv) to construe and interpret this Plan
and any Incentive Compensation Agreements and any rules and regulations relating
thereto, and to make all other determinations deemed necessary or advisable for
the administration of this Plan. Except as provided in Section 22 hereof, the
Committee shall not have any authority, the possession or exercise of which
would cause an ISO granted hereunder to be disqualified as such under the Code.
SECTION 6. Indemnification of the Committee. In addition to such
other rights of indemnification as they may have as directors of ALS or as
members of the Committee, members of the Committee shall be indemnified by ALS
as and to the fullest extent permitted by law, including without limitation,
indemnification against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal thereof, to which they or
any of them may be a party by reason of any action taken or failure to act
under or in connection with this Plan, or any Stock Options, SARs or Restricted
Stock awards granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by ALS), or paid by them in satisfaction of a judgment in any
such action, suit or proceeding except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee member
is liable for negligence, bad faith or misconduct in his duties.
3
<PAGE> 4
SECTION 7. Option Exercise Price. The option exercise price for
shares of Common Stock which shall be covered by each NSO shall be established
by the Board in its sole discretion at the time of granting the NSO. The
option exercise price for shares of Common Stock which shall be covered by each
ISO shall be no less than the fair market value of the Common Stock at the time
of granting the ISO. In the event that any ISO is granted to a Ten Percent
Shareholder the price at which shares of Common Stock shall be purchasable
under such ISO shall not be less than 110 percent of the fair market value of
such shares at the time of the grant. For the purposes of this Section 7 and
all other provisions of this Plan which require a determination of the fair
market value of the Common Stock as of a specified date, "fair market value"
shall mean: (i) if the primary market for the Common Stock is a national
securities exchange, the NASDAQ National Market System, or other market
quotation system in which last sale transactions are reported on a
contemporaneous basis, such fair market value shall be deemed to be the last
reported sale price of the Common Stock on such exchange or in such quotation
system on the day on which the option shall be granted (or other relevant
valuation date specified herein), or, if there shall not have been a sale on
such exchange or reported through such system on such trading day, the closing
or last bid quotation therefor on such exchange or quotation system on such
trading day; (ii) if the primary market for the Common Stock is not such an
exchange or quotation market in which transactions are contemporaneously
reported, such fair market value shall be deemed to be the closing or last bid
quotation in the over-the-counter market on such trading day as reported by
the National Association of Securities Dealers through NASDAQ, its automated
system for reporting quotations, or its successor (or such other generally
accepted source of publicly reported bid quotations as the Company may
reasonably designate) on the day on which the option shall be granted (or other
relevant valuation date specified herein); and (iii) in all other cases, such
fair market value shall be determined in good faith by the Committee at the
time the option is granted (or on any other relevant valuation date specified
herein). If the fair market value so determined shall include a fraction of a
cent, it shall be rounded up to the next full cent.
SECTION 8. Medium and Time of Payment. The option exercise price
shall be payable upon the exercise of the Stock Option and shall be paid in
cash, by check, with shares of Common Stock, or in any combination thereof as
specified by the Committee. For purposes of making such payment in shares of
Common Stock, such stock shall be valued at its fair market value as provided
in Section 7 hereof on the day of exercise of the Stock Option and shall have
been held by the grantee for a period of six (6) months.
SECTION 9. Limitation on Grant of ISOs. The aggregate fair market
value (determined as of the time the ISO is granted) of the shares with respect
to which ISOs are exercisable for the first time by a employee during any
calendar year (under all such plans of the Company) shall not exceed $100,000.
SECTION 10. Term of Stock Options and SARs.
(a) The period during which each Stock Option or SAR granted
hereunder may be exercised will be determined by the Committee in each case;
provided, however, that no
4
<PAGE> 5
Stock Option or SAR shall by its terms be exercisable after the expiration of
ten (10) years from the date the Stock Option or SAR is granted or before six
(6) months from the date the Stock Option or SAR is granted. In the event that
any ISO is granted to a Ten Percent Shareholder, the maximum period described
above shall be reduced to five (5) years from the date the ISO is granted.
(b) With the prior written consent of any affected grantee of
Stock Options hereunder, the Committee may grant to one or more such grantees,
in exchange for their surrender and the cancellation of such Stock Options and
their corresponding SARS, if any, new Stock Options and related SARs which may
have different exercise prices than the exercise prices provided in the Stock
Options and related SARs so surrendered and canceled and containing such other
terms and conditions consistent with the Plan as the Committee may deem
appropriate.
SECTION 11. Award of Stock Appreciation Rights. (a) SARs may be
granted under this Plan to such employees as the Committee may from time to
time select and upon such terms and conditions as the Committee may from time
to time prescribe. SARs may be granted in tandem with Stock Options designated
as being related to such SARs or may be granted on a stand alone basis. Each
SAR which relates to a specific Stock Option granted may be granted
concurrently with the Stock Option to which it relates or at any time prior to
the exercise, expiration or termination of such Stock Option (except as
otherwise provided in Sections 20 and 22 hereof), but no later than six months
and one day prior to the end of the term of such Stock Option. An SAR shall
entitle the participant, subject to the provisions of this Plan and the related
Incentive Compensation Agreement, to receive from ALS an amount equal to the
excess of the fair market value on the exercise date of the number of shares
for which the SAR is exercised over the exercise price for such shares under
the related Stock Option or as stated in the separate SAR award, as the case
may be. For this purpose, such fair market value shall be determined as
provided in Section 7 hereof on the close of business on the date of exercise.
(b) An SAR shall be exercisable on such dates or during such
periods as may be determined by the Committee from time to time, except that in
no event shall any SAR granted in tandem with a related Stock Option be
exercisable when the related Stock Option is not eligible to be exercised.
(c) An SAR granted in tandem with a related Stock Option may be
exercised only upon surrender of the related Stock Option by the employee,
which related Stock Option shall be terminated to the extent of the number of
shares for which the SAR is exercised. Similarly, a Stock Option granted in
tandem with an SAR may be exercised only upon surrender of the related SAR by
the employee, which related SAR shall be terminated to the extent of the number
of shares for which the Stock Option is exercised. Shares covered by such a
terminated Stock Option or SAR (or portion thereof) granted under this Plan
shall not be available for subsequent awards under this Plan.
5
<PAGE> 6
(d) The amount payable by ALS upon exercise of an SAR may be
paid in cash, in shares of Common Stock (valued at their fair market value on
the exercise date determined as provided in Section 7 hereof) or in any
combination thereof as the Committee shall determine from time to time. No
fractional shares shall be issued and the employee shall receive cash in lieu
thereof.
(e) The Committee may impose any other conditions upon the
exercise of an SAR, which conditions may include a condition that the SAR may
be exercised only in accordance with rules and regulations adopted by the
Committee from time to time. Such rules and regulations may govern the right
to exercise SARs granted prior to the adoption or amendment of such rules and
regulations as well as SARs granted thereafter.
(f) The Committee may at any time amend, terminate or suspend
any SAR theretofore granted under this Plan, provided that the terms of any SAR
after any amendment shall conform to the provisions of this Plan. An SAR
awarded in tandem with a related Stock Option shall terminate upon the
termination or expiration of any related Stock Option.
(g) Notwithstanding the provisions of this Section 11, an SAR
may not be exercised until the expiration of six (6) months from the date of
grant of such SAR.
SECTION 12. Limitations on Right to Exercise.
(a) No Stock Option or SAR may be exercised when the fair
market value of the shares subject to such Stock Option or SAR is less than the
exercise price of the Stock Option or SAR.
(b) No Stock Option or SAR may be exercised after (i) the
expiration of ninety (90) days after the earlier of the date the employment of
the employee terminates with the Company or the date the employee is given
written notice of his discharge from such employment or (ii) with respect to
participants who are not employees, the expiration of ninety (90) days after
the date such participant's service to the Company (in all capacities) as a
director, officer, independent contractor and agent shall terminate. The
expiration period described in the preceding sentence shall be waived in the
event such termination occurs because of death or in the event termination of
employment occurs because of disability within the meaning of Code Section
22(e)(3) ("Disability"); provided, however, that no ISO or related in tandem
SAR may be exercised after the expiration of 365 days after the earlier of the
date the employment of the employee terminates with the Company or the date the
employee is given written notice of his discharge from such employment because
of Disability. Absence or leave approved by the Company, to the extent
permitted by the applicable provisions of the Code, shall not be considered an
interruption of employment for any purpose under this Plan.
(c) The transfer or issuance of Common Stock upon the exercise
of any Stock Option or SAR granted under the Plan will be contingent upon the
advice of counsel to the Company that the shares to be issued pursuant thereto
have been duly registered or are exempt
6
<PAGE> 7
from registration under the applicable securities laws, and upon receipt by the
Committee of cash, check, Common Stock, or a combination thereof, in payment of
the full purchase price of such shares.
SECTION 13. Award of Restricted Stock. (a) The Committee shall have
the authority (i) to grant Restricted Stock awards, (ii) to issue or transfer
Restricted Stock to grantees, and (iii) to establish terms, conditions and
restrictions in connection with the issuance or transfer of Restricted Stock,
including the Restriction Period, which may differ with respect to each grantee
or award.
(b) The grantee of a Restricted Stock award shall execute and
deliver to a plan administrator designated by the Committee (who may be an
officer of ALS) an executed Incentive Compensation Agreement, an escrow
agreement satisfactory to the Committee and appropriate blank stock powers with
respect to the Restricted Stock covered by such agreements, as the Committee
deems necessary. The Committee shall then cause stock certificates registered
in the name of the grantee to be issued and deposited together with the stock
powers with an escrow agent to be designated by the Committee, who may be an
officer of ALS. The Committee shall cause the escrow agent to issue to the
grantee a receipt evidencing any stock certificate held by it registered in the
name of the grantee.
(c) Restricted Stock awards granted to a grantee shall be
subject to the following restrictions until the expiration of the Restriction
Period: (i) a grantee shall be issued, but shall not be entitled to delivery of,
the stock certificate for the Restricted Stock; (ii) the Restricted Stock shall
be subject to the restrictions on transferability set forth herein and in the
grantee's related Incentive Compensation Agreement; (iii) the Restricted Stock
shall be forfeited and the stock certificates shall be returned to ALS and all
rights of the grantee to such shares and as a shareholder shall terminate
without further obligation on the part of ALS when such grantee leaves or is
terminated from the employ of the Company (or its subsidiary, as the case may
be) for any reason, except in the case of Disability or death (in which event
the Restriction Period shall lapse and the shares shall be delivered to the
grantee's beneficiaries or legal representative) and except in the case of
normal retirement after reaching the age of 65 (in which event the Restriction
Period shall lapse and the shares shall be delivered to the grantee); and (iv)
any other restrictions which the Committee may determine in advance are
necessary or appropriate.
(d) The Committee shall have the authority to remove any or all
of the restrictions on the Restricted Stock whenever it may determine that, by
reason of changes in applicable laws or other changes in circumstances arising
after the date of the Restricted Stock award, such action is appropriate. Unless
permitted by Rule 16b-3, no Restricted Stock award shall have a Restriction
Period shorther than six (6) months from the date of grant of such award.
(e) Subject to Section 23 hereof, at the expiration of the
Restriction Period, a stock certificate evidencing the Restricted Stock with
respect to which the Restriction Period has expired (to the nearest full share)
shall be delivered without charge to the grantee, or his personal
representative, free of all restrictions under the Plan.
7
<PAGE> 8
SECTION 14. Limitations on Transfer and Issuance. No Stock Option,
SAR or Restricted Stock granted under this Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and no Stock Option or SAR
granted under this Plan may be exercised or other rights or benefits claimed
under the Plan by any person other than the participant to whom the Stock Option
or SAR shall initially have been granted during the lifetime of such participant
(other than the person's guardian or legal representative). After the death of
such original grantee, the "holder" of any Stock Option, SAR or Restricted Stock
granted under this Plan shall be deemed to be the person to whom the original
grantee's rights shall pass under the original grantee's will or under the laws
of descent and distribution. Notwithstanding the foregoing, no transfer by will
or the laws of descent or distribution will be binding on the Company unless the
Committee is furnished with sufficient proof establishing the validity of such
transfer.
SECTION 15. No Right to Employment Conferred. Nothing in this Plan
or in any Incentive Compensation Agreement prescribed by the Committee shall
confer upon any employee or other participant any right to continue in the
employ or service of the Company or interfere in any way with the right of the
Company to terminate such person's employment or service to the Company at any
time.
SECTION 16. Recapitalization. In the event of changes in the
outstanding shares of Common Stock by reason of stock dividends, stock splits,
subdivisions or combinations of shares, the number and class of shares
available under the Plan in the aggregate and the maximum number of shares as
to which Stock Options, SARs and Restricted Stock may be granted to any
employee under the Plan shall be correspondingly and fairly adjusted by the
Committee. A corresponding adjustment in outstanding Stock Options and SARs
shall be made without change in the total exercise price applicable to the
unexercised portion of any Stock Option or SAR, with a corresponding adjustment
in the exercise price per share. The number of SARs awarded to a employee
shall be adjusted in such event so that the same ratio of SARs to the number of
shares granted under any related Stock Option is maintained.
SECTION 17. Reorganization. If ALS is merged, consolidated or effects
a share exchange with another corporation (whether or not ALS is the surviving
corporation), or if substantially all of the assets or all of the Common Stock
is acquired by another corporation, or in the event of a separation,
reorganization or liquidation of ALS, the Board or the board of directors of any
corporation assuming the obligations of ALS hereunder, shall make appropriate
provision for the protection of any outstanding Stock Options and SARs by the
substitution on an equitable basis of appropriate stock of ALS, or of the
merged, consolidated or otherwise reorganized corporation which will be issuable
in respect to the shares of Common Stock, provided only that the excess of the
aggregate fair market value of the shares subject to the Stock Options and SARs
immediately after such substitution over the exercise price thereof is not more
than the excess of the aggregate fair market value of the shares subject to such
Stock Options and SARs immediately before such substitution over the exercise
price thereof. Notwithstanding the preceding sentence, if ALS is merged,
consolidated or effects a share exchange with another corporation or if
substantially all of the assets or all of the Common
8
<PAGE> 9
Stock is acquired by another corporation, or in the event of a separation,
reorganization or liquidation of ALS, the Board or the board of directors of
any corporation assuming the obligations of ALS hereunder may, upon written
notice to the holder of any outstanding Stock Option or SAR, provide that such
Stock Option or SAR must be exercised within sixty (60) days of the date of
such notice or it will be terminated.
SECTION 18. Stockholder Approval. This Plan is expressly made subject
to the approval by the holders of a majority of the issued and outstanding
shares of ALS Common Stock entitled to vote and represented at a meeting of
stockholders duly called in accordance with applicable law, where a quorum is
present. If the Plan is not so approved within one year after its adoption by
the Board, then the Plan shall not come into effect, and any Stock Option, SAR
or Restricted Stock award granted pursuant hereto shall terminate and end. No
Stock Option or SAR granted hereunder shall be exercisable and no Restricted
Stock transferable or deliverable to a grantee unless and until such stockholder
approval is obtained.
SECTION 19. Registration of Shares of Common Stock. The Committee, in
its discretion, may postpone the issuance and/or delivery of shares of Common
Stock issuable upon any exercise of a Stock Option or an SAR or upon the grant
of a Restricted Stock award until completion of any stock exchange listing,
registration, or other qualification or exemption of such shares under any state
and/or federal law, rule or regulation as the Committee may consider
appropriate, and may require any grantee to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of the shares in compliance with applicable laws, rules and
regulations.
SECTION 20. Termination and Amendment of the Plan. The Plan shall
terminate on the earlier of (i) ten years from the date this Plan is adopted by
the Board or by the stockholders of ALS, whichever is earlier, or (ii) such time
as a new stock incentive compensation plan is adopted by the Board expressly in
replacement of this Plan. No Stock Option, SAR or Restricted Stock shall be
granted under this Plan after its termination date, but the termination of this
Plan shall not adversely affect any Stock Option, SAR or Restricted Stock
theretofore granted hereunder. Subject to the foregoing, this Plan may at any
time or from time to time be terminated, modified or amended by (1) the Board
and (2) by the stockholders of ALS, if and to the extent that stockholder
approval thereof is required under Section 422 of the Code, under Rule 16b-3 or
by any securities exchange on which the shares of Common Stock are then listed,
or if directed by the Board.
SECTION 21. Plan Provisions Control Terms of Awards. The terms of this
Plan shall govern all Stock Options, SARs or Restricted Stock awards granted
under this Plan and in no event shall the Committee have the power to grant any
Stock Option, SAR or Restricted Stock under this Plan which is contrary to any
of the provisions of the Plan.
SECTION 22. Modification of Terms. Any provision contained in this
Plan to the contrary notwithstanding, on and after the date that any Stock
Option, SAR or Restricted Stock award is granted hereunder, the Committee shall
have the authority to modify the terms and
9
<PAGE> 10
provisions of any such Stock Option, SAR or Restricted Stock award including,
but not limited to, modifications that cause a previously granted Stock Option
to cease, upon the modification date, to qualify as an ISO; provided, however,
that no such modification shall (i) materially increase the benefits to
participants as provided for under this Plan (as such interpretation is
interpreted under Rule 16b-3, other applicable law or stock exchange
regulations), or (ii) materially decrease the benefits to a specific participant
in this Plan without the prior written consent of such participant. For
purposes of clause (ii) of the preceding sentence, any modification that would
convert a previously granted ISO into a NSO will be treated as causing a
material decrease in the benefits available to the holder of such Stock Option.
SECTION 23. Withholding Taxes. (a) Whenever shares are to be issued
or delivered pursuant to the Plan, the Company shall have the right, in its
sole discretion, to either (i) require the grantee to remit to the Company or
(ii) withhold from any salary, wages or other compensation payable by the
Company to the grantee, an amount sufficient to satisfy federal, state and
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Whenever payments are to be made, such payments
shall be net of an amount sufficient to satisfy federal, state and local
withholding tax requirements and authorized deductions.
(b) With respect to shares received by a grantee pursuant to
the exercise of an ISO, if such grantee disposes of any such shares within two
years from the date of grant of such option or within one year after the
transfer of such shares to the grantee, the Company shall have the right to
withhold from any salary, wages or other compensation payable by the Company to
the grantee an amount sufficient to satisfy federal, state and local withholding
tax requirements attributable to such disposition.
SECTION 24. Rights as a Stockholder. (a) A grantee of a Stock Option or
an SAR or a transferee of such grantee pursuant to Section 14 hereof shall have
no rights as a stockholder with respect to any shares of Common Stock related
thereto until the issuance of a stock certificate for such shares following the
exercise of such Stock Option or SAR. Except as otherwise provided for in
Sections 16 and 17 hereof, no adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities, or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued.
(b) A grantee of Restricted Stock or a transferee of such
grantee pursuant to Section 14 hereof shall, upon the date certificates for the
Restricted Stock are issued, have all of the rights of a stockholder including
the right to vote such shares and to receive dividends, subject however to the
restrictions established pursuant to Section 13 hereof.
SECTION 25. Compliance with Rule 16b-3. The Company intends that this
Plan shall comply with the requirements of Rule 16b-3 during the term of this
Plan. Should any provision of this Plan not be necessary to comply with the
requirements of the Rule or should any
10
<PAGE> 11
additional provisions be necessary for this Plan to comply with the requirements
of Rule 16b-3, the Board may amend the Plan to add or to modify the provisions
of this Plan accordingly.
SECTION 26. Plan Financing. ALS may extend and maintain, or arrange for
the extension and maintenance of, financing to any grantee (including a grantee
who is a director of ALS) to purchase shares pursuant to exercise of a Stock
Option granted hereunder on such terms as may be approved by the Committee in
its sole discretion. In considering the terms for extension or maintenance of
credit by ALS, the Committee shall, among other factors, consider the cost to
ALS of any financing extended by ALS.
SECTION 27. Funding. Except as provided under Section 13(b) hereof, no
provision of the Plan shall require or permit the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes.
SECTION 28. ERISA. The Plan is not an employee benefit plan which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, and the provisions of Code Section 401(a) are not applicable to the Plan.
SECTION 29. Effective Date of Plan. The Plan shall be effective June
28, 1995, subject to approval by the stockholders of ALS pursuant to the
provisions of Section 18 hereof.
11
<PAGE> 1
EXHIBIT 10.15
STOCK PURCHASE AGREEMENT
AMONG
HEARTLAND RETIREMENT SERVICES, INC.,
THE SHAREHOLDERS OF HEARTLAND RETIREMENT SERVICES, INC.
AND
ALTERNATIVE LIVING SERVICES, INC.
dated as of
January 25, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. PURCHASE AND SALE OF STOCK; PURCHASE PRICE; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 Documents Being Delivered by or on Behalf of Company and Shareholders . . . . . . . . . . . . . . . 2
1.05 Documents Being Delivered by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.02 Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.03 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.04 No Violation or Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.05 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.06 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.07 Absence of Certain Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.08 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.09 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.11 Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.12 Patents, Trademarks, Trade Names, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.16 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.18 No Condemnation or Expropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.19 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.20 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.21 Labor Disagreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.23 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.24 Affiliates' Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.25 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.26 Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.27 Acquisition of Acquisition Shares for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.28 Qualification of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.01 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.02 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.03 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.04 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.05 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.06 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.07 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.09 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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3.10 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.11 Labor Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.13 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.14 Acquisition for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.15 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.01 Conduct of Business Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.02 Other Obligations of the Company and the Shareholders Pending the Closing . . . . . . . . . . . . . 25
4.03 Other Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.04 Not Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.05 Company Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.06 Post-Closing Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.07 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.08 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.09 Cancellation of Certain Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.10 Not Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.11 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.12 Conditional Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.13 Conditional Put Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.14 Section 338 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.15 Stockholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5. CONDITIONS TO BUYER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.01 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.03 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.05 No Casualty Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.06 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.07 Resignation of Company Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.08 Not Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.09 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.10 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.12 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.13 Other Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6. CONDITIONS TO COMPANY'S AND SHAREHOLDERS' OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.01 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.03 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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7. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.01 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.02 Agreement to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.03 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.04 Limitations of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8. TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.01 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.02 Expense Reimbursement by Buyer; Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.03 Exclusive Dealing; Expense Reimbursement by Company and Shareholders; Break-Up Fee . . . . . . . . . 48
8.04 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.05 Amendment, Extension and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.01 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.02 Retention of Records and Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.03 Expenses, Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.06 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.07 Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.08 Notice to Department of Health and Social Services . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.09 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.12 Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.13 Counterparts/Telecopies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 25, 1996 (the
"Agreement"), by and among HEARTLAND RETIREMENT SERVICES, INC., a Wisconsin
corporation (the "Company"), HEARTLAND DEVELOPMENT CORPORATION, a Wisconsin
corporation ("HDC"), Douglas A. Hennig ("Hennig"), and ALTERNATIVE LIVING
SERVICES, INC., a Delaware corporation ("Buyer").
W I T N E S E T H :
WHEREAS, the Company and its Subsidiary Companies (as defined
below) are in the business of owning and operating assisted living or dementia
care facilities (the "Facilities") serving the frail and elderly (the
"Business").
WHEREAS, the authorized capital stock of the Company consists
solely of 9,000 shares of common stock, $1.00 par value, of which 100 shares
are issued and outstanding as of the date hereof ("Common Stock"), 95.5 of
which are owned by HDC and 4.5 of which are owned by Hennig (HDC and Hennig are
referred to hereinafter collectively as "Shareholders").
WHEREAS, pursuant to the terms and conditions of this
Agreement, the Shareholders desire to sell to Buyer, and Buyer desires to
purchase from the Shareholders, all of the Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. PURCHASE AND SALE OF STOCK; PURCHASE PRICE; CLOSING
1.01 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, at the Closing the Shareholders shall sell,
transfer, assign, convey and deliver to Buyer, free and clear of all Liens (as
hereinafter defined), and Buyer shall purchase from the Shareholders, all of
the Common Stock.
1.02 Purchase Price. Buyer will deliver or cause to be
delivered to the Shareholders at the Closing, in full payment for the Common
Stock, the Purchase Price (as hereinafter defined). The "Purchase Price" shall
be comprised of (a) 114.7 shares (the "Acquisition Shares") of the no par value
common stock of Buyer (the "Buyer Stock"), of which 109.54 shares shall payable
to HDC and 5.16 shares shall be payable to Hennig; and (b) a cash payment (the
"Acquisition Payment") equal to U.S. $5,529,218.00 of which $5,280,403.00 shall
be payable to HDC and $248,815.00 shall be payable to Hennig. The payment of the
Acquisition Payment at Closing shall be made by delivery to the Shareholders of
certified or bank cashier's checks of immediately available federal funds
payable to the order of each such
<PAGE> 6
Shareholder; provided, however, that HDC and/or Hennig may, at their respective
option, elect to receive their respective portion of the Acquisition Payment by
wire transfer of immediately available federal funds to an account designated
by HDC or Hennig, respectively, not less than 24 hours prior the Closing.
1.03 Closing; Effective Time. The consummation of the
transactions contemplated by this Agreement (the "Closing") shall take place at
11:00 A.M., at the offices of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin, on January 25, 1996 provided that the conditions set forth
in Sections 5.08 and 6.05 shall have been fulfilled or waived and, if not, on
the second business day following the date on which the last of the conditions
set forth in Articles 5 and 6 is fulfilled or waived, or at such other time
and/or place as the parties hereto shall agree upon in writing. The date of the
Closing is sometimes referred to herein as the "Closing Date". The purchase and
sale of the Common Stock contemplated hereby shall be effective for financial
reporting purposes as of 12:01 a.m., Milwaukee, Wisconsin time, or January 1,
1996 (the "Effective Time"), and following the Closing the parties hereto agree
to reflect such purchase and sale on their respective financial statements as
having occurred at the Effective Time.
1.04 Documents Being Delivered by or on Behalf of Company
and Shareholders. At the Closing, the Company and the Shareholders will deliver
or cause to be delivered to Buyer, the following:
1.04(a). certificates representing all of the issued and
outstanding Common Stock duly endorsed in blank, or accompanied by stock
power(s) duly endorsed in blank;
1.04(b). executed counterparts of any consents required to be
delivered pursuant to Sections 4.02(b) and 5.06 hereof;
1.04(c). all the books and records of the Company;
1.04(d). the Compliance Certificate referred to in Section
5.03 hereof and the legal opinion of Foley & Lardner referred to in Section
5.09 hereof;
1.04(e). a counterpart of a cross-receipt evidencing receipt
by the respective parties hereto of the consideration and documents
contemplated by Section 1.04 and 1.05 hereof (the "Cross Receipt"), duly
executed by the Company and the Shareholders (provided that the provisions of
Section 1.05 have been fulfilled);
1.04(f). and all other previously undelivered documents,
instruments or writings required to be delivered by the Company or the
Shareholders at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith;
2
<PAGE> 7
1.04(g). an unaudited consolidated balance sheet of the
Company as of December 31, 1995 together with the certificate of the Company's
chief executive and chief accounting officers certifying that such balance
sheet has been derived from the financial books and records of the Company and
accurately presents, in all material respects, the consolidated assets,
liabilities and financial position of the Company as of December 31, 1995 and
is prepared in accordance with generally accepted accounting principles applied
on a consistent basis (the "Preliminary Closing Balance Sheet");
1.04(h) a general release in favor of the Company executed by
each of the Shareholders, in form and substance reasonably acceptable to Buyer,
pursuant to which, effective as of the Closing Date, each of the Shareholders
shall release the Company from any and all claims, liabilities and obligations
except for (i) such rights as may arise under this Agreement or any instrument
delivered at Closing, as contemplated hereby and (ii) in the case of Hennig,
salary and other employee-related obligations of the Company due to Hennig but
not yet payable in the ordinary course; and
1.04(i) a counterpart of an admission amendment (the
"Admission Amendment") executed by each of the Shareholders pursuant to which
such Shareholders shall become parties to the Buyer's Amended Stockholders'
Agreement dated as of January 15, 1996 (the "Stockholders' Agreement"), which
Admission Amendment shall be in form and substance reasonably acceptable to the
Buyer and the Shareholders.
1.05 Documents Being Delivered by Buyer. At the Closing,
Buyer will deliver or cause to be delivered, the following:
1.05(a). to the Shareholders, the Acquisition Payment referred
to in Section l.02 hereof;
1.05(b). to the Shareholders, certificates representing the
Acquisition Shares (a certificate for 109.54 shares of Buyer Stock in the name
of HDC and a certificate for 5.16 shares of Buyer Stock in the name of Hennig);
1.05(c). to the Company and the Shareholders, the Compliance
Certificate referred to in Section 6.03 hereof;
1.05(d) to Shareholders, the payout statements and/or
releases as required pursuant to Section 4.05 hereof; and
1.05(e). a counterpart of the Cross-Receipt, duly executed by
the Buyer (provided that the provisions of Section 1.04 have been fulfilled);
3
<PAGE> 8
1.05(f) a counterpart of the Admission Amendment executed by
the Buyer; and
1.05(g). and all other previously undelivered documents,
instruments or writings required to be delivered by Buyer at or prior to the
Closing pursuant to this Agreement or otherwise required in connection
herewith.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
Except for the representations and warranties contained in
Sections 2.02 and 2.03 hereof which are made severally by the Shareholders ,
each of the following representations and warranties are made to Buyer by the
Company, HDC and Hennig, and all representations and warranties set forth below
are subject to and qualified by those matters set forth in the disclosure
schedule of the Company attached hereto and incorporated herein by this
reference (the "Disclosure Schedule"). Each of the following representations are
correct and complete as of the date of the Agreement and will be correct and
complete as of the Closing Date (as though then made). Where any representation
or warranty is made to "the Company's actual knowledge", to "the knowledge of
the Company", to "the Company's knowledge" or subject to a similar knowledge
limitation, such representation or warranty is made only to the knowledge and
belief of Hennig, Faith Lawler, Michael Dickel, Barry Perkel, Lance W. Ahearn
and Joel E. Simpson), or any of them, without any obligation to conduct any
inquiry or investigation other than such inquiry as the principal executive
officer of the Company most likely to have knowledge of such matter may conclude
is reasonable in the circumstances and the actual or imputed knowledge of the
other officers, agents or employees of the Company who are not among the
above-listed members of the Board of Directors or executive officers of the
Company shall not be imputed to the Company. For purposes of this Agreement, the
term material adverse effect on the Company and/or the Business shall mean any
change in, or effect on, the Company, a Subsidiary Company (as defined below),
or the Business which results in, or could reasonably be expected to result in,
the Company or a Subsidiary Company suffering a diminution of value or incurring
costs or expenses or becoming liable for any amount in excess of $100,000. All
references to the "Company" in Section 2.04 and Sections 2.06 through 2.26 shall
mean, except where the context otherwise requires, each of the Company and the
Subsidiary Companies, and each of them, as applicable. An item contained in the
Disclosure Schedule, or any part thereof, is deemed disclosed with respect to
all representations and warranties. Disclosure of items that are not strictly
called for by the Agreement shall not imply that such information is material or
that the inclusion establishes or implies a standard of materiality.
4
<PAGE> 9
2.01 Corporate.
2.01(a). The Company is a corporation duly organized and
validly existing under the laws of the State of Wisconsin, and has the
corporate power and authority to carry on its business as and where it is
presently conducted, to enter into this Agreement and the other documents and
instruments to be executed and delivered by the Company pursuant hereto (such
other documents and instruments sometimes referred to herein as the "Ancillary
Instruments") and to carry out the transactions contemplated hereby and
thereby. Each Subsidiary Company (as defined below) is duly organized and
validly existing as a corporation, limited partnership or limited liability
company, as applicable, under the laws of the State of Wisconsin and has the
power and authority to carry on its business as and where it is presently
conducted. For purposes of this Agreement, "Subsidiary Company" shall mean each
corporation, limited liability company or limited partnership in which the
Company has an ownership interest and which owns, leases or operates or intends
to own, lease or operate one or more Facilities.
2.01(b). The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
wherein the character of the properties owned or leased by it or the nature of
the Business, makes such licensing or qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Business or the operations of the Company as a whole. Each Subsidiary Company
is duly licensed or qualified to do business and is in good standing in each
jurisdiction wherein the character of the properties owned or leased by it or
the nature of the business conducted by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not have a material adverse effect on the Business or the
operations of such entity.
2.01(c). The Company does not own any interest in any
corporation, partnership or other entity, except as set forth in the Disclosure
Schedule. The identity and ownership interest of each equity owner of each
Subsidiary Company are as set forth on the Disclosure Schedule.
2.01(d). The authorized capital stock of the Company consists
entirely of 9,000 shares of Common Stock, $1.00 par value, of which 100 shares
are issued and outstanding as of the date hereof (and will be issued and
outstanding at the Closing), 95.5 and 4.5 of which are owned of record and
beneficially by HDC and Hennig, respectively. All such shares of Common Stock
are, and at Closing will be, validly issued, fully paid and nonassessable.
Other than under this Agreement or as set forth in the Disclosure Schedule,
there are no options, warrants, conversions, subscription or other rights,
agreements, contracts or commitments of any kind obligating the Company,
contingently or otherwise, to issue or sell any shares of capital stock or
other securities of the Company or any securities convertible into or
exchangeable for capital stock or other securities of the Company, or to
repurchase
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or redeem any capital stock or other securities of the Company. At the Closing,
the Common Stock will not be subject to any contractual restrictions relating
to its disposition.
2.02 Shareholders.
2.02(a). HDC is a corporation duly organized and validly
existing under the laws of the State of Wisconsin. Each of HDC and Hennig has
full power, right, authority and capacity to enter into, execute and deliver
this Agreement and the Ancillary Instruments (which term, when used with
respect to the Shareholders, shall include all other documents and instruments
to be executed and delivered by the Shareholders pursuant hereto) to be
executed and delivered by each Shareholder and to carry out transactions
contemplated hereby and thereby.
2.02(b). Other than the Buyer's interest therein as a result of
this Agreement, each of HDC and Hennig has, and will have at the Closing, and at
the Closing will transfer to Buyer, good and marketable title to the Common
Stock to be sold by such Shareholder hereunder, free and clear of all Liens,
claims and encumbrances and free and clear of any restrictions on transfer
(other than restrictions under the Securities Act of 1933 and applicable state
securities laws). Other than this Agreement and the agreements to be terminated
at or immediately prior to Closing as contemplated by Section 4.09 hereof,
neither HDC nor Hennig are parties to any option, warrant, purchase right or
other contract or commitment that could require them to sell, transfer or
otherwise dispose of any Common Stock nor are they parties to any voting trust,
proxy or other agreement or understanding with respect to the voting of the
Common Stock.
2.03 Authority. The execution, delivery of this Agreement
and the Ancillary Instruments to be executed and delivered by the Company and
HDC pursuant hereto and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of each of the
Company and HDC. No other corporate act or proceeding on the part of the Company
or HDC is necessary to authorize this Agreement, the Ancillary Instruments to
which the Company or HDC will be a party or the transactions contemplated hereby
or thereby. This Agreement constitutes, and when executed and delivered, the
Ancillary Instruments to be executed and delivered by the Company, HDC and/or
Hennig pursuant hereto will constitute, legal, valid and binding agreements of
the Company, HDC and/or Hennig enforceable in accordance with their respective
terms (except insofar as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and except as to the availability of equitable
remedies).
2.04 No Violation or Conflict.
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2.04(a) No Violation. Neither the execution or delivery of this
Agreement or the Ancillary Instruments, nor the consummation by the Company and
the Shareholders of the transactions contemplated hereby or thereby will, to the
knowledge of the Company, violate any statute, law, rule, regulation, order,
writ, injunction or decree of any court or governmental authority applicable to
the Company, which violation would have a material adverse effect on the
Business. To the Company's knowledge, no consent, approval, authorization or
action by any governmental agency, instrumentality, commission, authority, board
or body (collectively, a "Governmental Agency") is required in connection with
the execution and delivery by the Company and the Shareholders of this
Agreement, the Ancillary Instruments or the consummation by the Company and the
Shareholders of the transactions contemplated herein or therein. Except as set
forth in the Disclosure Schedule, the Company is not required, to its knowledge,
to submit any notice, report or other filing to any Governmental Agency in
connection with the execution or delivery of this Agreement and the consummation
of the transactions contemplated hereby.
2.04(b) No Conflict. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
will, to the Company's actual knowledge, conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate or modify, or cancel, or require any notice
under any agreement, contract, lease or other arrangement to which the Company
or either of the Shareholders are parties or by which the Company or either of
the Shareholders is bound which would have a material adverse effect on the
Company or the Business. Furthermore, neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby
will conflict with, result in a breach of, constitute a default under, result
in acceleration of, or create in any party the right to accelerate, terminate
or modify, or cancel, any agreement, contract or other arrangement relating to
the indebtedness of the Company or any Subsidiary Company with Firstar Bank
Sheboygan, N.A. or its assignees.
2.05 Financial Statements. The Company has previously
delivered to Buyer the financial statements of the Company consisting of (i)
balance sheets of the Company as of December 31, 1994 and December 31, 1993,
and the related statements of income, stockholders' equity and cash flows for
the years then ended (including the notes contained therein), which financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and have been audited and reported on,
and are accompanied by, the signed, unqualified opinions of Arthur Andersen
LLP, independent public accountants for the Company for such years and (ii) an
unaudited consolidated balance sheet of the Company as of December 31, 1995
(the "Recent Balance Sheet"), and the related unaudited consolidated statements
of income, stockholders' equity and cash flows for the twelve (12) months then
ended. All of such financial statements (including all
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notes and schedules contained therein or annexed thereto) have been derived
from the financial books and records of the Company and accurately present, in
all material respects, the assets, liabilities and financial position, the
results of operations, stockholders' equity and cash flows of the Company as of
the dates and for the years and periods indicated and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis.
2.06 No Undisclosed Liabilities. To the Company's actual
knowledge, the Company has no liabilities or obligations except (i) to the
extent reflected or reserved for on the Recent Balance Sheet; (ii) liabilities
or obligations arising or incurred in the ordinary course of business since the
date of the Recent Balance Sheet; (iii) liabilities and obligations which,
under generally accepted accounting principles, would not be required to be
disclosed on the Recent Balance Sheet or in the accompanying footnotes thereto;
or (iv) liabilities or obligations disclosed in the Disclosure Schedule or
pursuant to or in any section of this Agreement.
2.07 Absence of Certain Material Changes. Except as
disclosed in the Disclosure Schedule, since the date of the Recent Balance
Sheet, the Company has conducted the Business in the ordinary and usual course
of business, consistent with past practice, except as contemplated by this
Agreement, and the Company has not:
2.07(a). suffered any damage, destruction or loss to its
property or assets, whether covered by insurance or not, having, or reasonably
expected to have, a material adverse effect upon the Company or the Business;
2.07(b). experienced any strike or labor disturbance, other
than routine individual grievances which have not had, and are not reasonably
expected to have, a material adverse effect upon the Company;
2.07(c). entered into any commitment or transaction
(including, without limitation, any borrowing or capital expenditure) other
than in the ordinary course of business consistent with past practice and its
current business plan, as disclosed to Buyer;
2.07(d). entered into any employment agreement, bonus, stock
option or arrangement respecting employee benefits or granted any increase in
the compensation of employees of the Company (including, without limitation,
any increase or change pursuant to any bonus, pension, profit-sharing,
retirement or other plan or commitment), or any increase in any such
compensation payable or to become payable to any officer or employee thereof;
2.07(e). made, declared, paid or become obligated to make,
declare or pay any dividend or distribution to its equity owners;
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2.07(f). terminated, modified or cancelled any material
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) to which the Company is a party or bound;
2.07(g). has made any capital investment in, any loan to or
any acquisition of the securities or assets of any other entity;
2.07(h). incurred any indebtedness or increased or accelerated
its obligations under any indebtedness; or
2.07(i). taken any other action or become subject to any
liability outside of the ordinary course of business.
2.08 Real Property. The Disclosure Schedule sets forth all
of the material real property (the "Property") owned, used or occupied by the
Company to operate the Business as currently operated, including all land,
easements or rights of way of record granted to it, and all buildings or
warehouses located thereon. To the knowledge of the Company, no fact or
condition exists which would prohibit or materially adversely affect the
ordinary rights of access to and from a Property from and to the existing
highways and roads and the Company has not received notice of any pending or
threatened restriction or denial, governmental or otherwise, upon such ingress
and egress. All improvements and structures located on the Property are located
within the applicable boundaries of the Property and within all applicable
setback requirements and do not encroach upon any adjacent properties and there
are no encroachments on the Property from any adjacent properties, except for
such matters as would not materially adversely affect the Company or the
Business.
2.09 Leases. The Disclosure Schedule contains a complete
list of all leases (including all amendments thereof and modifications thereto)
(the "Leases") material to the Business pursuant to which the Company leases
real or personal property as lessor or lessee (whether capital, operating or
otherwise), true copies of which Leases have been delivered to Buyer. To the
Company's actual knowledge, no party is in default, or with notice of lapse of
time would be in default, with respect to any of the Leases.
2.10 Title to Properties. The Company has, to its
knowledge, good, valid and marketable title to all of its assets and properties
reflected in the books and records of the Company as being owned, free and
clear of all Liens, except Permitted Liens.
"Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or charges of any kind. "Permitted Liens" shall mean
(i) the liens disclosed in the title report(s) provided prior to the date of
this Agreement to Buyer,
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if any, none of which individually or in the aggregate materially impair (or
are expected to impair in the future) the use, occupancy or value of the assets
and properties of the Company or otherwise materially impair (or are expected
to impair in the future) its business operations, (ii) statutory liens for real
or personal property taxes not yet delinquent or payable subsequent to the
Closing Date, and statutory or common law liens securing the payment or
performance of any obligation of the Company, the payment or performance of
which is not delinquent, or which are payable or performable subsequent to such
date; (iii) the statutory rights of customers of the Company with respect to
inventory under orders or contracts entered into by the Company in the ordinary
course of business; (iv) such imperfections or irregularities of title, liens,
easements, charges or encumbrances as do not materially impair the use,
occupancy or value of the assets and properties of the Company, or otherwise
materially impair business operations; (v) building, zoning and other laws
applicable to the Company's assets and properties, none of which individually
or in the aggregate materially impair (or are expected to impair in the future)
the use, occupancy or value of the assets and properties of the Company or
otherwise materially impair (or are expected to impair in the future) its
business operations; and (vi) any liens disclosed in the Disclosure Schedule.
Except with respect to the representations and warranties
contained in this Section 2.10 with respect to title and in Section 2.11 hereof
with respect to condition, Buyer is obtaining the tangible properties and
assets of the Company AS IS, WHERE IS. THE COMPANY DOES NOT MAKE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE DESIGN,
CAPACITY, VALUE, UTILITY, PERFORMANCE OR QUALITY OF THE COMPANY'S TANGIBLE
PROPERTIES AND ASSETS, NOR DOES THE COMPANY MAKE ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT THERETO.
2.11 Condition of Property. Except in each case for normal
wear and tear, all structures owned or utilized by the Company are, to the
Company's knowledge, structurally sound with no material defects which impair
the use of such structures in the manner in which they are currently being
used, and all machinery and equipment owned or utilized by the Company are in
good and normal operating condition and repair, except for normal wear and
tear.
2.12 Patents, Trademarks, Trade Names, Etc. The Disclosure
Schedule contains an accurate and complete description of all material
trademark and service mark registrations, trademark and service mark
applications, trade names, copyright applications and registrations, software
programs (exclusive of common commercially available software), patents and
patent applications owned or held by the Company, or under which the Company
owns or holds any license or other interest, all registered or assumed names
under which the Company is carrying on the Business and all licenses,
agreements or other arrangements under which the Company has the right
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to use any of the foregoing (collectively, the "Rights"). Except as indicated
in the Disclosure Schedule, all such patents, trademarks, and copyrights have
been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Registrar of Copyrights or the
corresponding offices of other countries, and have been properly maintained and
renewed in accordance with all applicable laws and regulations. The Company
owns (or possesses adequate licenses or other rights to use) all Rights and all
inventions, processes and other technical know- how or other proprietary rights
used in and necessary to the conduct of the Business. Except as set forth in
the Disclosure Schedule, no notice of conflict with the asserted rights of
others with respect to the foregoing has been received, and such Rights are
adequate, in the Company's judgment, for the conduct of the Business. The
Company has not granted any licenses or sublicenses thereunder to others except
as set forth in the Disclosure Schedule. To the knowledge of the Company,
except as disclosed in the Disclosure Schedule, none of the Rights are subject
to any claim that (i) any of the Rights are invalid are subject to a claim of
patent misuse, (ii) the Company is infringing any patents, trademarks, trade
names or copyrights of others, (iii) the Company is violating any secrecy
rights of any person, or (iv) any Rights are being used contrary in any respect
to the provisions of any license or other agreement relating to the use of the
Rights. The Company does not know of any claims of third parties to the use or
title of any Rights inconsistent with the rights of ownership or use set forth
in the Disclosure Schedule. Except as disclosed in the Disclosure Schedule, to
the knowledge of the Company, none of the Rights is being infringed by a third
party. To the Company's knowledge, the Company has not interfered with,
infringed upon or misappropriated any trademark, trade name, copyright or
patent of any third party.
2.13 Litigation. Except as set forth in the Disclosure
Schedule, there are no claims, actions, suits, proceedings or investigations
pending or, to the Company's knowledge, threatened by or against the Company or
the Business or the transactions contemplated hereby, which might individually
or in the aggregate materially adversely affect the Company's financial
condition or the conduct of the Business as presently conducted, nor is there,
to the Company's knowledge, any judgment, decree, injunction or order
outstanding against the Company which individually or in the aggregate has or
is likely to have such an effect.
2.14 Insurance. The Disclosure Schedule sets forth a
complete and accurate list and description, including but not limited to
deductibles thereunder, of all material policies of fire, liability, product
liability, workmen's compensation, health and other forms of insurance
presently in effect with respect to the Business. To the Company's knowledge,
all such policies are in full force and effect, are sufficient for all
applicable requirements of law and will not be effected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement.
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2.15 Employees. The Disclosure Schedule contains a summary
list of all employees of the Company as of the date hereof. All such employees
are terminable at will.
2.16 Employee Benefit Plans; ERISA.
2.16(a). Except for the employee plans, benefits and materials
described in the Disclosure Schedule (the "Plans"), the Company does not have
bonus, deferred compensation, incentive compensation, severance or termination
pay, hospitalization or other medical, stock purchase, stock option, pension,
life or other insurance, profit-sharing or retirement plan, agreement or
arrangement, or other employee benefit plan or arrangement, whether formal or
informal, and whether legally binding or not, maintained or contributed to by
the Company with respect to its employees.
2.16(b). The Company has never been a party to a
"multiemployer plan" as that term is defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
2.16(c). With respect to each Plan, to the Company's
knowledge, (i) all payments due from the Company to date with respect to any
such Plan have been made and all amounts properly accrued to date as
liabilities of the Company which have not been paid have been properly recorded
on the books of the Company and are reflected in the Recent Balance Sheet; (ii)
all reports and information relating to such Plan required to be filed with any
governmental entity have been timely filed except where the failure to do so
would not result in material liability to the Company; (iii) there are no
actions, suits or claims pending (other than routine claims for benefits) with
respect to such Plan or against the assets of such Plan; (iv) no Plan is a plan
which is established and maintained outside the United States primarily for the
benefit of individuals substantially all of whom are nonresident aliens.
2.17 Compliance with Laws. To the knowledge of the
Company, the Company is in compliance with all laws, regulations, ordinances,
permits and licenses relating to the ownership or use of the Company's
properties and assets or related to the conduct of the Business the enforcement
of which would materially adversely affect the Company or the Business as
currently conducted by the Company.
2.18 No Condemnation or Expropriation. The Company has not
received a notice that either the whole or any portion of the Property or any
other of its assets is subject to any governmental decree or order to be sold
or is being condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefor, or that any such
condemnation, expropriation or taking has been proposed.
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2.19 Tax Matters.
2.19(a). The provision made for taxes on the Recent Balance
Sheet is, in the Company's judgment, sufficient for payment of all federal,
state, foreign, local and other income, excise, profits, franchise, occupation,
property, payroll, sales, use, gross receipts and other taxes and assessments,
whether or not disputed at the date of the Recent Balance Sheet, and for all
years and periods prior thereto, except in each case where a failure to make
such a provision would not have a material adverse effect on the Business or
the operations of the Company as a whole. Since the date of the Recent Balance
Sheet, the Company has not incurred any taxes material to the Business or
operations of the Company as a whole, other than (i) taxes incurred in the
ordinary course of business, and (ii) federal and state income, franchise or
other taxes incurred pursuant to the Section 338(h)(10) Elections contemplated
hereunder (as defined in and as set forth in Section 4.14 hereof).
2.19(b). Except as disclosed in the Disclosure Schedule, to
the Company's knowledge, (i) the Company has filed when due all federal, state,
local and foreign tax returns required by applicable law to be filed by it
(and, with respect to federal income taxes, all such returns have been filed on
a consolidated basis with HDC pursuant to Sections 1501 through 1505 of the
Code) and has paid all taxes (including all deficiency assessments, additions
to taxes, penalties and interest, of which notice has been received) to the
extent that such amounts have become due or are claimed to be due from any
federal, state, local or foreign taxing authorities; (ii) there is no
agreement, waiver or consent providing for an extension of time with respect to
the assessment of any tax or deficiency against the Company and no power of
attorney granted by the Company with respect to any tax matter is currently in
force; (iii) there is no action, suit, proceeding, investigation, audit or
claim pending against or with respect to the Company in respect of any tax or
assessment, nor has any claim for additional tax or assessment being asserted
by any such authority; and (iv) the Company has not filed any agreement or
consent under Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code"). Neither of the Shareholders nor the Company is a "foreign
person," as that term is defined in Section 1445(f) of the Code.
2.20 Contracts and Commitments. Except for (i) liabilities
or obligations disclosed in the Disclosure Schedule or (ii) liabilities or
obligations disclosed pursuant to or in any section of this Agreement, to the
Company's knowledge:
2.20(a). The Company does not have any (i) collective
bargaining agreements in effect or being negotiated, (ii) agreements to which
it is a party that contain any severance or termination pay liabilities or
obligations, (iii) employment or consulting agreements for employees in effect
or being negotiated;
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2.20(b). The Company has not given any power of attorney
(revocable or irrevocable) to any person, firm or corporation for any purpose
whatsoever that is currently in force;
2.20(c). The Company is not a party to any agreement which
contains covenants limiting the freedom of the Company or the Buyer to compete
in any line of business or market or with any person;
2.20(c). The Company is not a party to any agreement that
provides for payments to or by the Company in an aggregate amount of $100,000
or more and requires performance by the Company for a term of more than six (6)
months from the date hereof and that is not terminable within six (6) months by
the Company without material cost, liability or penalty;
2.20(d). The Company is not a party to any agreement
establishing or providing for any joint venture, partnership or similar
arrangement with any other person or entity related to the Business; and
2.20(e). The Company has no reason to believe that any
material contract or commitment to which the Company is a party is not in full
force and effect in accordance with the terms thereof (except in each case
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and except as to the availability of equitable remedies). To the
Company's actual knowledge, no party is in default with respect to any such
contracts, except where the aggregate effect of such defaults would not have a
material adverse effect on the Business or the operations of the Company as a
whole.
2.21 Labor Disagreements. The Company has not experienced
any material labor disputes, union organization attempts or any work stoppage
due to labor disagreements. The Company has not received a notice that there is
any unfair labor practice, charge or complaint pending or threatened against it
before the National Labor Relations Board or any comparable state agency or
authority. To the Company's knowledge, there is no labor strike, dispute,
request for representation, slowdown or stoppage actually pending or threatened
against or affecting the Company. To the Company's knowledge, no question
concerning representation has been raised or is threatened respecting the
Company's employees. No grievance which might have a material adverse effect on
the Business and the operations of the Company as a whole is pending.
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2.22 Environmental Matters.
2.22(a). To the Company's actual knowledge, except as set
forth in the Disclosure Schedule, (i) each facility and property owned,
operated or leased by the Company has been and is now owned, operated or leased
in compliance with all applicable Environmental Laws (as hereinafter defined)
the noncompliance with which could materially adversely affect the Business as
currently conducted by the Company and (ii) there are no circumstances that may
prevent or interfere with such compliance in the future.
2.22(b). To the Company's actual knowledge, there has been no
and there are no pending or threatened suits, actions, claims, complaints,
notices or requests for information received by the Company with respect to any
alleged violation of any Environmental Law except for: (i) matters set forth in
the Disclosure Schedule and (ii) matters which, if adversely decided or
resolved, individually or in the aggregate would not have a material adverse
effect on the Business as currently conducted by the Company.
2.22(c). The Company holds such permits, certificates,
approvals, licenses, exemptions, variances, waivers, permits-by-rule, or other
authorizations ("Permits") issued by any governmental authority, or otherwise
granted or conferred by operation of any Environmental Law, for the operation
of its facilities or the Business as are sufficient, in the Company's
knowledge, to avoid a breach of the representation in Section 2.22(a) hereof.
All such Permits held by the Company are identified in the Disclosure Schedule.
2.22(d). To the Company's knowledge, no property owned,
operated or leased by the Company is listed or is proposed for listing on the
National Priorities List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), on the Comprehensive
Environmental Response, Compensation and Liability Information System List
("CERCLIS") or on any similar state or foreign list of sites requiring
investigation or cleanup; and the Company has not received notice, nor is
aware, of any lien filed against either the personal or real property of the
Company under any Environmental Law.
2.22(e). To the Company's knowledge, the Company has not been
required by any Environmental Law to place any notice or restriction relating
to the presence of any hazardous materials in any deed to any facility or
property owned, operated or leased by the Company where the failure to so place
any such notice has, or may reasonably be expected to have, a material adverse
effect on the Business.
2.22(f). For purposes of this Agreement, "Environmental Law"
shall mean any law, regulation, rule, ordinance, order or decree now existing
relating to (i) pollution or protection of the environment, including natural
resources, (ii) exposure
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of persons to hazardous materials, (iii) protection of the public health or
welfare from the effects of products, by-products, wastes, emissions,
discharges or releases of hazardous materials, or (iv) regulation of the
manufacture, use or introduction into commerce of hazardous materials,
including their manufacture, formulation, packaging, labeling, distribution,
transportation, handling, storage or disposal.
2.23 Title Insurance. The Disclosure Schedule sets forth a
complete and accurate list of all title insurance policies with respect to the
Property (true copies of which policies have heretofore been furnished to
Buyer), which policies are effective as of the respective effective dates of
such policies.
2.24 Affiliates' Relationships.
2.24(a). All leases, contracts or other arrangements between
the Company and any Affiliate (as hereinafter defined) are set forth in the
Disclosure Schedule.
2.24(b). Other than as set forth in the Disclosure Schedule,
no Affiliate has any material direct or indirect interest in (i) any entity
which does business with the Company or is competitive with the Business or
(ii) any property, asset or right which is used by the Company in the conduct
of the Business.
2.24(c). For purposes of this Agreement, "Affiliate" shall
mean and include all Shareholders, directors and officers of the Company; the
spouse, parent or child of any such person; and any entity in which any of the
foregoing has a direct or indirect interest, except through ownership of less
than 5% of the outstanding shares of any such entity.
2.25 No Brokers or Finders. Neither the Company nor any of
its directors, officers, employees, Shareholders or agents have retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof other than
HDC's retention of Cain Brothers & Company, Incorporated ("Cain Brothers").
2.26 Management Agreements. The Disclosure Schedule
contains a complete list of all management, consulting or development
agreements (the "Management Agreements') to which the Company is a party and
which relate to the management, consulting or development of one or more
Facilities. To the Company's knowledge, no party is in default, or with notice
of lapse of time could be in default, with respect to any of the Management
Agreements.
2.27 Acquisition of Acquisition Shares for Investment. The
Shareholders are acquiring the Acquisition Shares for investment and not with a
view
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toward, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the Acquisition Shares.
2.28 Qualification of Shareholders. HDC is an "accredited
investor" within the meaning of Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"). Each Shareholder, with respect to himself,
represents and warrants that he or it (i) is acquiring the Acquisition Shares
for his own account and not with a view to, or for resale in connection with,
any distribution thereof; (ii) understands and acknowledges that the
Acquisition Shares have not been registered under the Securities Act or any
state securities laws by reason of certain exemptions from the registration
provisions thereof which depend upon, among other things, the bona fide nature
of such Shareholder's investment intent as expressed herein; (iii) is able to
bear the economic risk of investment in the Acquisition Shares and has such
knowledge and experience in financial and business matters that he or it is
capable of evaluating the risks and merits of such Acquisition Shares; and (iv)
understands and acknowledges that the Acquisition Shares will be "restricted
securities" as that term is defined in Rule 144 under the Securities Act and
that the certificate representing such Acquisition Shares will bear a legend
restricting transfer unless (a) the transfer is exempt from registration
requirements under the Securities Act and any applicable state securities law
and an opinion of counsel reasonably satisfactory to Buyer that such transfer
is exempt therefrom if delivered to Buyer or (b) the transfer is made pursuant
to an effective registration statement under the Securities Act and any
applicable state securities law.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
All representations and warranties set forth below are subject
to and qualified by those matters set forth in the Buyer's disclosure schedule
attached hereto and incorporated herein by this reference ("Buyer's Disclosure
Schedule"). Each of the following representations are correct and complete as
of the date of the Agreement and will be correct and complete as of the Closing
Date (as though then made). Where any representation or warranty is made to
"Buyer's actual knowledge", to "the knowledge of Buyer", to "Buyer's knowledge"
or subject to a similar knowledge limitation, such representation or warranty
is made only to the knowledge and belief of William G. Petty, Jr., William F.
Lasky, J. David Lutich and John W. Kneen, or any of them, without any
obligation to conduct any inquiry or investigation other than such inquiry as
the principal executive officer of Buyer most likely to have knowledge of such
matter may conclude is reasonable in the circumstances and the actual or
imputed knowledge of the other officers, agents or employees of Buyer who are
not among the above-listed executive officers of Buyer shall not be imputed to
Buyer. For purposes of this Agreement, the term material adverse effect on
Buyer and/or the business, financial condition or results of operations of
Buyer shall mean
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any change in, or effect on, Buyer, a subsidiary of Buyer, or the business of
Buyer which results in, or could reasonably be expected to result in, Buyer or
a subsidiary of Buyer suffering a diminution of value or incurring costs or
expenses or becoming liable for any amount in excess of $200,000. All
references to "Buyer" in Section 3.04 and Sections 3.06 through 3.12 shall
mean, except where the context otherwise requires, each of Buyer and the
subsidiaries of Buyer, and each of them, as applicable. An item contained in
Buyer's Disclosure Schedule, or any part thereof, is deemed disclosed with
respect to all representations and warranties. Disclosure of items that are not
strictly called for by the Agreement shall not imply that such information is
material or that the inclusion establishes or implies a standard of
materiality.
3.01 Corporate. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own, lease and operate its assets and
properties, to carry on its business as it is now being conducted, to enter
into this Agreement and the Ancillary Instruments to be executed and delivered
by Buyer pursuant hereto and to carry out the transactions contemplated hereby
and thereby. Buyer is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a material adverse effect on
Buyer. True, accurate and complete copies of Buyer's Certificate of
Incorporation and By-laws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Company.
3.02 Capitalization.
3.02(a). The authorized capital stock of Buyer
consists of 100,000 shares of Buyer Stock, no par value per share, of which
3,670 shares are issued and outstanding as of the date hereof. All of the
issued and outstanding shares of Buyer Stock are validly issued and are fully
paid, nonassessable and free of preemptive rights, except as set forth on
Buyer's Disclosure Schedule.
3.02(b). Except as set forth in Buyer's Disclosure
Schedule, as of the date hereof, there are no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement obligating Buyer
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Buyer or obligating Buyer to grant, extend or
enter into any such agreement or commitment, except for this Agreement. Except
as set forth in Buyer's Disclosure Schedule, there are no voting trusts,
proxies or other agreements or understandings to which Buyer or any subsidiary
of Buyer is a party or is bound with respect to the voting of any shares of
capital stock of Buyer. The shares of Buyer Stock to be issued to the
Shareholders
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pursuant to the Agreement will be at the Closing duly authorized, validly
issued, fully paid and nonassessable.
3.03 Authority. The execution, delivery of this Agreement and
the Ancillary Instruments to be executed and delivered by Buyer pursuant hereto
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of Buyer. No other corporate act
or proceeding on the part of Buyer or its stockholders is necessary to
authorize this Agreement, the Ancillary Instruments to be executed and
delivered by Buyer pursuant hereto or the transactions contemplated hereby or
thereby, including the payment by Buyer of the Purchase Price to the
Shareholders. This Agreement constitutes, and when executed and delivered, the
Ancillary Instruments to be executed and delivered by Buyer pursuant hereto
will constitute, legal, valid and binding agreements of Buyer, enforceable
against Buyer in accordance with their respective terms (except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and except as to the availability of equitable remedies).
3.04 No Violation. Neither the execution, delivery and
performance of this Agreement or the Ancillary Instruments to be executed and
delivered by Buyer pursuant hereto, nor the consummation by Buyer of the
transactions contemplated hereby or thereby (a) will, to the knowledge of
Buyer, violate any statute, law, rule, regulation, order, writ, injunction or
decree of any court or governmental authority by which Buyer is bound or (b)
will violate or conflict with or constitute a default under any term or
provision of (i) the Certificate of Incorporation or Bylaws of Buyer or (ii)
any material contract (including any contract for the borrowing of money or the
issuance of securities of Buyer), commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Buyer is a party or
by which Buyer is bound.
3.05 Financial Statements. Included as part of Buyer's
Disclosure Schedule are true and complete copies of the consolidated financial
statements of Buyer consisting of (i) consolidated balance sheets of Buyer as
of December 31, 1993 and 1994 (such December 31, 1994 balance sheet referred to
herein as the "1994 Balance Sheet"), and the related consolidated statements of
income and cash flows for the years then ended (including the notes contained
therein or annexed thereto), which financial statements have been reported on,
and are accompanied by, copies of the signed, unqualified opinions of KPMG Peat
Marwick LLP, independent auditors for Buyer for such years, and (ii) an
unaudited consolidated balance sheet of Buyer as of November 30, 1995 (the
"Buyer Recent Balance Sheet"), the related unaudited consolidated statement of
operations for the eleven (11) months then ended and for the corresponding
period of the prior year (including the notes and schedules contained therein
or annexed thereto). All of such financial statements (including all notes and
schedules contained therein and annexed thereto) have been prepared in
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accordance with generally accepted and accounting principles (except, in the
case of unaudited statements, for the absence or condensing of certain
statements and information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles) applied on a consistent basis (except as may be indicated therein
or in the notes thereto), and fairly present in all material respects the
financial position and results of operations of Buyer as of the dates and for
the years and periods indicated.
3.06 Absence of Undisclosed Liabilities. Except as disclosed
in Buyer's Disclosure Schedule, Buyer has no liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature (a) except
liabilities, obligations or contingencies (i) which are accrued or reserved
against in Buyer's consolidated financial statements or reflected in the notes
thereto set forth in Buyer's Disclosure Schedule; or (ii) which were incurred
in the ordinary course of business and consistent with past practices.
3.07 Absence of Certain Changes or Events. Except as set forth
in Buyer's Disclosure Schedule, since November 30, 1995, there has not been:
(a) any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of Buyer;
(b) any loss, damage or destruction, whether covered by
insurance or not, affecting Buyer's business or properties which would
have a material adverse effect on the business, financial condition or
results of operations of Buyer and its subsidiaries, taken as a whole;
(c) any labor dispute or disturbance, other than routine
individual grievances which do not have a material adverse effect on
the business, financial condition or results of operations of Buyer
and its subsidiaries, taken as a whole;
(d) any commitment or transaction by Buyer (including,
without limitation, any borrowing or capital expenditure) involving in
excess of $100,000 other than in the ordinary course of business
consistent with past practice;
(e) any declaration, setting aside or payment of any
dividend or any other distribution in respect of Buyer's capital
stock; any redemption, purchase or other acquisition by Buyer of any
capital stock of Buyer, or any security relating thereto; or any other
payment to any shareholder of Buyer as such a shareholder;
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(f) any sale, lease or other transfer or disposition of
any properties or assets of Buyer, except for the sale of inventory
items or other items with an aggregate value of less than $100,000 in
the ordinary course of business;
(g) any indebtedness for borrowed money incurred, assumed
or guaranteed by Buyer;
(h) any mortgage, pledge, lien or encumbrance made on any
of the properties or assets of Buyer;
(i) any entering into, amendment or termination by Buyer
of any contract, or any waiver of material rights thereunder, other
than in the ordinary course of business; or
(j) any loan or advance (other than advances to employees
in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person including, but not
limited to, any Affiliate.
3.08 Litigation. Except as set forth in Buyer's Disclosure
Schedule, there are no claims, suits, actions or proceedings pending or, to the
knowledge of Buyer, threatened against, relating to or affecting Buyer, before
any court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator. Except as set forth in Buyer's Disclosure
Schedule, Buyer is not subject to any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator which prohibits or restricts the
consummation of the transactions contemplated hereby or would have material
adverse effect on the business, financial condition or results of operations of
Buyer and its subsidiaries, taken as a whole.
3.09 Tax Matters.
3.09(a). The provision made for taxes on the 1994 Balance
Sheet is, in Buyer's judgment, sufficient for payment of all federal, state,
foreign, local and other income, excise, profits, franchise, occupation,
property, payroll, sales, use, gross receipts and other taxes and assessments,
whether or not disputed at the date of the 1994 Balance Sheet, and for all
years and periods prior thereto, except in each case where a failure to make
such a provision would not have a material adverse effect on the business,
financial conditions or results of operations of Buyer and its subsidiaries,
taken as a whole. Since the date of the 1994 Balance Sheet, Buyer has not
incurred any taxes material to the business, financial condition or results of
operations of Buyer and its subsidiaries, taken as a whole, other than taxes
incurred in the ordinary course of business.
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3.09(b). Except as disclosed in Buyer's Disclosure Schedule,
to Buyer's knowledge, (i) Buyer has filed when due all federal, state, local
and foreign tax returns required by applicable law to be filed by it and has
paid all taxes (including all deficiency assessments, additions to taxes,
penalties and interest, of which notice has been received) to the extent that
such amounts have become due or are claimed to be due from any federal, state,
local or foreign taxing authorities; (ii) there is no agreement, waiver or
consent providing for an extension of time with respect to the assessment of
any tax or deficiency against Buyer and no power of attorney granted by Buyer
with respect to any tax matter is currently in force; (iii) there is no action,
suit, proceeding, investigation, audit or claim pending against or with respect
to Buyer in respect of any tax or assessment, nor has any claim for additional
tax or assessment being asserted by any such authority; and (iv) Buyer has not
filed any agreement or consent under Section 341(f) of the Code. Buyer is not a
"foreign person," as that term is defined in Section 1445(f) of the Code.
3.10 Employee Benefit Plans; ERISA.
3.10(a). Except for the employee plans, benefits and materials
described in Buyer's Disclosure Schedule (the "Buyer Plans"), Buyer does not
have bonus, deferred compensation, incentive compensation, severance or
termination pay, hospitalization or other medical, stock purchase, stock
option, pension, life or other insurance, profit-sharing or retirement plan,
agreement or arrangement, or other employee benefit plan or arrangement,
whether formal or informal, and whether legally binding or not, maintained or
contributed to by Buyer with respect to its employees.
3.10(b). Buyer has never been a party to a "multiemployer
plan" as that term is defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
3.10(c). With respect to each Buyer Plan, to Buyer's
knowledge, (i) all payments due from Buyer to date with respect to any such
Buyer Plan have been made and all amounts properly accrued to date as
liabilities of Buyer which have not been paid have been properly recorded on
the books of Buyer and are reflected in the Buyer Recent Balance Sheet; (ii)
all reports and information relating to such Buyer Plan required to be filed
with any governmental entity have been timely filed except where the failure to
do so would not result in material liability to Buyer; (iii) there are no
actions, suits or claims pending (other than routine claims for benefits) with
respect to such Buyer Plan or against the assets of such Buyer Plan; (iv) no
Buyer Plan is a plan which is established and maintained outside the United
States primarily for the benefit of individuals substantially all of whom are
nonresident aliens.
3.11 Labor Controversies. Except as set forth in Buyer's
Disclosure Schedule, (a) there are no significant controversies pending or, to
the knowledge of Buyer, threatened between Buyer and any representatives of any
of its employees; (b)
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to the knowledge of Buyer, there are no material organizational efforts
presently being made involving any of the presently unorganized employees of
Buyer; (c) Buyer has, to the knowledge of Buyer, complied in all material
respects with all laws relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, hours, collective
bargaining, and the payment of social security and similar taxes; and (d) no
person has, to the knowledge of Buyer, asserted that Buyer or any of its
subsidiaries is liable in any material amount for any arrears of wages, or any
taxes or penalties for failure to comply with any of the foregoing, except for
such controversies, organizational efforts, non-compliance and liabilities
which, singly or in the aggregate, could not reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of Buyer and its subsidiaries, taken as a whole.
3.12 Environmental Matters.
3.12(a). To Buyer's actual knowledge, except as set forth in
Buyer's Disclosure Schedule, (i) each facility and property owned, operated or
leased by Buyer has been and is now owned, operated or leased in compliance
with all applicable Environmental Laws the noncompliance with which could
materially adversely affect Buyer's business as currently conducted and (ii)
there are no circumstances that may prevent or interfere with such compliance
in the future.
3.12(b). To Buyer's actual knowledge, there has been no and
there are no pending or threatened suits, actions, claims, complaints, notices
or requests for information received by the Company with respect to any alleged
violation of any Environmental Law except for: (i) matters set forth in Buyer's
Disclosure Schedule and (ii) matters which, if adversely decided or resolved,
individually or in the aggregate would not have a material adverse effect on
Buyer's business as currently conducted.
3.12(c). Buyer holds such Permits issued by governmental
authorities, or otherwise granted or conferred by operation of any
Environmental Law, for the operation of its facilities or its business as are
sufficient, in Buyer's knowledge, to avoid a breach of the representation in
Section 3.12(a) hereof.
3.12(d). To Buyer's knowledge, no property owned, operated or
leased by Buyer is listed or is proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any similar state or foreign list
of sites requiring investigation or cleanup; and Buyer has not received notice,
nor is aware, of any lien filed against either the personal or real property of
Buyer under any Environmental Law.
3.12(e). To Buyer's knowledge, Buyer has not been required by
any Environmental Law to place any notice or restriction relating to the
presence of any hazardous materials in any deed to any facility or property
owned, operated or leased
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by Buyer where the failure to so place any such notice has, or may reasonably
be expected to have, a material adverse effect on Buyer's business.
3.13 Governmental Consents. No consent, approval,
authorization or action by any Governmental Agency is required in connection
with the execution and delivery by Buyer of this Agreement, the Ancillary
Instruments to be executed and delivered by Buyer pursuant hereto or the
consummation by Buyer of the transactions contemplated herein or therein.
Except for filings under applicable requirements of applicable securities laws
or as disclosed in writing to the Company and the Shareholders
contemporaneously with execution of this Agreement, Buyer is not required to
submit any notice, report or other filing to any governmental or regulatory
authority in connection with the execution or delivery of this Agreement and
the consummation of the transactions contemplated hereby.
3.14 Acquisition for Investment. Buyer is acquiring the
shares of Common Stock for investment and not with a view toward, or for sale
in connection with, any distribution thereof, nor with any present intention of
distributing or selling such shares of Common Stock. The Buyer acknowledges
that such securities have not been registered under the Securities Act or any
applicable state securities (or "blue sky") laws or regulations and, therefore,
cannot be resold unless so registered or exempted from such registration.
Buyer, individually or together with its representatives and agents, represents
that it has sufficient knowledge and experience in financial and business
matters that it is capable of evaluating the economic risks of investment in
the Common Stock.
3.15 No Brokers or Finders. Neither Buyer nor any of its
directors, officers, employees or agents have retained, employed or used any
broker or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
4. COVENANTS
4.01 Conduct of Business Pending the Closing. From the
date hereof until the Closing, unless set forth in the Disclosure Schedule,
consented to by Buyer in writing or as contemplated in this Agreement (all
references to the "Company" in this Section 4.01 shall mean, except where the
context otherwise requires, each of the Company and the Subsidiary Companies):
4.01(a). The Company will carry on the Business substantially
in the same manner as heretofore conducted. The Company will use, operate,
maintain and repair its properties and assets in a normal business manner and
in the ordinary course of business and the Company will not institute any
material changes in the Business or institute any unusual or novel methods of
purchase, sale, management or operation
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of its properties and assets or the Business.
4.01(b). Other than as contemplated by this Agreement, the
Company, to the best of its ability, will take such action as may be necessary
to maintain, preserve, renew and keep in full force and effect the existence,
rights and franchises of the Business and to use its best efforts to (i)
preserve the business organization and goodwill of the Company and maintain the
Business intact; (ii) to keep available to Buyer the officers and employees of
the Company; (iii) and to preserve for Buyer its present relationships with its
suppliers and customers and others having business relationships with the
Company and the Business.
4.01(c). The Company will not do or omit to do any act, or
permit any act or omission to act, which may cause a breach of any material
contract, commitment or obligation of the Company or any breach of any
representation, warranty, covenant or agreement made by the Company herein.
4.01(d). The Company will not terminate or modify any lease,
license, permit, contract or other agreement to which it is a party, except
that the Company may terminate this Agreement in accordance with the terms of
Section 8 hereof.
4.01(e). The Company will not incur additional indebtedness to
other parties, either as a guarantor or a primary obligor, for borrowed money
or other indebtedness other than short-term borrowings in the ordinary course
of business.
4.01(f). The Company will not enter into any material
transaction or commitment other than in the ordinary course of business.
4.01(g). The Company will not declare or distribute any
dividends, distributions, cash and/or assets to the Shareholders and will not
sell, issue, commit to sell or issue, purchase or commit to purchase any of its
capital stock or equity securities or change its capital structure in any way.
4.01(h). Neither HDC nor Hennig shall transfer or attempt to
transfer any Common Stock and the Company shall refuse to accept any
certificates for shares of Common Stock to be transferred or otherwise to allow
such transfers to occur upon its books prior to the Closing Date.
4.02 Other Obligations of the Company and the Shareholders
Pending the Closing.
4.02(a). Access; Arrangements with Employees. The Company and
the Shareholders shall permit Buyer and its counsel, accountants and other
representatives full access during normal business hours to all of the
Property, plants, equipment, books, contracts, commitments and records of or
relating to the Business and
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will furnish Buyer and its representatives during such period with all such
information concerning the affairs of the Company and the Subsidiary Companies
as Buyer or its representatives may request. The Buyer shall permit the
Shareholders and their counsel, accountants and other representatives full
access during normal business hours to all of the material property, plants,
equipment, books, contracts, commitments and records of or relating to its
business and will furnish the Shareholders and their representatives during
such period with all such information concerning the affairs of the Buyer as
the Shareholders or their representatives may request. Pending the Closing,
Buyer and the Shareholders agree to keep all such information strictly
confidential. Pending the Closing, Buyer also shall have access to all
employees of the Company and shall be entitled, if it so elects, to negotiate
with the Company's principal executive officers employment arrangements with
the Company or the Buyer to become effective post-Closing if the Closing shall
occur in accordance herewith.
4.02(b). Consents. The Company and the Shareholders will
exercise their best efforts to obtain, prior to the Closing, all consents
and/or waivers necessary for the consummation of the transactions contemplated
hereby.
4.02(c). Title Insurance Policies. The Company shall use its
best efforts to obtain title insurance policies for each Facility owned or
leased by the Company or any Subsidiary Company (other than the New Richmond
facility) at least twelve (12) days prior to Closing (such policies referred to
as the "Title Policies"), and shall coordinate such effort with the Buyer so as
to afford the Buyer the opportunity to review and approve the status of title
with respect to all such Facilities. Premiums payable for such Title Policies
shall be payable by the Company. If the Buyer shall elect prior to Closing to
conduct any other title examination with respect to the Facilities and other
assets of the Company or any Subsidiary Company, including without limitation a
search of the UCC records, the Company shall cooperate with and assist Buyer in
conducting such examinations. The cost of any such further title examinations
shall be payable by Buyer.
4.02(d). Environmental Assessments. The Company shall use its
best efforts to obtain "Phase I" environmental assessments (or their
equivalent) for each of the Lodi, Plymouth, New Richmond, Wisconsin Rapids,
Brown Deer, Onalaska, New London, Clintonville, Kaukauna, Shawano, Rice Lake,
Platteville, Cambridge, Janesville 2, Whitewater, Manitowac and Neenah
Facilities at least ten (10) days prior to Closing, and shall coordinate such
effort with the Buyer so as to afford the Buyer the opportunity to review and
approve environmental status of such Facilities. As to all Phase I
environmental assessment reports previously provided to the Buyer by the
Company in draft form, the Company shall provide the Buyer with final reports
at least ten (10) days prior to Closing. Likewise, to the extent that
environmental consultants performing such "Phase I" evaluations shall recommend
further testing or evaluation, the Company shall authorize such further testing
and evaluation unless consented to
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by Buyer (all such environmental assessments procured pursuant to this Section
4.02(d) referred to herein as "Environmental Assessments"). The cost of such
Environmental Assessments shall be payable by the Company.
4.02(e). Licenses. Each of the Company and the Buyer shall
promptly make all such filings, take all such actions and use their respective
best efforts to transfer all applicable licenses necessary for the operation of
the Facilities owned, leased or operated by Company or any Subsidiary Company,
including any CBRF license issued by the Wisconsin Department of Health and
Social Services, such that all such Facilities shall be fully licensed in
accordance with applicable law immediately following Closing as contemplated
hereby. Any licensing, processing or filing fee incurred by the Company or the
Buyer in accordance herewith shall be paid by the Company.
4.02(f). Preliminary Balance Sheet. At least 48 hours prior to
Closing, the Company and the Shareholders shall deliver to the Buyer a copy of
the Preliminary Balance Sheet, which Preliminary Balance Sheet shall be used to
calculate the Acquisition Payment in accordance herewith.
4.03 Other Action. Each of the parties hereto shall use
its or his or her best efforts to cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the sale and purchase of the Common Stock under this Agreement.
4.04 Not Used.
4.05 Company Indebtedness. At Closing, Buyer shall fully
repay and discharge all of the Company's principal and accrued but unpaid
interest outstanding as of the Closing Date under the agreements and/or
instruments set forth on Schedule 4.05 hereof ("Company Indebtedness") and
shall secure and deliver to Shareholders at Closing written payout statements
and/or releases, in form and substance satisfactory to HDC and HDC's counsel,
releasing Company and Shareholders from all liability relating to such Company
Indebtedness. At Closing, Buyer shall substitute a letter of credit or other
appropriate substitute credit facility satisfactory to HDC for the $500,000
letter of credit provided by WPL Holdings, Inc., a Wisconsin corporation in
connection with the $2.5 million WHEFA bond financing (Heartland - Edgerton
Group, LLC, Project)(the "Bond Financing").
4.06 Post-Closing Audit. At its sole expense, by no later
than February 23, 1996, Buyer shall secure from Arthur Andersen LLP or another
nationally recognized public accounting firm retained by the Company audited
consolidated balance sheets, statements of income, shareholders' equity and
cash flows for the Company for the year ended December 31, 1995. Immediately
upon receipt of such financial statements, Buyer shall deliver a copy to each
Shareholder. If such audited
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consolidated balance sheet for the year ended December 31, 1995 reflects (i)
total liabilities which exceeds the total liabilities reflected on the Recent
Balance Sheet (such excess amount referred to herein as the "Liabilities
Difference") or (ii) total assets which are less than the total assets
reflected on the Recent Balance Sheet (such shortfall in total asset referred
to herein as the "Asset Difference"), then, in either case, the Purchase Price
paid at Closing shall be reduced by the amount of the Liabilities Difference
plus the Asset Difference, if any, and such adjustment shall be payable
promptly to Buyer by the Shareholders, in proportion to their respective
interest in the Purchase Price paid at Closing, upon request by the Buyer and
in any event within ten (10) days of such request.
4.07 Covenant Not to Compete. Each Shareholder hereby
covenants and agrees that, for a period of two (2) years from the Closing Date,
neither such Shareholder nor any affiliate of such Shareholder (as defined in
Rule 12b- 2 of the Securities Exchange Act of 1934) shall, for himself or
itself or on behalf or in conjunction with any person, partnership, corporation
or other entity, compete, own, operate, control or participate in or engage in
the ownership, management, operation or control of, or be connected with as an
executive officer, director, managerial employee, partner, shareholder,
representative, consultant, independent contractor or advisor or in any other
manner or otherwise have a financial interest in, a proprietorship,
partnership, joint venture, association, firm, corporation or other business
organization or enterprise that owns, operates or manages Facilities or
otherwise engages in the Business of the Company within the State of Wisconsin
or within twenty (20) miles of (i) any Facility owned, leased or operated by
the Company or any Subsidiary Company has plans to develop, own or operate as
of the Closing Date; provided, however, the prohibitions of this Section 4.07
shall not prohibit (a) Hennig serving as an officer, employee or agent of
either Company or Buyer or (b) the ownership, directly or indirectly, of less
than five percent (5%) of the outstanding capital stock of any publicly traded
corporation or (c) HDC and its subsidiaries, incidental to their business of
developing housing pursuant to credits awarded pursuant to Section 42 of the
Code, engaging in such activities as are required by Section 42 of the Code in
order for HDC or its subsidiaries to qualify for tax credits pursuant to
Section 42 of the Code.
It is the desire and intent of the parties that the provisions
of this Section 4.07 shall be enforced to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular portion of this Section 4.07 shall be
adjudicated to be invalid or unenforceable, the parties hereto agree that the
court making such determination of invalidity or unenforceability shall have
the power to reduce the scope, duration or area of any term or provision,
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Section 4.07 shall be enforceable as so
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modified after the expiration of the time within which the judgment of such
court may be appealed. If such court shall elect not to so revise this Section
4.07, then this Section 4.07 shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of this Section 4.07.
4.08 Confidentiality. Each of the Shareholders will treat
and hold as confidential all of the information held by them concerning the
business and affairs of the Buyer, the Company and the Subsidiary Companies
that is not generally available to the public (such information referred to as
"Confidential Information"), shall refrain from using any of the Confidential
Information except in connection with this Agreement or in the service of the
Company and shall deliver promptly to Buyer or destroy, at the request of the
Buyer, all tangible embodiment and all copies of the Confidential Information
which are in his or its possession.
4.09. Cancellation of Certain Contract. On or prior to
Closing, the Company, the Shareholders and their respective affiliates, to the
extent they are parties thereto or have any rights pursuant thereto, shall
execute such instruments and agreements as are sufficient, in Buyer's reasonable
judgment, to terminate and cancel, and to waive all further rights or claims
resulting from, each of the following agreements: (i) Stock Subscription and
Capital Contribution Agreement dated as of January 11, 1993 by and among the
Company, Hennig and Heartland Properties, Inc.; (ii) Shareholders' Agreement
dated as of January 11, 1993 by and between the Company and Hennig; and (iii)
Long-Term Incentive Stock Appreciation Rights Agreement dated as of January 11,
1993 by and between Company and Hennig; provided, however, nothing herein is
intended to interfere with the rights of the Shareholders as amongst themselves
in connection with the termination and cancellation of the foregoing agreements.
4.10 Not Used.
4.11 Right of First Refusal. If Buyer proposes to offer
newly issued shares of Buyer Stock (the "New Shares") to any person or entity
at any time prior to the earlier of a Public Offering or April 1, 1997, Buyer
shall, before such offer, deliver to each of the Shareholders an offer (the
"Offer") to sell to such Shareholder a portion of the New Shares proportional
to the percentage of the outstanding Buyer Stock represented by the shares of
Buyer Stock held by such Shareholder at such time, which Offer shall be
accompanied by a copy of Buyer's then most current monthly operating statements
(the "Operating Statements"). The Offer shall be on terms and at a price no
less favorable to the Shareholders than the terms and price offered to other
persons or entities. Each Shareholder may accept the Offer by delivering to
Buyer a notice (the "Purchase Notice") within seven (7) days after receiving
the Offer and the Operating Statements. The Purchase Notice shall state the
number of New Shares that such Shareholder desires to purchase. For purposes of
this Agreement,
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New Shares means: (i) all shares of Buyer Stock, (ii) all securities of Buyer
which by their terms are convertible into or exchangeable for Buyer Stock and
(iii) all options, warrants or other instruments of Buyer representing the
right to acquire shares of Buyer Stock; provided, however, that New Shares
shall not include any of the foregoing shares, securities, options, warrants or
other instruments: (a) issued in connection with stock options granted to
Buyer's officers, directors, employees and agents; (b) issued pursuant to an
acquisition, merger, exchange offer, employee benefit plan, or other business
transaction (including joint venture arrangements) approved by the Board of
Directors of Buyer; or (c) issued as a stock dividend or upon any stock split
or other subdivision of shares of Buyer Stock.
4.12 Conditional Registration Rights.
(a) Certain Other Definitions. As used in this Agreement,
the following terms shall have the following respective meanings:
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"Cut-Back Right" shall mean the conditional registration right
described in Section 4.12(c) hereof.
"Initiating Holders" shall mean any Shareholder or Shareholders who in
the aggregate own not less than 50% of the aggregate number of Registrable
Securities then existing, which have not previously been sold or transferred
and which represent at least 25% of the Acquisition Shares originally issued
pursuant to Section 1.02 hereof.
"IPO Right" shall mean the right of the Shareholders to include the
Acquisition Shares, as selling shareholders, in the Public Offering in
accordance with Section 4.12(b) hereof.
"Pricing Right" shall mean the conditional registration right
described in Section 4.12(d) hereof.
"Public Offering" shall mean the first sale by Buyer of shares of
Buyer Stock in an offering made to the public and registered pursuant to the
Securities Act.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
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"Registrable Securities" shall mean the Acquisition Shares for so long
as they are held by the Shareholders, or either of them; provided, however,
Registrable Securities shall not include Acquisition Shares held by a
Shareholder at any time after such Shareholder may first dispose of all such
Acquisition Shares held by such Shareholder within one calendar quarter
pursuant to Rule 144.
"Registration Expenses" shall mean all expenses incurred by the Buyer
in complying with Section 4.12 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Buyer, blue sky fees and expenses, and accountants' expenses
including without limitation any special audits or "comfort" letters incident
to or required by any such registration, and any fees and disbursements of
underwriters customarily paid by issuers, but excluding underwriting discounts
and commissions.
"Registration Rights" shall mean each of the Cut-Back Right
and the Pricing Right.
"Rule 144" shall mean Rule 144 promulgated by the Commission
under the Securities Act, as in effect from time to time.
(b) IPO Right. In the event the Buyer effects a Public
Offering on or prior to March 31, 1997, the Shareholders, and each of them,
shall be entitled to include in such registration all of the Registrable
Securities held by them and to sell such Registrable Securities in the Public
Offering (such shares referred to herein as the "Included Shares"), as selling
shareholders, subject to the terms, conditions and limitations hereof.
Notwithstanding anything herein to the contrary, if (1) the Public Offering
involves an underwritten offering of the securities being so registered to be
distributed by or through one or more underwriters and (2) the managing
underwriter of such underwritten offering shall advise the Buyer in writing
that, in its opinion,
(i) the distribution of all or a specified portion of
such Included Shares as to which the Shareholders seek registration
concurrently with the shares of Buyer Stock being sold by Buyer in
such Public Offering will materially and adversely affect the
distribution of such securities by such underwriters, then the Buyer
will reduce the number of shares of Buyer Stock to be sold by the
Buyer in the Public Offering so as to permit the inclusion of such
Included Shares in the Public Offering, or
(ii) the distribution proposed to be made by the
Buyer in the Public Offering will be materially and adversely affected
by the inclusion of any shares of a selling shareholder, including the
Included Shares, or, in spite of the reduction in the number of shares
to be offered by Buyer pursuant to clause (i) above, certain Included
Shares are otherwise not permitted to be included in the Public
Offering by either the Buyer or its underwriters, then the
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Shareholders shall not be entitled to include such Included Shares in
the Public Offering (either of the events described in this clause
(ii) referred to as an "Exclusion Event").
The Buyer shall not be obligated to effect a registration of
Registrable Securities under this Section 4.12(b) incidental to the
registration of any of its securities in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock option or other employee
benefit plans or incidental to the registration of any non-equity securities
convertible into equity securities.
(c) "Cut-Back Right". In the event an Exclusion Event
shall occur, the Shareholders shall be entitled to one demand registration
right as described herein with respect to their Registrable Securities (the
"Cut- Back Right"), which Cut-Back Right shall first become exercisable 180
days following the Public Offering and shall be subject to the terms,
limitations and conditions hereof.
(d) "Pricing Right". If the Shareholders do not become
entitled to the Cut-Back Right pursuant to Section 4.12(c) hereof and the per
share price of the Buyer Stock offered to the public (before underwriting
commissions and discounts) in the Public Offering is less than the Put Price
(hereinafter defined), as adjusted for stock dividends, splits,
reclassifications and other appropriate adjustments to the outstanding shares
of Buyer Stock occurring subsequent to the date of this Agreement, as
applicable, then the Shareholders shall be provided with one demand
registration right with respect to their Registrable Securities (the "Pricing
Right") as to all Acquisition Shares held by them following the Public
Offering. The Pricing Right shall be subject to the following additional terms
and conditions: (i) it shall not first become exercisable until 180 days
following the Public Offering; (ii) in the event the Pricing Right shall be
exercised in accordance herewith by Initiating Holders, Buyer may delay the
filing of a registration statement pursuant to such exercise if Buyer
determines, in its good faith reasonable judgment, that such filing (and the
obligations under applicable law that are incident thereto) would likely
interfere with the then current business plans and activities of Buyer;
provided, however, that such delay shall not exceed four (4) months in the
aggregate; (iii) Buyer shall not be obligated to keep such registration
statement filed pursuant to the Pricing Right effective for longer than 45 days
in the aggregate and (iv) the Shareholders electing to register Acquisition
Shares pursuant to the Pricing Right shall be obligated to reimburse Buyer
promptly upon demand for up to $100,000 of Registration Expenses incurred in
connection with such registration of the Acquisition Shares (in addition to the
payment of all amounts payable by such Shareholders pursuant to Section
4.12(e)(3) hereof).
(e) Exercise of Registration Rights.
(1) Request. Upon the written request of one or
more Initiating Holders requesting that the Buyer effect the
registration under the Securities
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Act of all of such Initiating Holders' Registrable Securities and
specifying the intended method or methods of disposition thereof, the
Buyer will promptly, but in any event within 10 days, give written
notice of such requested registration to all holders of Registrable
Securities and thereupon will use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the
Buyer has been so requested to register by such Initiating
Holders, for disposition in accordance with the intended
method or methods of disposition stated in such request,
(ii) all other Registrable Securities
which the Buyer has been requested to register by the holders
thereof by written request delivered to the Buyer within 10
days after the giving of such written notice by the Buyer
(which request shall specify the intended method or methods of
disposition of such Registrable Securities), and
(iii) all shares of Buyer Stock which the
Buyer may elect to register for its own account in connection
with the offering of Registrable Securities pursuant to this
Section 4.12, provided, that, the Initiating Shareholders
consent, in writing, to the inclusion of such shares of Buyer
Stock for Buyer's own account, which consent may be withheld
by the Initiating Shareholders only on the basis of their good
faith and informed determination (based on the opinion of a
recognized national or regional investment banking firm
experienced in underwriting secondary offerings) that the
inclusion of such additional shares of Buyer Stock will have a
material adverse effect on the price per share of Registrable
Securities that the Initiating Shareholders could receive in
the offering to be made pursuant to the registration
contemplated by this Section 4.12,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered, provided that (A) the Buyer shall not be required to effect more
than one registration pursuant to the exercise of Registration Rights and (B)
the Buyer shall not be required to effect any registration pursuant to this
Section 4.12 on and after the expiration of the term set forth in Section
4.12(j).
(2) Registration Statement Form. Each
registration requested pursuant to the exercise of Registration Rights
shall be effected by the filing of a registration statement on any
form which the Buyer is eligible to use, such form to be selected by
the Buyer.
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(3) Expenses. Except as otherwise provided herein
or prohibited by applicable law, the Buyer will pay all Registration
Expenses in connection with the registration of Registrable Securities
requested pursuant to this Section 4.12. Any underwriter's discount or
commission payable with respect to Acquisition Shares pursuant to a
registered underwritten offering thereof pursuant to this Section 4.12
shall be paid by the Shareholder selling such shares.
(4) Effective Registration Statement. A
registration requested pursuant to the exercise of Registration Rights
shall not be deemed to be effected unless it has been declared
effective by the Commission or otherwise becomes effective, provided
that a registration which does not become effective after the Buyer
has substantially completed the preparation of, or has filed, a
registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than any refusal
to proceed based upon the advice of their counsel that the
registration statement, or the prospectus contained herein, contains
an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing) shall be deemed to have been effected by the Buyer at the
request of such holders.
(5) Registration Rights Nonexclusive. The Buyer
may register securities for sale for the account of any person other
than holders of Registrable Securities in any registration of
Registrable Securities requested by one or more holders pursuant to
this Section 4.12 (including shares to be registered by or on behalf
of the Buyer), provided, that, the Initiating Shareholders consent, in
writing, to the inclusion of such securities, which consent may be
withheld by the Initiating Shareholders only on the basis of their
good faith and informed determination (based on the opinion of a
recognized national or regional investment banking firm experienced in
underwriting secondary offerings) that the inclusion of such
additional securities will have a material adverse effect on the price
per share that the Initiating Shareholders would receive in the
offering to be conducted pursuant to the registration contemplated by
this Section 4.12.
(f) Registration Procedures. If and whenever the Buyer is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 4.12(c) and 4.12(d),
the Buyer will promptly:
(1) prepare and (in any event within 80 days of
the last date on which the holders of Registrable Securities may
notify the Buyer of their request to include their Registrable
Securities in such registration
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in accordance herewith) file with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective
provided that in the case of a registration of any Registrable
Securities pursuant to Section 4.12(d) such preparation and filing may
be delayed in the manner set forth in Section 4.12(d);
(2) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities and other securities covered by such
registration statement until the earlier of such time as all of such
Registrable Securities and securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement or the
expiration of 90 days (or, in the case of a registration of
Registrable Securities pursuant to Section 4.12(d), 45 days) after
such registration statement becomes effective; and will furnish, upon
request, to each such seller prior to the filing thereof a copy of any
amendment or supplement to such registration statement or prospectus
and shall not file any such amendment or supplement to which any such
seller shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or of the rules or regulations
thereunder;
(3) furnish to each seller of such Registrable
Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents, if any,
incorporated by reference in such registration statement or
prospectus, and such other documents, as such seller may reasonably
request;
(4) use its best efforts to register or qualify
all Registrable Securities covered by such registration statement
under such other securities or blue sky laws of such United States
jurisdictions as each seller shall reasonably request, to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and do any and all other
acts and things which may be necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of its
Registrable Securities
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covered by such registration statement, except that the Buyer shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (4) be obligated to
be so qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;
(5) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission;
(6) use its best efforts to list all Registrable
Securities covered by such registration statement on each securities
exchange on which any of the Buyer Stock is then listed or, if the
Buyer Stock is then quoted on NASDAQ, use its best efforts to have
such Buyer Stock quoted on NASDAQ.
The Buyer may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Buyer such information regarding
such seller and the distribution of such securities as the Buyer may from time
to time reasonably request in writing and as shall be required by law or by the
Commission in connection therewith.
(g) Underwritten Offerings.
(1) Underwriting Agreement. If requested by the
underwriters for any underwritten offering of Registrable Securities on
behalf of a holder or holders of Registrable Securities pursuant to a
registration requested under Section 4.12, the Buyer will enter into an
underwriting agreement reasonably acceptable to the Buyer with such
underwriters for such offering, such agreement to contain such
representations and warranties by the Buyer and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities to the effect and to the extent provided in Section
4.12(i). The holders of Registrable Securities on whose behalf
Registrable Securities are to be distributed by such underwriters shall
be parties to any such underwriting agreement (which as to the selling
shareholders shall be in such form as is reasonable and customary in
the circumstances) and the representations and warranties by, and the
other agreements on the part of, the Buyer to and for the benefit of
such underwriters, shall also be made to and for the benefit of such
holders of Registrable Securities. Such holders of Registrable
Securities shall not be required by the Buyer to make any
representations or warranties to or agreements with the Buyer or the
underwriters other than reasonable representations, warranties or
agreements (including indemnity
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agreements customary in secondary offerings) regarding such holder,
such holder's Registrable Securities and such holder's intended method
or methods of disposition and any other representation required by
law.
(2) Selection of Underwriters. Whenever a
registration requested pursuant to Section 4.12(c) or 4.12(d) is for
an underwritten offering, the Buyer shall have the right to select the
managing underwriters to administer the offering, subject to the
approval of the holders of a majority of the Registrable Securities
included in such registration, such approval not to be unreasonably
withheld.
(3) Holdback Agreements. If any registration
pursuant to Section 4.12(b), 4.12(c) or 4.12(d) shall be in connection
with an underwritten public offering, each Shareholder agrees, if so
required by the managing underwriter, not to effect any public sale or
distribution of Buyer Stock (other than as part of such underwritten
public offering) within seven days prior to the effective date of such
registration statement or 90 days after the effective date of such
registration statement,
(h) Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Buyer will give the
holders of Registrable Securities on whose behalf such Registrable Securities
are to be so registered and their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Buyer with its officers and the independent public
accountants who have certified its financial statements as shall be necessary
in the opinion of such holders and such underwriters or their respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
(i) Indemnification.
(1) Indemnification by the Buyer. In the event of any
registration of any securities of the Buyer under the Securities Act,
the Buyer will, and hereby does, indemnify and hold harmless, in the
case of any registration statement filed pursuant to Sections 4.12(b),
4.12(c) or 4.12(d), the seller of any Registrable Securities covered
by such registration statement, its directors, trustees and officers,
each other person who participates as an underwriter in the offering
or sale of such securities and each other person, if any, who controls
such seller or any such underwriter within the meaning of the
Securities Act, and in each case, against any losses, claims, damages,
liabilities
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or expenses, joint or several, to which such seller or any such
director or officer or participating or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings in
respect thereof) arise out of or are based upon (x) any untrue
statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment
or supplement thereto, or any document incorporated by reference
therein, or (y) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Buyer will reimburse such
seller, and each such director, trustee, officer, participating person
and controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the
Buyer shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense (or action or proceeding in
respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished to the Buyer
through an instrument duly executed by such seller or any such
director, trustee, officer, participating person or controlling person
specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such
director, officer, participating person or controlling person and
shall survive the transfer of such securities by such seller. The
Buyer shall agree to provide provision for contribution relating to
such indemnity as shall be reasonably requested by any seller of
Registrable Securities or the underwriters.
(2) Indemnification by the Sellers. The Buyer may require,
as a condition to including any Registrable Securities in any
registration statement filed pursuant to Sections 4.12(b), 4.12(c) and
4.12(d), that the Buyer shall have received an undertaking satisfactory
to it from the prospective seller of such securities, to indemnify and
hold harmless (in the same manner and to the same extent as set forth
in subdivision (1) of this section 4.12(i)) the Buyer, each director of
the Buyer, each officer of the Buyer who shall sign such registration
statement and each other person, if any, who controls the Buyer within
the meaning of the Securities Act, with respect to any statement in or
omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, if such statement or omission was made
in reliance upon and in conformity with written information furnished
to the Buyer through an instrument duly executed by such seller
specifically stating that it is for use in
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the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Buyer or
any such director, officer or controlling person and shall survive the
transfer of such securities by such seller. The sellers shall also
agree to provide provision for contribution relating to such indemnity
as shall be reasonably requested by the Buyer or the underwriters.
(3) Notice of Claims, etc. Promptly after receipt
by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions
of this Section 4.12(i), such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 4.12(i).
In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(4) Other Indemnification. Indemnification
similar to that specified in the preceding subdivisions of this
Section 4.12(i) (with appropriate modifications) shall be given by the
Buyer and each seller of Registrable Securities with respect to any
required registration or other qualification of such Registrable
Securities under any federal or state law or regulation of
governmental authority other than the Securities Act.
(j) Termination of Registration Rights. All Registration
Rights shall terminate and no longer be exercisable upon the third anniversary
of the date of this Agreement; provided, however, with respect to any
Shareholder, such Registration Rights shall terminate on the date that such
Shareholder may be entitled to sell all
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Acquisition Shares then held by such Shareholder free of any resale restriction
under the Securities Act (whether pursuant to Rule 144 or otherwise), if such
date is earlier than such third anniversary of this Agreement.
4.13 Conditional Put Option. In the event that there has
not been a Public Offering on or before March 31, 1997, then each Shareholder
shall have the right (the "Put Right") to require Buyer to purchase all of the
Acquisition Shares then owned by the Shareholder for a price equal to $13,077.60
per share, as adjusted for stock dividends, splits, reclassifications, and other
appropriate adjustments to the outstanding shares of Buyer Stock occurring
subsequent to the date of this Agreement, as applicable (the "Put Price"). Each
Shareholder may exercise the Put Right by notifying Buyer, on or before March 1,
1997, in writing (the "Put Notice") of his or its intention to exercise the Put
Right and the number of Acquisition Shares then owned by such Shareholder (the
"Put Shares"). If one or more of the Shareholders exercises the Put Right (the
"Selling Shareholders"), then on April 1, 1997 or such other date as Buyer shall
designate within 30 days thereafter, the Selling Shareholders shall sell,
assign, transfer and deliver to Buyer good title to the Put Shares, free and
clear of any and all liens, claims or encumbrances whatsoever and shall deliver
to Buyer certificates representing the Put Shares accompanied by stock powers
duly executed in blank. Upon receipt of such Put Shares, Buyer shall pay to the
Selling Shareholders, in immediately available funds, an amount equal to the
product of the Put Price times the number of Put Shares.
4.14 Section 338 Election. HDC agrees to join with Buyer,
if Buyer so requests, in making a timely election to treat the purchase and
sale as a sale of all of Company's assets under Section 338(h)(10) of the Code
(and, if Buyer so requests, any corresponding election under Wisconsin or Iowa
tax law) (collectively, a "Section 338(h)(10) Election") with respect to each
of (i) the purchase and sale of the Common Stock pursuant to this Agreement,
and/or (ii) the purchase and sale of all of the outstanding stock of Wovencare
Systems, Inc. ("Wovencare") that is deemed to occur for purposes of Section 338
of the Code by reason of the purchase and sale of the Common Stock pursuant to
this Agreement. Buyer shall prepare at its own expense the forms and schedules
(including, without limitation, Internal Revenue Service Form 8023-A) and take
whatever other steps necessary to effect such Section 338(h)(10) Elections and
shall provide HDC any such forms and schedules at least 30 days prior to their
respective due dates. HDC shall have the right to review and approve such forms
and schedules (which approval shall not be unreasonably withheld). HDC will pay
any federal income tax attributable to the making of the Section 338(h)(10)
Election and will indemnify Buyer, the Company and its subsidiaries against any
Adverse Consequences arising out of any failure to pay such federal income tax.
Other than federal income taxes and interest and penalty in connection
therewith, Buyer will indemnify HDC against any Taxes attributable to the
making of the Section 338(h)(10) Election and any Adverse Consequences arising
out of any failure to pay such other Taxes. HDC further agrees to cooperate
fully with Buyer to determine
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whether Buyer desires to make the Section 338(h)(10) Election applicable for
Wisconsin state income or franchise tax purposes and thus agrees, without
limitation, to provide to Buyer the 1995 Wisconsin state income tax returns for
each of the Company and Wovencare as filed (or as to be filed) no later than
the earlier of (i) 45 days prior to the date on which the first short-period
returns for such companies would be due for 1996 in the event that the Section
338(h)(10) Election were to be applicable for Wisconsin state income tax
purposes, (ii) 45 days prior to the due date of the Section 338(h)(10) Election
for federal income tax purposes, or (iii) 10 days after the date of filing of
such returns. Hennig acknowledges and consents in full to the Section
338(h)(10) Election. Further, Shareholders and Buyer agree that for purposes of
determining the amount of consideration paid by Buyer for the Common Stock as
required to be set forth in making the Section 338(h)(10) Election, the fair
market value of the Acquisition Shares as of the date of Closing is equal to
$1,300,000; provided, however, that in the event that the Acquisition Shares
become entitled to the IPO Right pursuant to Section 4.12 hereof, the fair
market value of such Acquisition Shares shall be the average of the closing
prices of the Buyer Stock for the first 20 days of trading after its initial
Public Offering multiplied by the number of Acquisition Shares (as adjusted by
any stock split, stock dividend or similar transaction). Each of the
Shareholders and Buyer agrees to report the purchase and sale of the Common
Stock pursuant to this Agreement for federal and state tax purposes in
accordance with any Section 338(h)(10) Election and the determination of the
fair market value of the Acquisition Shares as set forth in this Section 4.14,
and not to file any tax return or report or otherwise take any position with
federal or state tax authorities that is inconsistent herewith. For purposes of
this Agreement, "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses. For purposes of this Section, "Tax" or "Taxes" means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
4.15 Stockholders' Agreement. At Closing, the Shareholders
shall become parties to the Stockholders' Agreement by executing, together with
the Buyer, counterparts of the Admission Amendment.
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5. CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to close the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or at
the Closing unless otherwise required below, of each of the following
conditions (all or any of which may be waived in whole or in part by Buyer):
5.01 Representations and Warranties. The representations
and warranties made by the Company and the Shareholders in this Agreement and
the statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by the Company and the Shareholders pursuant
to this Agreement shall be true in all material respects when made and at and
as of the Closing Date as though such representations and warranties were made
at and as of such date, except as consented to by Buyer in writing.
5.02 Performance. The Company and the Shareholders shall
have performed and complied with all agreements, obligations and conditions
required by this Agreement to be so performed or complied with by them prior to
or at the Closing.
5.03 Compliance Certificate. The Company and the
Shareholders shall have delivered to Buyer a certificate, dated the Closing
Date, executed by Hennig, on behalf of the Company, and each of the
Shareholders, certifying to the fulfillment of the conditions set forth in
Sections 5.01 and 5.02 hereof.
5.04 Litigation. No suit, proceeding, investigation,
injunction, writ or preliminary restraining order shall have been commenced or
threatened by any Governmental Agency on any grounds to restrain, enjoin or
hinder the transactions contemplated hereby.
5.05 No Casualty Loss. There shall not have occurred any
damage to or destruction of the properties or assets of the Company by fire or
by other casualty which would have a material adverse effect on the Company or
the Business as presently conducted, unless such damage or destruction is
insured in all material respects and can be repaired or replaced in all
material respects prior to the Closing.
5.06 Consents. All approvals, consents and waivers that
are required to effect the transactions contemplated hereby including, without
limitation, those set forth in the Disclosure Schedule, shall have been
received, and executed counterparts thereof shall have been delivered to Buyer.
Notwithstanding the foregoing, receipt of the consent of any third party shall
not be a condition to Buyer's obligation to close, provided that the lack of
such consent or consents shall not have a material adverse effect on the
Business as a whole. After the Closing, the Company and the
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Shareholders will continue to use their best efforts to obtain any such
consents or approvals.
5.07 Resignation of Company Directors. Each of the persons
who is a director of the Company on the Closing Date shall have tendered to
Buyer in writing his or her resignation as such in the form and substance
reasonably satisfactory to Buyer.
5.08 Not Used.
5.09 Legal Opinion. The Buyer shall have received from
Foley & Lardner a written opinion, dated the Closing Date and containing such
assumptions and limitations as are customary with respect to such opinions, to
the effect that (i) HDC, the Company and each of the Subsidiary Companies is
duly formed, validly existing and in good standing in the State of Wisconsin;
(ii) the Company and HDC has the corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby; (iii)
the execution, delivery and performance of this Agreement by the Company and
HDC has been duly authorized by all necessary corporate action, and this
Agreement constitutes a legal, valid and binding obligation of the Company and
HDC, enforceable against the Company and HDC in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws and equitable principles of general
application affecting the rights or remedies of creditors; and (iv) to the best
of such counsel's knowledge, the execution and delivery of this Agreement by
HDC and the Company and the performance by HDC and the Company hereunder and
the consummation of the transactions on the part of HDC and the Company
contemplated by this Agreement will not conflict with, or result in a breach or
violation of, any of the terms or conditions of or constitute (or with notice
or lapse of time or both would constitute) a default under (a) the Articles of
Incorporation or Bylaws of HDC or the Company or (b) any order, writ, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body that is binding upon any of HDC and the Company or (c) any
contract or agreement to which HDC or the Company is a party.
5.10 Title Insurance. The Company shall have obtained and
delivered to Buyer the Title Policies for all real property owned or leased by
the Company or a Subsidiary Company, and such policies shall reflect only such
title exceptions as are either (i) Permitted Liens or (ii) reasonably
acceptable to Buyer.
5.11 Environmental. Buyer shall have received all
Environmental Assessments contemplated by Section 4.02 hereof and the results
of each such assessments shall confirm, in the reasonable judgment of Buyer,
the substance of the representations in Section 2.22 hereof.
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5.12 Licenses. Each of the Facilities owned, leased or
operated by the Company or any Subsidiary Company as of the Closing Date shall
have all governmental licenses, approvals and permits as are required for its
operation as a CBRF under applicable law immediately following the Closing.
5.13 Other Encumbrances. The Buyer shall have received
assurances from the holder(s) of the mortgages on the Plymouth, Menomonie, New
Richmond, Wisconsin Rapids and Brown Deer Facilities that, as of the Closing
Date, such mortgagee shall have no claims secured by such mortgages other than
claims related to the indebtedness of the Company or of any Subsidiary Company
due to such mortgagee.
6. CONDITIONS TO COMPANY'S AND SHAREHOLDERS' OBLIGATIONS
The obligations of the Company and the Shareholders to close
the transactions contemplated by this Agreement are subject to the fulfillment,
prior to or at the Closing unless otherwise required below, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Company and the Shareholders):
6.01 Representations and Warranties. The representations
and warranties made by Buyer in this Agreement shall be true when made and at
and as of the Closing as though such representations and warranties were made
at and as of such date, except for any changes permitted by the terms of this
Agreement or consented to by the Company and the Shareholders in writing.
6.02 Performance. Buyer shall have performed and complied
in all material respects with all agreements, obligations and conditions
required by this Agreement to so be performed or complied with by it prior to
or at the Closing.
6.03 Compliance Certificate. Buyer shall have delivered to
the Company and the Shareholders a certificate, dated the date of the Closing
and executed by the President of Buyer, certifying to the fulfillment of the
conditions specified in Sections 6.01 and 6.02.
6.04 Litigation. No suit, proceeding or investigation
shall have been commenced or threatened by any Governmental Agency on any
grounds to restrain, enjoin or hinder the transactions contemplated hereby.
7. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
7.01 Survival of Representations. All representations,
warranties, covenants and agreements made by any party to this Agreement or
pursuant hereto
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shall survive the Closing hereunder for a period of twelve (12) months after
the Closing Date. Indemnification for breach or violation of representations,
warranties, covenants or agreements shall be limited to claims made by Buyer
against the Shareholders or the Shareholders against Buyer, as the case may be,
within twelve (12) months of the Closing Date. Notwithstanding the foregoing,
the covenants and agreements set forth in Sections 4.07, 4.08, 4.11 through
4.14, 7.01 through 7.04, 8.03 and 9.01 through 9.13 hereof (and indemnification
claims resulting from their breach) shall survive the Closing and remain in
full force and effect for a period of ten (10) years after the Closing Date,
except, to the extent any such Section shall expressly contain a provision
setting forth a shorter time period during which such Section is to be
effective, then such shorter time period shall control.
7.02 Agreement to Indemnify.
7.02(a). Subject to the terms and conditions of this Article
7, each of the Shareholders severally in proportion to their respective portion
of the Purchase Price hereby agrees to indemnify, defend and hold harmless
Buyer, and its affiliates, successors and assigns (hereinafter, including the
Company after the Closing, collectively, "Buyer's affiliates"), from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and attorneys fees and expenses (collectively, "Damages"),
asserted against, resulting to, imposed upon or incurred by such indemnified
parties, directly or indirectly, by reason of or resulting from (i) any failure
by the Company or any Shareholder to perform any of its or his agreements or
covenants under this Agreement; (ii) a breach of any representation or warranty
of the Company or any Shareholder contained in or made pursuant to this
Agreement; or (iii) any suit, action or other proceeding brought by any
governmental authority or other person arising out of, or in any way related
to, any of the matters referred to in this Section 7.02(a) (collectively with
the claims set forth in Section 7.02(b), "Claims"). The indemnity obligations
of the Shareholders hereunder shall be the joint and several obligations of the
Shareholders, and the Company shall have no contribution or other obligation to
the Shareholders as a result thereof or arising thereunder (even if such
indemnity obligation results from a breach of a representation or warranty by
the Company). Nothing set forth herein shall be interpreted as preventing HDC
or Hennig from seeking and securing from the other contribution, damages or
losses for such respective Shareholder's failure to meet his or its several
obligations arising hereunder.
7.02(b). Subject to the terms and conditions of this Article
7, Buyer hereby agrees to indemnify, defend and hold harmless each Shareholder,
and its, his or her affiliates, successors and assigns, from and against all
Damages asserted against, resulting to, imposed upon or incurred by such
indemnified parties, directly or indirectly, by reason of or resulting from (i)
any failure by Buyer to perform any of its agreements and covenants under this
Agreement; (ii) a breach of any representation or warranty of Buyer contained
in or made pursuant to this Agreement;
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or (iii) any suit, action or other proceeding brought by any governmental
authority or other person arising out of, or in any way related to, any of the
matters referred to in this Section 7.02(b).
7.03 Conditions of Indemnification. The obligations and
liabilities of any party to indemnify any other party under this Article 7 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
7.03(a). The party to be indemnified (the "Indemnified Party")
will give the other party (the "Indemnifying Party") prompt notice of any such
Claim, and the Indemnifying Party will undertake the defense thereof at its
expense by counsel chosen by it. The failure to promptly notify the
Indemnifying Party shall not relieve such party of its obligations hereunder
except to the extent (but only to the extent) that the failure to so notify
results in the forfeiture of rights or defenses otherwise available to such
Indemnifying Party with respect to such Claim.
7.03(b). If the Indemnifying Party, within a reasonable time
after notice of any such Claim, fails to defend such Claim, the Indemnified
Party will (upon further notice to the Indemnifying Party) have the right to
undertake the defense, compromise or settlement of such Claim on behalf of and
for the account and risk of the Indemnifying Party, subject to the right of the
Indemnifying Party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof. The party who is not
undertaking the defense of a Claim may, at its sole expense, participate in
(but not control) such defense. The party conducting the defense of such Claim
shall give great weight to the reasonable business judgment of the other party
regarding the effect a particular course of action, settlement or judgment in
such Claim might have on such other party or its business.
7.03(c). Anything in this Section 7.03 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect the Indemnified Party, the Indemnified Party
shall have the right, at its own cost and expense, and without any right of
indemnification from the other party, to defend, compromise or settle such
Claim, and (ii) the Indemnifying Party shall not, without the written consent
of the Indemnified Party, which consent shall not be unreasonably withheld,
settle or compromise any Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party an unconditional release from all
liability in respect of such Claim.
7.04 Limitations of Indemnification.
7.04(a). Neither the Shareholders, on the one hand, nor Buyer,
on the other hand, shall be required to make any indemnification payments under
Sections 7.02(a)(ii) or Section 7.02(b)(ii), as the case may be, with respect
to any breach of
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any of their (and, in the case of the Shareholder, the Company's) respective
representations and warranties set forth herein, in the Disclosure Schedule or
in any certificate delivered pursuant hereto, except to the extent that the
cumulative amount of the Damages actually incurred by the other party hereto as
a result of all breaches of such representations and warranties actually
exceeds the sum of $100,000.
7.04(b). The amount of any payment or reimbursement of Damages
by the Indemnifying Party shall be: (i) net of a reasonable estimate of the
present value of any tax benefits realized or reasonably expected to be
realized by the Indemnified Party by reason of the facts and circumstances
giving rise to the Indemnifying Party's liability (after taking into
consideration the tax effect of the receipt by the Indemnified Party of the
indemnification payment at the then maximum federal and state tax rates); and
(ii) net of any insurance proceeds received by the Indemnified Party in
connection with the facts giving rise to the right of indemnification. The
parties agree to use their best efforts to make claims on and pursue recovery
with respect to all insurance on account of such matters.
7.04(c). Buyer and Buyer's affiliates hereby waive any right
it or they may have to file a claim for reimbursement or indemnity against any
Shareholder under the terms of this Agreement concerning any matter with
respect to which it is ultimately determined that Buyer or any of its
representatives (i) has actual personal knowledge prior to the Closing Date of
specific facts which constitute a breach by the Company and the Shareholders of
a representation or warranty made under this Agreement; (ii) has an
understanding prior to the Closing that those facts constitute such a breach of
warranty or representation; and (iii) fails to disclose such facts and such
understanding to the Company and the Shareholders.
7.04(d). The aggregate liability of HDC and Hennig under this
Article 7 shall in no event exceed the sum of $4,775,000 and $255,000,
respectively.
8. TERMINATION, AMENDMENT AND WAIVER
8.01 Termination of Agreement. Time is of the essence
hereof. This Agreement may be terminated at any time prior to the Closing:
8.01(a). without liability of any party, by mutual agreement
of the parties hereto;
8.01(b). by Buyer, if there has been a material violation or
breach by the Company or the Shareholders of any of their covenants,
agreements, representations or warranties contained in this Agreement which has
not been waived in writing by Buyer;
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8.01(c). by Buyer, if any of the conditions precedent to
Closing set forth in Article 5 of this Agreement shall not be fulfilled prior
to or by January 31, 1996 and shall not have been waived in writing by Buyer.
8.01(d). by the Company, if there has been a material
violation or breach by the Buyer of any of its covenants, agreements,
representations or warranties contained in this Agreement which has not been
waived in writing by Company and each of the Shareholders.
8.01(e). by the Company, if any of the conditions precedent to
Closing set forth in Article 6 of this Agreement shall not be fulfilled prior
to or by January 31, 1996 and shall not have been waived in writing by the
Company and each of the Shareholders;
8.02 Expense Reimbursement by Buyer; Termination Fee.
8.02(a) Expense Reimbursement upon Breach. If this Agreement
is terminated pursuant to Section 8.01(d), then the Buyer shall promptly (but
not later than five business days after receipt of notice from Company) pay to
Company in cash all of the expenses and fees incurred by the Company on or
subsequent to December 18, 1995 including, without limitation, all expenses
payable to all legal, accounting, financial, public relations and other
professional advisors arising out of, in connection with or related to the
transactions contemplated by this Agreement.
8.02(b) Termination Fee. If this Agreement is terminated by
Company pursuant to Section 8.01(d), Buyer shall, at the time of termination by
Company, pay to Company in cash a termination fee equal to ten percent (10%) of
the Purchase Price. The obligation to pay this termination fee shall be in
addition to any amounts paid or to be paid by Buyer under Section 8.02(a)
hereof.
8.02(c) Expenses. The parties agree that the agreements
contained in this Section 8.02 are an integral part of the transactions
contemplated by the Agreement and constitute liquidated damages and not a
penalty. If Buyer fails to promptly pay to the Company any expense and/or fee
due hereunder, Buyer shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the prime rate as published in The Wall Street
Journal as of the date such fee was required to be paid.
8.03 Exclusive Dealing; Expense Reimbursement by Company
and Shareholders; Break-Up Fee.
8.03(a) Exclusive Dealing. Each of the Company and the
Shareholders (collectively, the "HRS Parties") shall not, nor shall it
permit any
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of its subsidiaries to, nor shall it authorize or permit any officer,
director of employee of, or any investment banker, attorney or other
advisor or representative of, any such HRS Party (collectively, the
"HRS Representatives") to, (i) solicit or initiate, or encourage the
submission of, any Acquisition Proposal (as hereinafter defined) or
(ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. For purposes of this Agreement "Acquisition
Proposal" means an inquiry about or proposal for the acquisition or
purchase of a substantial amount of assets of the Company or any of
its subsidiaries or any equity securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated
would result in any person beneficially owning any equity securities
the Company or any of its subsidiaries, or any merger, consolidation,
business combination, sale of any material assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company
or any of its subsidiaries (or the equity securities thereof) other
than the transactions contemplated by this Agreement, or any other
transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the Closing or
which would reasonably be expected to dilute materially the benefits
to Buyer of this Agreement.
8.03(b) Acquisition Proposal. Neither any of the HRS Parties
nor the respective Boards of Directors of the HRS Parties nor any
committee thereof, shall (i) approve or recommend, propose to approve
or recommend, consider or evaluate, or cause to be considered or
evaluated, any Acquisition Proposal or (ii) enter into any agreement
or understanding with respect to any Acquisition Proposal. The HRS
Parties acknowledge and agree that none of them is required or
obligated in order to comply with any fiduciary or other duty to
review, consider or take any action with respect to any Acquisition
Proposal (including, without limitation any action prohibited by this
Section 8.03).
8.03(c) Expense Reimbursement by HRS Parties and Break-Up Fee.
(i) If any of the Company or HDC proposes to enter into an agreement
with respect to any Acquisition Proposal, it shall concurrently with
entering into such agreement (and regardless of whether the
transaction contemplated by such Acquisition Proposal is consummated)
pay, or cause to be paid, in same day funds, all of the costs and
expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated thereby on or subsequent to December 18,
1995, including without limitation the fees and expenses of its
financial consultants, accountants and counsel and the time (on a
reasonable per diem rate basis) and expenses incurred by Buyer's
personnel (the "Buyer Expenses"), plus the sum of (A) $500,000 plus
(B) 50% of the difference between the value of the Purchase Price and
the value of the purchase price
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contemplated by such Acquisition Proposal (the "Break-Up Fee"), or
(ii) if an Acquisition Proposal shall have been made prior to the
termination of this Agreement and within one year of such termination
any of the Company or HDC enters into an agreement with respect to, or
approves or recommends or takes any action to facilitate such
Acquisition Proposal, the Company and HDC shall pay, or cause to be
paid, in same day funds upon demand, the Buyer Expenses and the
Break-Up Fee; provided that, so long as the Company and HDC are not
then in breach of any of their obligations herein, no payment shall be
due to Buyer under subpart (ii) above if, at the time of the
termination of this Agreement, the Company and HDC shall desire in
good faith to proceed with the Closing in accordance with the terms of
this Agreement, and Buyer shall elect not to do so.
8.03(d) Notice of Acquisition Proposals. In addition to the
obligations set forth in subparagraphs (a), (b) and (c) above, each of
the HRS Parties shall immediately advise Buyer orally and in writing
of any request for information or any Acquisition Proposal made to any
HRS Representative or of any inquiry made to any HRS Representative,
with respect to or which could lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or
inquiry, and the identity of the person making any request,
Acquisition Proposal or inquiry. Each HRS Party shall keep Buyer fully
informed of the status and details (including amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry.
8.03(e) Notice to Others. At Buyer's request, HDC shall
instruct Cain Brothers, as its financial advisor, to inform all
parties that have been in contact with any of the HRS Parties or Cain
Brothers subsequent to September 18, 1995 regarding a possible
Acquisition Proposal that the HRS Parties have entered into an
agreement with a third party with respect to the sale of all of the
Common Stock and that no further Acquisition Proposals will be
entertained nor negotiations and discussions relating thereto
conducted; provided, however, that the parties to receive such
communication and the form and content of such communication shall be
approved by Buyer in advance.
8.03(f) Termination of Section 8.03. If this Agreement is
terminated pursuant to subsections 8.01(a), 8.01(d) or 8.01(e) hereof,
the provisions of this Section 8.03 shall thereafter be of no further
force and effect. Nothing herein, however, shall diminish, limit or
otherwise affect Buyer's rights hereunder with respect to any breach
of Section 8.03 arising prior to such termination of this Agreement.
8.03(g) Expenses. The parties agree that the agreements
contained in this Section 8.03 are an integral part of the
transactions contemplated by the Agreement and constitute liquidated
damages and not a penalty. If any
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Shareholder or the Company fails to promptly pay to the Buyer any
expense and/or fee due hereunder, such party shall pay the costs and
expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any
unpaid expenses and fees at the prime rate as published in The Wall
Street Journal as of the date such expenses or fees were required to
be paid.
8.04 Effect of Termination. Termination of this Agreement
pursuant to Sections 8.01(b) - (e) shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other party
which has violated, breached or failed to satisfy any of the representations,
warranties, covenants, agreements, conditions or other provisions of this
Agreement prior to termination hereof.
8.05 Amendment, Extension and Waiver. At any time prior to
the Closing Date, Buyer, on the one hand, and the Company and the Shareholders,
on the other hand, may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of the parties hereto, (c)
waive any inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto and (d) waive compliance with any
of the agreements or conditions contained herein; provided that, this Agreement
may not be amended nor shall the time for performance of any obligations of
other acts of the parties be extended, except by an instrument in writing
signed on behalf of all of the parties hereto. Any agreement on the part of a
party hereto to any waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
9. MISCELLANEOUS
9.01 Commissions. The Company and the Shareholders, on the
one hand, and Buyer, on the other hand, agree to indemnify and hold the other
harmless from and against any and all claims or liabilities for brokerage
commissions or finder's fees incurred by reason of any action taken by it or
them in connection with the execution of this Agreement or consummation of the
transactions provided for herein. The Shareholders shall pay any transaction
fee payable to Cain Brothers & Company, Incorporated in connection with these
transactions.
9.02 Retention of Records and Access to Information. For a
period of ten (10) years after the Closing Date, Buyer shall cause the Company
to retain and preserve all business, accounting, tax and other records of the
Company existing on the Closing Date. Within thirty (30) days prior to the
destruction of any of such records, Buyer shall notify the Shareholders in
writing of Buyer's or the Company's intention to destroy records and deliver to
the Shareholder or Shareholders so requesting, at its, his, her or their
expense, all such records requested. From and after
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the Closing Date, Buyer and the Company shall afford to the Shareholders access
to said records. Any such access shall be: (i) at the request of the
Shareholders; (ii) scheduled and provided on a reasonable basis taking into
account the business requirements of the Company; and (iii) for any legal
purpose including obtaining information necessary in connection with preparing
tax returns, preparing for a tax audit or other governmental investigation or
defending against a claim, complaint or action by Buyer or a third party
against either HDC or Hennig.
9.03 Expenses, Taxes, Etc. Subject to Section 8.02 hereof,
the Shareholders will pay all professional fees and expenses incurred by the
Shareholders in connection with this Agreement and the transactions
contemplated hereby. Subject to Section 8.03 hereof, Buyer will pay all
professional fees and expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby. All sales and transfer taxes and fees
and filing fees payable in connection with this Agreement for the consummation
of the transaction contemplated hereby shall be the sole responsibility of
Buyer.
9.04 Further Assurances. From time to time, at Buyer's
request and without further consideration, the Company and the Shareholders
will execute and deliver to Buyer such documents and take such other action as
Buyer may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
9.05 Successors and Assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other parties.
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and the successors and permitted assigns of such party.
9.06 Severability. If any provision, clause, or part of
this Agreement, or the application thereof under certain circumstances, is held
invalid, the remainder of this Agreement, or the application of such provision,
clause or part under other circumstances, shall not be affected thereby.
9.07 Announcements. The initial general notices, releases,
statements and communications with employees, suppliers, distributors and
customers of the Business and to the general public and the press relating to
the transactions contemplated by this Agreement shall be made only at such time
and in such manner as may be mutually agreed upon by the Buyer, on the one
hand, and the Company and the Shareholders, on the other hand; provided,
however, that any party shall be entitled to make a public announcement about
such transactions if, in the opinion of its counsel, such announcement is
required to comply with any applicable law, rule or regulation. Information
provided by any party to third parties whose assistance and cooperation may, in
the judgment of such informing party, be required for the successful
consummation of the transactions contemplated by this Agreement, and
52
<PAGE> 57
information provided by Buyer or the Company to its employees with respect to
such transactions, shall not be construed as a general notice, release,
statement or communication within the meaning or intent of this section.
9.08 Notice to Department of Health and Social Services.
Immediately following Closing, Buyer shall cause each of the Facilities to file
appropriate reports with the applicable office or offices of the State of
Wisconsin Department of Health and Social Services, as required under Section
50.03(3)(d) of the Wisconsin Statutes.
9.09 Entire Agreement. This Agreement, the Buyer's
Disclosure Schedule, Schedule 4.05 and the Disclosure Schedule and other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior agreements and
understandings between the parties on such matters. The Company and the
Shareholders make no representations and warranties about the Company or the
Business other than those contained in the above-described writings.
9.10 Headings. The Article and Section headings contained
in this Agreement are for reference purposes only and will not affect in any
way the meaning or interpretation of this Agreement.
9.11 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder will be in writing and will be
deemed to have been duly given if (i) personally delivered; (ii) sent by
telecopy, facsimile transmission or other electronic means of transmitting
written documents (if confirmation of such transmission is received); or (iii)
sent to the parties at their respective addresses indicated herein by
registered or certified mail, postage prepaid, return receipt requested, or by
private overnight mail courier service. The respective addresses to be used for
all such notices, demands or requests are as follows:
(a) If to the Company, to it:
Heartland Retirement Services, Inc.
309 West Washington Avenue
Suite 345
Madison, Wisconsin 53703
Attention: Douglas A. Hennig, President
Facsimile: (608) 283-6951
53
<PAGE> 58
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Benjamin F. Garmer, III
Facsimile: (414) 297-4900
(b) If to HDC, to:
Heartland Development Corporation
222 West Washington Avenue
Madison, Wisconsin 53701
Attention: Lance W. Ahearn
Facsimile: (608) 283-6927
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Benjamin F. Garmer, III
Facsimile: (414) 297-4998
(c) If to Hennig, to:
Heartland Retirement Services, Inc.
309 West Washington Avenue
Madison, Wisconsin 53703
Attention: Douglas A. Hennig
Facsimile: (608) 283-6951
with a copy to:
Quarles & Brady
Firstar Plaza
One South Pickney
Madison, Wisconsin 53701-2113
Attention: Jeffrey B. Bartell, Esq.
Facsimile: (608) 251-9166
54
<PAGE> 59
(d) If to Buyer, to it:
Alternative Living Services, Inc.
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attention: William F. Lasky
Facsimile: (414) 789-9592
with a copy to:
Alternative Living Services, Inc.
184 Shuman Boulevard
Suite 200
Naperville, Illinois 60563
Attention: John W. Kneen
Facsimile: (708) 357-4020
and
Rogers & Hardin
Suite 2700
229 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attention: Alan C. Leet
Facsimile: (404) 525-2224
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
9.12 Law Governing. This Agreement will be governed by,
and construed and enforced in accordance with, the internal laws of the State
of Wisconsin without regard to its conflicts of law rules.
9.13 Counterparts/Telecopies. This Agreement may be
executed simultaneously in counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument. Facsimile and telecopy versions of signed documents shall be deemed
to be original documents for purposes of Closing.
55
<PAGE> 60
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
HEARTLAND RETIREMENT SERVICES, INC.
(the "Company")
By: /s/ Douglas A. Hennig
-------------------------------------
Douglas A. Hennig
President
ALTERNATIVE LIVING SERVICES, INC.
("Buyer")
By: /s/ John W. Kneen
-------------------------------------
John W. Kneen
Vice President
SHAREHOLDERS:
HEARTLAND DEVELOPMENT CORPORATION
By: /s/ Joel E. Simpson
-------------------------------------
Joel E. Simpson, Vice President and
Chief Financial Officer
/s/ Douglas A. Hennig
-----------------------------------------
Douglas A. Hennig ("Hennig")
56
<PAGE> 1
EXHIBIT 10.16
LOAN AGREEMENT
This Agreement, dated as of January 25, 1996, is entered into among
Alternative Living Services, Inc., a Delaware corporation ("Borrower"), and RDV
Capital Management L.P., a Delaware limited partnership ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make loans to Borrower in
an aggregate amount not to exceed the amount set forth as the Aggregate Amount
on Schedule 1 hereto, to be utilized by Borrower in connection with the
acquisition (the "Stock Acquisition") by Borrower of 100% of the issued and
outstanding capital stock (the "HRS Stock") of Heartland Retirement Services,
Inc., a Wisconsin corporation ("HRS"); and
WHEREAS, Lender is willing to make the loans to Borrower for such
purposes, on such terms and subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this
Agreement (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Business Day" shall mean a day on which national banks are open for
the transaction of business required for this Agreement in Grand Rapids,
Michigan.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Closing" shall mean the consummation of the Stock Acquisition and the
other transactions contemplated by the Stock Purchase Agreement among HRS, the
shareholders of HRS and Borrower (the "Stock Purchase Agreement").
"Closing Date" shall mean the date of the Closing.
<PAGE> 2
"Event of Default" shall mean any of the events specified in Section
7.1 hereof, provided that any requirement for notice or passage of time has
been satisfied.
"GAAP" shall mean generally accepted accounting principles, as in
effect from time to time, consistently applied.
"HRS Indebtedness" shall mean any Indebtedness of HRS and/or any of its
Subsidiaries.
"Indebtedness" of any Person shall mean, without duplication, (i) any
obligation of such Person for borrowed money, including, without limitation,
(a) any obligation of such Person evidenced by bonds, debentures, notes or
other similar debt instruments and (b) any obligation for borrowed money which
is non-recourse to the credit of such Person, but which is secured by a Lien on
any asset of such Person; provided, that for purposes of this subsection
(i)(b), the amount of such obligation shall not be deemed to exceed the fair
market value of such Lien; (ii) any obligation of such Person on account of
deposits or advances; (iii) any obligation of such Person for the deferred
purchase price of any property or services, except accounts payable arising in
the ordinary course of such Person's business; (iv) any obligation of such
Person as lessee under a Capitalized Lease; and (v) any guaranty of such Person
with respect to any obligation of another Person of the types describes in the
foregoing subsections (i) through (iv).
"Lender" shall mean RDV Capital Management L.P., a Delaware limited
partnership.
"Lien" shall mean, with respect to any property, any security deed,
mortgage, deed to secure debt, deed of trust, lien, pledge, assignment, charge,
security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property.
"Loan Documents" shall mean the Notes and the Stock Pledge Agreement.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person and its Subsidiaries,
taken as a whole.
"Net Income" shall mean, as applied to any Person for any fiscal
period, the aggregate amount of net income (or net loss) of such Person, after
taxes, for such period as determined in accordance with GAAP.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Stock Purchase Agreement" shall have the meaning set forth in the
definition of Closing.
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<PAGE> 3
"Subsidiary" of any Person (the "Parent") shall mean any other Person
of which or in which the Parent owns, directly or indirectly, 50% or more of
(i) the combined voting power of all classes of stock having general voting
power, if it is a corporation, (ii) the capital interest or profits interest of
such Person, if it is a partnership, limited liability company, joint venture
or similar entity, or (iii) the beneficial interest of such Person, if it is a
trust, association or other incorporated organization.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or
any of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which,
with the lapse of time or giving of notice to Borrower contemplated hereby,
would constitute an Event of Default.
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1 Tranche A Loan
(a) Amount. Lender agrees, upon the terms and conditions hereinafter
set forth, to make a loan to Borrower in the principal amount up to the amount
set forth as the Tranche A Amount on Schedule 1 hereto (said loan being
hereinafter referred to as the "Tranche A Loan").
(b) Promissory Note. The obligations of Borrower to repay the Tranche
A Loan shall be evidenced by Borrower's promissory note in the form attached
hereto as Exhibit A, dated the Closing Date and payable to the order of Lender
for the principal sum of the Tranche A Loan Amount with interest as therein and
herein provided (said promissory note being referred to herein as the "Tranche
A Note").
(c) Payments. Unless payment of the Tranche A Loan is accelerated
upon occurrence of an Event of Default pursuant to Section 7.2 hereof, the
principal amount of the Tranche A Loan shall be due and payable on the second
anniversary of the Closing Date (the "Maturity Date") and interest shall be due
and payable, at the rates set forth below, monthly in arrears (through and
including the date immediately preceding the payment date) on the 15th day of
each calendar month commencing with the month following the month in which the
Closing Date shall occur, with a final interest payment due when the principal
amount of the Tranche A Loan is paid in full.
(d) Interest Rate. The Tranche A Loan shall bear interest, during the
period from and including the Closing Date to (but not including) the date the
Tranche A Loan is paid in full, at the per annum rates set forth below:
-3-
<PAGE> 4
<TABLE>
<S> <C> <C>
9%
(i) from the Closing Date to the day immediately before the six
month anniversary of the Closing Date:
(ii) from the six month anniversary of the Closing Date until 10.5%
the day immediately before the twelve month anniversary of
the Closing Date:
(iii) from the twelve month anniversary of the Closing Date until 12.5%
the day immediately before the fifteen month anniversary of
the Closing Date:
(iv) from the fifteen month anniversary of the Closing Date 14.5%
until the day immediately before the eighteen month
anniversary of the Closing Date:
(v) from the eighteen month anniversary of the Closing Date 16.5%
until the day immediately before the twenty-one month
anniversary of the Closing Date:
(vi) from the twenty-one month anniversary of the Closing Date 18.5%
and thereafter:
</TABLE>
Section 2.2 Tranche B Loan.
(a) Amount. Lender agrees, upon the terms and conditions hereinafter
set forth, to make a loan to Borrower in the principal amount up to the amount
set forth as the Tranche B Amount on Schedule 1 hereto (said loan being
hereinafter referred to individually as the "Tranche B Loan" and, collectively
with the Tranche A Loan, the "Loan").
(b) Promissory Note. The obligations of Borrower to repay the Tranche
B Loan shall be evidenced by Borrower's promissory note in the form attached
hereto as Exhibit B, dated the Closing Date and payable to the order of Lender
for the principal sum of the Tranche B Loan Amount (as hereinafter defined)
with interest as therein and herein provided (said promissory note being
referred to herein individually as the "Tranche B Note" and, collectively with
the Tranche A Note, as the "Notes").
(c) Payments. Unless payment of the Tranche B Loan is accelerated
upon occurrence of an Event of Default pursuant to Section 7.2 hereof, the
principal amount of the Tranche B Loan shall be due and payable on the Maturity
Date and interest shall be due and payable, at the rates set forth below,
monthly in arrears (through and including the date immediately preceding the
payment date) on the 15th day of each calendar month commencing with the month
following the month in which the Closing Date shall occur, with a final
interest payment due when the principal amount of the Tranche B Loan is paid in
full.
-4-
<PAGE> 5
(d) Interest Rates. The Tranche B Loan shall bear interest during the
period from and including the Closing Date to (but not including) the date the
Tranche B Loan is paid in full, at the per annum rates set forth below:
<TABLE>
<S> <C> <C>
(i) from the Closing Date to the day immediately before the one
year anniversary of the Closing Date: 9%
(ii) from the one year anniversary of the Closing Date until the 11%
day immediately before the fifteen month anniversary of the
Closing Date:
(iii) from the fifteen month anniversary of the Closing Date 13%
until the day immediately before the eighteen month
anniversary of the Closing Date:
(iv) from the eighteen month anniversary of the Closing Date 15%
until the day immediately before the twenty-one month
anniversary of the Closing Date:
(v) from the twenty-one month anniversary of the Closing Date 17%
and thereafter:
</TABLE>
Section 2.3 Manner of Borrowing and Disbursement; Commitment Term.
(a) Borrower shall notify Lender (the "Notice") no less than two
Business Days prior to the Closing, of the amount that Borrower intends to
borrow pursuant to the Tranche A Loan and the Tranche B Loan, respectively
(collectively the "Loan Amount" and separately the "Tranche A Amount" and the
"Tranche B Amount", respectively). The Notice shall also set forth the
scheduled time, place and date of the Closing, and shall provide Lender with
instructions as to the bank account(s) to which the Loan Amount is to be
disbursed at Closing. On the Closing Date, the Lender shall, subject to the
satisfaction of the conditions set forth in Article III of this Agreement,
disburse the Loan Amount by transferring the Loan Amount by wire transfer
pursuant to Borrower's instructions.
(b) Lender's commitment and obligation to make the Loan pursuant to
the terms and conditions of this Agreement shall expire on February 15, 1996
if, on or prior to such date, Borrower has not given the Notice and borrowed
the Loan Amount in accordance with the terms of this Agreement.
- 5 -
<PAGE> 6
Section 2.4 Prepayment.
The principal amount of the Tranche A Loan and the Tranche B Loan may
be repaid or prepaid in full or in part at any time prior to the Maturity Date,
without premium or penalty.
Section 2.5 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of
the principal or interest on the Tranche A Loan or the Tranche B Loan shall be
made on the dates specified for payment under this Agreement to the Lender in
lawful money of the United States of America in immediately available funds.
Any prepayment by Borrower shall set forth in writing whether the payment is a
prepayment of principal under the Tranche A Loan or the Tranche B Loan.
(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received
by Lender, Lender shall distribute such amounts in the following order of
priority: (i) to the payment of all amounts then due and payable under this
Agreement other than interest or principal; (ii) to the payment of interest
then due and payable on the Tranche A loan; (iii) to the payment of interest
then due and payable on the Tranche B Loan; (iv) to the repayment or prepayment
of the principal balance of the Tranche A Loan; and (v) to the repayment or
prepayment of the principal balance of the Tranche B Loan.
Section 2.6 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.7 Use of Proceeds of Loan.
Borrower hereby represents, warrants and covenants to and with the
Lender that all proceeds of the Loan will be applied either (i) to pay fees set
forth in Section 2.8 hereof or (ii) to satisfy Borrower's obligations arising
in connection with the Stock Acquisition. Borrower hereby covenants that the
proceeds of the Tranche A Loan shall be reflected in the accounting records of
Borrower and HRS as a contribution by Borrower to the capital of HRS and shall
be promptly applied by HRS to pay off certain indebtedness as set forth in the
Stock Purchase Agreement.
- 6 -
<PAGE> 7
Section 2.8 Loan Fees.
Borrower agrees to pay to RDV Corporation, a Michigan corporation
("RDVC"), a fee equal to three (3%) percent of the Loan Amount. Borrower and
Lender acknowledge that Lender may deduct on RDVC's behalf such fees from the
Tranche B Loan prior to distributing the proceeds of the Tranche B Loan on the
Closing Date. Borrower also agrees to reimburse Lender for the reasonable
attorneys' fees and expenses of Lender's counsel, Hecht & Lentz, incurred in
connection with the making of the Loan.
Section 2.9 Stock Pledge.
Borrower and Lender shall enter into a stock pledge agreement at
Closing substantially in the form of Exhibit C hereto (the "Stock Pledge
Agreement"), pursuant to which Borrower shall pledge to Lender the HRS Stock as
security for Borrower's obligations hereunder.
Section 2.10 Maximum Interest Rate.
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower
elects to have such excess sum returned to it forthwith. It is the express
intent hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
ARTICLE III
CONDITIONS PRECEDENT TO THE LOAN
The obligation of Lender to make the Loan on the Closing Date shall be
subject to the fulfillment at or prior to the Closing of the following
conditions:
Section 3.1 Notice.
Lender shall have received the Notice in accordance with Section 2.3
hereof.
Section 3.2 Stock Purchase Agreement.
Borrower shall have delivered to Lender a true, correct and complete
copy of the Stock Purchase Agreement, together with all schedules and exhibits
thereto.
- 7 -
<PAGE> 8
Section 3.3 Stock Acquisition.
The Stock Acquisition shall become effective simultaneously with or
shall have become effective immediately prior to the making of the Loan.
Section 3.4 The Notes.
Borrower shall have delivered to Lender the Notes duly executed and
dated as of the Closing Date.
Section 3.5 Stock Pledge Agreement.
Borrower shall have delivered to Lender the Stock Pledge Agreement duly
executed and dated as of the Closing Date and shall have delivered to Lender in
accordance therewith stock certificate(s) representing all of the HRS Stock.
The HRS Stock shall be fully paid and nonassessable and shall be free and clear
of all Liens, claims and encumbrances other than Liens, claims and encumbrances
arising out of this Agreement and the Loan Documents.
Section 3.6 Default.
No Event of Default or Unmatured Event of Default shall have occurred
and be continuing as of the Closing Date.
Section 3.7 Representations and Warranties.
The representations and warranties in Article IV hereof shall be true
and correct as though made on the Closing Date.
Section 3.8 Certification.
Borrower shall have delivered to Lender a Certificate of Borrower,
dated as of the Closing Date, executed by the President of Borrower on behalf
of Borrower, certifying to the fulfillment of the conditions set forth in
Sections 3.6, 3.7 and 3.9 hereof.
Section 3.9 Material Adverse Change.
Subsequent to the date of this Agreement, there shall not have occurred
and be continuing as of the Closing Date any material adverse change in the
business, operations or financial condition of Borrower.
Section 3.10 Destruction of Property.
Subsequent to the date of this Agreement, neither Borrower nor HRS has
experienced any damage, destruction or loss (whether or not covered by
insurance) to any of their
- 8 -
<PAGE> 9
respective properties which damage, destruction or loss would have a Material
Adverse Effect on Borrower or HRS, respectively.
Section 3.11 Legal Opinion.
Lender shall have received from Rogers & Hardin, counsel to Borrower,
an opinion, dated as of the Closing Date, in a form reasonably satisfactory to
Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower and its Subsidiaries
are corporations duly organized, validly existing and in good standing under
the laws of the states of their respective incorporation, have the power and
authority, corporate and otherwise, to own or lease and operate their
respective properties and to carry on their respective businesses as now being
and hereafter proposed to be conducted and are duly qualified and have good
standing as foreign corporations, and are authorized to do business, in each
jurisdiction in which the character of their respective properties or the
nature of their respective businesses requires such qualification or
authorization, and on which failure to so qualify would have a Material Adverse
Effect on Borrower or HRS.
(b) Execution and Enforceability. This Agreement has been duly
executed and delivered by Borrower, and is, and each of the Loan Documents to
which Borrower is a party is, a legal, valid and binding obligation of
Borrower, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to the following qualifications: (i) an order of specific
performance and an injunction are discretionary remedies, and in particular,
may not be available where damages are considered an adequate remedy at law,
and (ii) may be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors'
rights generally (insofar as any such law relates to the bankruptcy, insolvency
or similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute, deliver
and perform its respective obligations under this Agreement and the Loan
Documents. The execution, delivery and performance by Borrower of this
Agreement and the Loan Documents do not and will not require any consent or
approval of any governmental agency or authority.
(d) No Conflicts. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents do not and will not conflict
with: (i) any provision of law, (ii) the certificate of incorporation or bylaws
of Borrower, (iii) any material agreement binding upon Borrower, or (iv) any
court or administrative order or decree applicable to
- 9 -
<PAGE> 10
Borrower and, except as set forth in Section 2.9, do not and will not require,
or result in, the creation or imposition of any Lien on any asset of Borrower.
(e) No Default. Borrower and its Subsidiaries are not in default
under any agreement or instrument to which they are a party or by which any of
their respective properties or assets is bound or affected, which default would
have a Material Adverse Effect on Borrower or HRS. No Event of Default or
Unmatured Event of Default has occurred and is continuing.
(f) Financial Statements. Borrower has furnished, or caused to be
furnished, to Lender the consolidated financial statements of Borrower as of
and for the periods ended November 30, 1995 which are correct and complete in
all material respects and present fairly in accordance with GAAP the financial
position and the results of the operations of Borrower and its Subsidiaries
(except for the absence or condensing of certain statements, information and
footnote disclosure normally included in financial statements prepared in
accordance with GAAP). Except as disclosed in such financial statements,
neither Borrower nor any of its Subsidiaries have any material liabilities,
contingent or otherwise, and there are no material unrealized or anticipated
losses by Borrower or any of its Subsidiaries (other than the charge to
earnings that will be recorded if the Borrower elects to write off capitalized
pre-opening costs as of December 31, 1995 (hereinafter referred to as the
"Pre-Op Charge")).
(g) No Adverse Change. Since November 30, 1995, there has occurred no
event which would have a Material Adverse Effect on Borrower or HRS (other than
the Pre-Op Charge).
(h) Litigation. Except as disclosed on Exhibit 4.1(h) hereof, no
claims, litigation, arbitration proceedings or governmental proceedings are
pending or threatened against or are affecting Borrower or its Subsidiaries,
the results of which, if decided adversely to Borrower or any of its
Subsidiaries, would have a Material Adverse Effect on Borrower or HRS.
(i) Taxes. All federal, state and local tax returns required by law
to be filed by Borrower have been properly prepared and filed, and all taxes
shown thereon to be due, including interest and penalties, have been made,
except for such taxes as are being contested by Borrower in good faith and by
appropriate proceedings.
ARTICLE V
AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
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<PAGE> 11
Section 5.1 Financial Statements and Other Reports.
Borrower shall furnish or cause to be furnished to Lender:
(a) Annual Audit Report. Within 90 days after each fiscal year of
Borrower, a copy of the annual audited consolidated financial statements of
Borrower prepared in conformity with GAAP and certified by KPMG Peat Marwick or
another independent certified public accountant who shall be reasonably
satisfactory to Lender;
(b) Quarterly Financial Statements. Within 45 days after each quarter
(except the last quarter) of each fiscal year of Borrower, a copy of the
unaudited consolidated financial statements of Borrower, prepared in the same
manner as the financial statements referred to in preceding clause (a) hereof
except that certain footnotes and other financial information may be omitted in
accordance with Borrower's current practices, and consisting of at least a
balance sheet as of the close of such quarter and statements of operations and
cashflows for such quarter and for the period from the beginning of such fiscal
year to the close of such quarter;
(c) Requested Information. Promptly from time to time, such other
reports or information regarding Borrower's financial condition as the Lender
may reasonably request.
Section 5.2 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and,
if applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured Event
of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which is reasonably expected to have a
Material Adverse Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower or HRS;
or
(d) Other Events. The occurrence of such other events as the Lender
may from time to time reasonably specify regarding the financial condition of
Borrower and its Subsidiaries, taken as a whole.
Section 5.3 Existence.
Borrower shall, and shall cause HRS to, maintain and preserve, their
respective existences as corporations, and all rights, privileges, licenses,
patents, patent rights, copyrights, trademarks, tradenames, and other authority
to the extent material and necessary
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<PAGE> 12
for the conduct of their respective businesses in the ordinary course as
conducted from time to time.
Section 5.4 Nature of Business.
Borrower and its Subsidiaries shall engage in substantially the same
fields of business they are engaged in on the date hereof.
Section 5.5 Books, Records and Access.
Borrower shall maintain, and cause its Subsidiaries to maintain,
complete and accurate books and records in which full and correct entries in
conformance with GAAP shall be made of all dealings and transactions in
relation to their respective businesses and activities. Within 15 days after
receiving written notice from Lender, Borrower shall permit, and cause its
Subsidiaries to permit, reasonable access by the Lender to the books and
records of Borrower and its Subsidiaries during normal business hours and
permit, and cause its Subsidiaries to permit, the Lender to make reasonable
copies of such books and records.
Section 5.6 Insurance.
Borrower shall maintain, and cause its Subsidiaries to maintain,
insurance to such extent and against such hazards and liabilities as is
commonly maintained by companies similarly situated.
Section 5.7 Repair.
Borrower shall maintain, preserve and keep, and cause its Subsidiaries
to maintain, preserve and keep, their respective properties in good repair,
working order and condition, and from time to time make, and cause its
Subsidiaries to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained except for where the
failure to comply with this Section 5.7, individually or in the aggregate, does
not have a Material Adverse Effect on Borrower or HRS.
Section 5.8 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books such reserves or other
appropriate provisions therefor as may be required by GAAP.
Section 5.9 Compliance.
Borrower shall comply, and shall cause its Subsidiaries to comply, with
all statutes and governmental rules and regulations applicable to them, except
where the failure to
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<PAGE> 13
comply with this Section 5.9, individually or in the aggregate, does not have a
Material Adverse Effect on the business, financial condition, or operations of
Borrower.
Section 5.10 Ownership of HRS.
From the Closing Date and thereafter until the Loan Amount, and all
interest thereon, is paid in full, Borrower shall continue to own, directly or
indirectly, all of the capital stock of HRS free and clear of all Liens, claims
or encumbrances except for Liens, claims or encumbrances arising out of this
Agreement or the Loan Documents.
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount,
and all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale
Borrower shall not, and shall not permit HRS, to:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of all or
substantially all its assets;
(c) be party to any merger or consolidation, unless after giving effect
thereto, no Event of Default or Unmatured Event of Default has occurred and is
continuing and (i) it is the surviving entity thereto or (ii) in the case of
Borrower, such merger is with a wholly-owned subsidiary of Borrower for the
purpose of reincorporating the Borrower in another state or (iii) in the case
of Borrower, the holders of the voting capital stock of the Company prior to
such merger or consolidation are the holders of at least 51% of the voting
power of the outstanding voting capital stock of the surviving entity
immediately following such transaction.
Section 6.2 Restrictive Payments
Borrower shall not permit HRS to purchase or redeem any shares of its
stock or declare or pay any dividends thereon (other than dividends payable in
shares of HRS) (i) if any Event of Default or Unmatured Event of Default has
occurred and is continuing or (ii) in an aggregate amount that is greater than
fifty percent (50%) of HRS's Net Income earned subsequent to the date of this
Agreement. Borrower shall not purchase or redeem any shares of its stock or
declare of pay any dividends thereon (other than dividends payable in shares of
Borrower) (i) if any Event of Default or Unmatured Event of Default has
occurred and is
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<PAGE> 14
continuing or (ii) in an aggregate amount that is greater than fifty percent
(50%) of Borrower's Net Income earned subsequent to the date of this Agreement.
Section 6.3 Indebtedness.
Borrower shall not permit HRS and its Subsidiaries to incur or permit
to exist any HRS Indebtedness, except:
(a) Indebtedness under the terms of this Agreement or approved in
writing by the Lender;
(b) Indebtedness hereafter incurred in connection with the Liens
permitted by Section 6.4 (provided, however, with respect to the Liens
permitted by Section 6.4(a) such Indebtedness shall not exceed the fair market
value of the property acquired with such Indebtedness);
(c) Other Indebtedness outstanding on the date hereof and listed on
Exhibit D and any refundings or reborrowings of such Indebtedness so long as
the respective outstanding amounts of such Indebtedness do not exceed the
respective amounts set forth on Exhibit D;
(d) Other Indebtedness of HRS not exceeding, in the aggregate,
$2,000,000.00 (excluding Capitalized Leases) at any time outstanding;
(e) Indebtedness secured by the properties set forth on Exhibit E (the
"Unencumbered Properties"), provided that the net loan proceeds of any such
Indebtedness is first used to prepay any principal (together with any accrued
interest thereon) outstanding on the Tranche A Loan at the time such
Indebtedness is incurred, provided, however, that such Indebtedness shall not
exceed the fair market value of the Unencumbered Properties.
Section 6.4 Liens.
Borrower shall not permit HRS to create or permit to exist any Lien
with respect to any property, accounts, equipment or inventory of HRS and its
Subsidiaries, now owned or hereafter acquired, except:
(a) Liens in connection with the acquisition and development of
assisted living and specialty care facilities, including all real and personal
property associated therewith, after the date hereof by way of purchase money
mortgage or security agreement, conditional sale or other title retention
agreement, Capitalized Lease or other deferred payment contract, and attaching
only to the property being acquired;
(b) Liens for current Taxes not delinquent or Taxes being contested
in good faith and by appropriate proceedings as to which such reserves or other
appropriate provisions as may be required by GAAP are being maintained;
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<PAGE> 15
(c) Carriers', warehousemen's, mechanics', material-men's, repairmen's,
and other like statutory Liens arising in the ordinary course of business
securing obligations which are not overdue for a period of more than thirty
days or which are being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate provisions as may be
required by GAAP are being maintained;
(d) Pledges or deposits in connection with state and local licensing
and regulatory requirements, workers' compensation, unemployment insurance and
other social security legislation;
(e) Deposits to secure the performance of bids, trade contracts,
leases, statutory obligations and other obligations of a like nature incurred
in the ordinary course of business;
(f) Liens in favor of Lender;
(g) Liens created to secure the Indebtedness referenced in Sections
6.3(c) or 6.3(e).
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
Each of the following shall constitute an Event of Default under this
Agreement:
(a) Non-payment. Borrower shall default in the payment when due of
any principal of, or interest on, the Tranche A Loan or the Tranche B Loan, and
such default shall not be cured within three (3) Business Days following notice
thereof from Lender.
(b) Insolvency. Borrower becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in, the appointment of a trustee,
receiver or other custodian for Borrower or for a substantial part of the
property of Borrower, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower or for a
substantial part of the property of the Borrower and is not discharged within
sixty days; or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against Borrower and, if instituted
against Borrower, is consented to or acquiesced in by Borrower or remains for
sixty days undismissed; or any warrant of attachment or similarly legal process
is issued against any substantial part of the property of Borrower which is not
released within sixty days of service.
- 15 -
<PAGE> 16
(c) Representations and Warranties. Any representation or warranty
made under this Agreement or any statement in any certificate given by Borrower
hereunder shall be untrue, incorrect or misleading in any material respect when
made or given.
(d) Covenants. Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and,
with respect to any covenant set forth in Section 5.1, 5.2, 5.5, 5.6, 5.7 or
5.8, such default shall not be cured within thirty (30) days following notice
thereof from Lender to Borrower.
(e) There is an event of default under the Loan Documents.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $250,000.00 (other than
as evidenced by this Agreement or the Notes) owing by Borrower when due,
whether at maturity, by acceleration or otherwise, or (ii) fails to perform any
term, covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing
or securing or relating to such indebtedness or other obligations, when
required to be performed, and if as the result of such failure the maturity
date of such indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution by
appropriate proceedings of any judgment rendered against it or any Subsidiary
of Borrower in excess of $250,000.
Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be continuing,
Lender shall have the right at its option, and in its sole discretion, to
declare all amounts outstanding under the Notes and this Agreement to be
immediately due and payable (except that if an event described in Section
7.1(b) occurs, all amounts outstanding under the Notes and this Agreement shall
automatically become immediately due and payable). Lender shall promptly advise
Borrower, in writing, of any such declaration, but failure to do so shall not
impair the effect of such declaration. Lender shall also be entitled to
exercise any and all remedies available to it, at law or equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of any power
or right, and no course of dealing between Borrower and Lender, shall operate
as a waiver of such power or right, nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise
of any other power or right. Remedies provided for
- 16 -
<PAGE> 17
herein are cumulative and not exclusive of any remedies which may be available
to the Lender at law or in equity. No notice to or demand on the Borrower
required hereunder or under the Notes shall in any event entitle Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of Lender to any other or further action and
any circumstances without notice or demand. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement or the
Notes shall in any event be effective unless the same shall be in writing and
signed and delivered by Lender. Any waiver of any provision of this Agreement
or the Notes, and any consent to any departure by Borrower from the terms of
any provision of this Agreement or the Notes, shall be effective only in the
specific instance and for the specific purpose for which given.
Section 8.2 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail, or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) Business Days
after the post-mark date thereof and, if by telecopy, shall be followed
forthwith by letter and shall be deemed to have been received on the next
Business Day following dispatch and acknowledgment of receipt by the
recipient's telecopier machine. In addition, notices hereunder may be delivered
by hand in which event the notice shall be deemed effective when delivered or
by overnight courier, in which event the Notice shall be deemed delivered the
day after it is accepted by the courier for next day delivery. All notices and
other communications under this Agreement shall be given to the parties hereto
at the following addresses:
(i) If to Borrower:
Alternative Living Services, Inc.
184 Shuman Boulevard
Suite 200
Naperville, Illinois 60563
Attn: Chairman
With a copy to:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President
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<PAGE> 18
and a copy to:
Rogers & Hardin
229 Peachtree Street, N.E.
2700 Cain Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
(ii) If to Lender:
RDV Capital Management L.P.
c/o RDV Corporation
500 Penn Plaza Building
126 Ottawa Avenue, N.W.
Grand Rapids, Michigan 49503
Attn: Jerry Turbergen
With a copy to:
Hecht & Lentz
333 Bridgestreet, N.W.
Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Any party hereto may change the address to which notices shall be
directed under this Section by giving written notice of such change to the
other parties.
Section 8.3 Severability.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction, shall as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the laws of the
state of Michigan.
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their
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<PAGE> 19
successors and assigns. Neither Borrower nor Lender shall assign its rights or
duties hereunder without the consent of the other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall not
be used in connection with the interpretation of any provision hereof.
Section 8.7 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such separate counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ John W. Kneen
------------------------------------------------
Title: Vice President
RDV CAPITAL MANAGEMENT L.P., a Delaware
Limited Partnership
By: RDV Corporation, a Michigan corporation
Its: General Partner
By: /s/ Jerry Tubergen
------------------------------------------------
Jerry Tubergen
Title: President
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<PAGE> 1
EXHIBIT 10.21
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT ("Agreement"), made as of the 29th day of
March, 1995, between ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation
("ALS"), and EVERGREEN HEALTHCARE, INC., a Georgia corporation ("EHI");
W I T N E S S E T H:
WHEREAS, ALS wishes to acquire certain real estate located in Sarasota,
Florida and legally described on Exhibit A attached hereto and improvements
thereon and certain other property relating thereto (collectively, the
"Mortgaged Property") from DCA Florida, Inc., a Florida corporation formerly
known as Diversicare Florida, Inc., and DCAmerica, Inc., a Delaware corporation
formerly known as Diversicare Corporation of America (collectively or
individually, "Seller"), pursuant to a certain Agreement for Purchase and Sale
dated December 27, 1994, as amended (the "Purchase Agreement").
WHEREAS, ALS wishes Seller to accept, as part of the consideration for the
Mortgaged Property, its promissory note dated as of March 29, 1995 in a
principal amount not to exceed $4,300,000 with a stated maturity date of May
31, 1995 (together with any and all notes issued in replacement, substitution
or exchange therefor, the "Bridge Note");
WHEREAS, each of ALS and Seller has requested that EHI guarantee payment of
the Bridge Note pursuant to a certain Guaranty dated as of March 29, 1995 (as
the same may from time to time be amended, modified or supplemented, the "EHI
Guaranty");
WHEREAS, EHI has agreed to do so, provided that, among other things, ALS
enter into this Reimbursement Agreement with EHI;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Reimbursement on Demand.
ALS agrees to pay to EHI, on demand, at EHI's address as shown on the
signature page hereof: (i) any and all amounts paid by EHI to Seller or its
assigns or demanded from EHI by Seller or its assigns pursuant to the EHI
Guaranty; (ii) any and all amounts due and owing by ALS to EHI hereunder or
under "EHI Mortgage" (as hereinafter defined); (iii) any and all amounts paid,
advanced or extended by EHI to or on behalf of ALS in connection with its
purchase of the Mortgaged Property; (iv) any and all charges and expenses paid
or incurred by EHI in connection with the EHI Guaranty, this Reimbursement
Agreement,
<PAGE> 2
the EHI Mortgage and/or any other instrument or agreement relating thereto (all
of the foregoing being herein collectively referred to as the "Documents"),
including, without limitation, reasonable attorneys' fees and legal expenses
for the enforcement of any of EHI's rights hereunder and/or thereunder, and any
and all filing, recording or other taxes or fees imposed with respect to the
EHI Mortgage or other Document; and (v) interest on all amounts referred to in
clauses (i), (ii), (iii) and/or (iv) above from the date of such payment,
advance or extension by EHI until payment in full by ALS to EHI at a rate per
annum equal to the lessor of (a) a fluctuating rate per annum (the "Default
Rate") equal to the sum of the Prime Rate (as announced or published from time
to time by National City Bank, Indianapolis, Indiana) plus two percent (2%) per
annum or (b) the "Maximum Rate" (as hereinafter defined).
2. Maximum Rate.
The term "Maximum Rate" as used herein means the maximum nonusurious rate
of interest per annum permitted by applicable law, including to the extent
permitted by any amendments thereof hereafter or any new law hereafter coming
into effect to the extent a higher Maximum Rate is permitted thereby. The
Maximum Rate shall be applied by taking into account all amounts required to be
characterized by applicable law as interest on the indebtedness hereunder, so
that the aggregate of all interest does not exceed the maximum nonusurious
amount permitted by applicable law (the "Maximum Amount") or (b) as otherwise
as otherwise provided herein.
3. Facilitation Fee.
In consideration of the financial accommodation and facilitation provided
by EHI to ALS by EHI's execution and delivery of the EHI Guaranty to Seller,
ALS shall pay to EHI, on demand, a facilitation fee in an amount equal to
$84,163; provided, however, that if on or before September 30, 1995, (i) EHI's
Guaranty shall have been terminated, released or satisfied in full and (ii) all
amounts due to EHI under this Reimbursement Agreement shall have been paid in
full to EHI, then the facilitation fee shall be reduced to $42,082 and any
excess fee amount previously paid to EHI shall be promptly returned to ALS.
4. Obligations Absolute.
The obligations of ALS under this Reimbursement Agreement shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Reimbursement Agreement under all circumstances, including,
without limitation, the following circumstances: (i) any lack of validity or
enforceability of the Bridge Note or the EHI Guaranty, the EHI Mortgage or any
other Documents; (ii) any amendment or waiver of,
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<PAGE> 3
or any consent to departure from, all or any of the Documents; (iii) the
existence of any claim, set-off, defense or other right that ALS may have at
any time against Seller or any other holder of the Bridge Note or any obligee
under the EHI Guaranty, EHI or any other person or entity, whether in
connection with any of the Documents, the transactions contemplated therein, or
any unrelated transaction; or (iv) the existence of any challenge to the
necessity, appropriateness or correctness of any payment by EHI under the EHI
Guaranty.
5. Security.
As collateral for the full and timely payment and performance of any and
all obligations, liabilities and indebtedness of ALS to EHI under this
Agreement and/or the other Documents, ALS hereby agrees to execute and cause
to be delivered to EHI a Mortgage, Assignment of Rents and Security Agreement
dated as of March 29, 1995 (as the same may from time to time be amended,
modified and supplemented, the "EHI Mortgage"), pursuant to which EHI Mortgage,
among other things, ALS grants to EHI a mortgage lien and security interest in
the Mortgaged Property and agrees to cause Seller to execute and deliver
(contemporaneously with the delivery of the EHI Mortgage) one or more
subordination agreements or instruments, the effect of which is to cause the
lien of any mortgage granted by ALS to Seller on the Mortgaged Property to be
subordinated to the lien of the EHI Mortgage. Furthermore, as additional
collateral, EHI shall be subrogated to the rights (but shall have none of the
obligations) of ALS in respect of any transaction to which the EHI Guaranty
relates. ALS hereby agrees to execute, deliver, file and/or record such
receipts, agreements, forms or other documents as EHI may request to further
evidence EHI's interests in such property, it being understood that EHI's
rights as specified therein shall be in furtherance of and in addition to (but
not in limitation of) EHI's rights hereunder. ALS will pay the cost of any such
filing and/or recording and, upon EHI's request, sign such instruments,
documents or other papers and take such other action as EHI may reasonably
require.
6. Default.
In the event of the happening of any one or more of the following events,
any such event being hereunder called an "Event of Default"), namely (i) the
nonpayment of any obligations, liabilities or indebtedness of ALS to EHI under
this Agreement or any of the other Documents when due, or (ii) the failure of
ALS to perform or observe any other term or covenant of this Agreement or any
of the other Documents or (iii) the institution by or against ALS of any
proceeding seeking to adjudicate ALS a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of ALS or its debts under any law relating to
- 3 -
<PAGE> 4
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for ALS or for any substantial part of its
property, or then, or at any time after the happening of such event, the amount
of the EHI Guaranty, as well as any and all other obligations of ALS under this
Agreement or the other Documents, shall, at EHI's option, and whether or not
otherwise then due and payable, become due and payable immediately without
demand upon or notice to ALS.
6. Remedies.
If any Event of Default shall have occurred and be continuing, EHI may
exercise any and all of its rights and remedies available under applicable law
and/or under the Documents, and all such rights and remedies shall be
cumulative. ALS will pay to EHI on demand all costs and expenses, including,
without limitation, reasonable attorney's fees and legal expenses related or
incidental to the custody, preservation or sale of, or collection from, or
other realization upon any collateral or related or incidental to the
establishment, preservation or enforcement of EHI's rights in respect of any
such collateral.
Without limitation of the foregoing, upon the occurrence and during the
continuance of any Event of Default, EHI is hereby authorized to set off and
apply any and all indebtedness at any time owing by EHI or any subsidiary or
affiliate of EHI (other than ALS) to or for the credit or the account of ALS
against any and all of ALS's obligations to EHI under this Agreement and/or the
other Documents, irrespective whether or not EHI shall have made any demand
under this Agreement.
7. Indemnity.
ALS will indemnify and hold EHI (such term to include for purposes of this
paragraph, EHI and EHI's affiliates (other than ALS) and their respective
officers, directors, employees and agents) harmless from and against any and
all claims, loss, liabilities, damages, suits, costs or expenses (including
reasonable attorneys' fees and legal expenses) (collectively, "Claims")
directly or indirectly arising out of (i) any breach of or failure of ALS to
timely pay, perform and/or discharge any obligation to EHI under any of the
Documents and/or (ii) any Claim asserted by Seller (whether or not valid).
- 4-
<PAGE> 5
8. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of Georgia.
(b) This Agreement shall not be amended, modified or supplemented except by
a writing executed by ALS and EHI.
(c) This Agreement shall be binding upon, and shall inure to the benefit
of, EHI, ALS and their respective successors and assigns.
(d) This Agreement may be executed in one or more counterparts.
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Reimbursement
Agreement as of the date and year first above written.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ William F. Lasky
----------------------------------------
Title: President
---------------------------------
Address: 450 North Sunnyslope Road
Suite 300
Brookfield, WI 53005
EVERGREEN HEALTHCARE, INC.,
a Georgia corporation
By: /s/ John W. Kneen
----------------------------------------
Title: Vice President
---------------------------------
Address: 11350 N. Meridian Street
Suite 200
Carmel, Indiana 46032
- 6 -
<PAGE> 7
EXHIBIT A
- 7 -
<PAGE> 1
EXHIBIT 10.28
FOURTH LEASE AMENDMENT
By this FOURTH LEASE AMENDMENT dated 11-21-95, that certain Lease Agreement
made and entered into between Badger II Limited Partnership ("Landlord") and
Alternative Living Services, Inc. ("Tenant"), EXECUTED the 19th day of
December, 1994; First Lease Amendment dated March 10, 1995, by and between the
same parties; Second Lease Amendment dated May 4, 1995, by and between the same
parties; Third Lease Amendment dated September 11, 1995, by and between the
same parties (hereinafter collectively referred to as the "Lease") for the
rental of the Leased Premises commonly known as Chancellory Park I, 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005; and
WHEREAS, TENANT desires to lease the space approximately shown and outlined
on EXHIBIT A-4 commencing on November 27, 1995, and in accordance therewith,
Landlord and Tenant desire to execute this FOURTH LEASE AMENDMENT to evidence
their respective agreements and obligations with respect thereto.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. Tenant agrees to pay to Landlord for the space approximately shown and
outlined on EXHIBIT A-4 Operating Costs pursuant to Paragraph 3 of the
Lease of Four Hundred Sixty-Three and 86/100 DOLLARS ($463.86) per month
for the time period commencing on November 27, 1995 and ending on December
31, 1995.
All other terms of this lease agreement, except as expressed or by necessary
implication modified herein, shall be in full force and effect throughout the
term of this lease agreement.
<TABLE>
<S> <C>
LANDLORD TENANT:
Badger II Limited Partnership Alternative Living Services, Inc.
BY: Great Lakes Properties of Wisconsin, Inc. BY: /s/ J. David Lutich
------------------------------------
J. DAVID LUTICH
------------------------------------
(Please print name.)
BY: /s/ Jon D. Hammes TITLE: CHIEF FINANCIAL OFFICER
---------------------------- -------------------------------
Jon D. Hammes (Please print title.)
ITS: President
</TABLE>
<PAGE> 2
THIRD LEASE AMENDMENT
By this THIRD LEASE AMENDMENT dated 9/11/95, that certain Lease Agreement
made and entered into between Badger II Limited Partnership ("Landlord") and
Alternative Living Services, Inc. ("Tenant"), EXECUTED the 19th day of December,
1994; First Lease Amendment dated March 10, 1995, by and between the same
parties; Second Lease Amendment dated May 4, 1995, by and between the same
parties (hereinafter collectively referred to as the "Lease") for the rental of
the Leased Premises commonly known as Chancellory Park I, 450 North Sunnyslope
Road, Suite 300, Brookfield, Wisconsin 53005; and
WHEREAS, TENANT desires to expand the Leased Premises, and in accordance
therewith, Landlord and Tenant desire to execute this THIRD LEASE AMENDMENT to
evidence their respective agreements and obligations with respect thereto.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. Paragraph 1 of the Lease shall be amended to reflect 10,910 rentable square
feet as approximately shown and outlined on EXHIBITS A, A-3, A-2 and A-4.
2. Paragraph 2A of the Lease shall be amended to reflect a rate of Ten Thousand
Nine Hundred Twenty-Eight and 45/100 DOLLARS ($10,928.45) per month, net of
Operating Costs, for the time period commencing on January 1, 1996 and
ending January 31, 2000.
3. Paragraph 2B of the Lease shall be amended to reflect to sum of Fourteen
Thousand Nine Hundred Seventy-Three and 96/100 DOLLARS ($14,973.96).
4. Paragraph 3 of the Lease shall be amended to reflect a Tenant's initial
monthly payment for Operating Costs of Five Thousand Five Hundred Thirty-Six
and 83/100 DOLLARS ($5,536.83).
5. Paragraph 21J of the Lease shall be amended to reflect a numerator of
10,910 and a Tenant's Proportionate Share of 13.11%.
6. Notwithstanding the aforementioned Landlord shall contribute One Thousand
Six Hundred Seventy-Two and 31/100 DOLLARS ($1,672.31) for the architectural
design and construction of certain leasehold improvements to be approved
in writing by Landlord and to be installed in or made to the space
approximately shown and outlined on EXHIBIT A-4, provided the portion of
Landlord's contribution attributable to the cost of architectural design
does not exceed Ninety-Nine and 51/100 DOLLARS ($99.51).
Tenant shall not unreasonably interfere with the general contractor or
otherwise delay the progress of construction, and shall be responsible for
any costs or obligations incurred by Landlord as a result thereof. Tenant
shall not withhold any estoppel certificate required by Landlord's mortgagee
regarding the completion of the tenant improvements.
In the event that the total actual cost of the architectural design and
construction of such leasehold improvements is greater than One Thousand Six
Hundred Seventy-Two and 31/100 DOLLARS ($1,672.31), the difference between
such actual cost and One Thousand Six Hundred Seventy-Two and 31/100 DOLLARS
($1,672.31) shall be the sole responsibility of Tenant and shall be paid in
full by Tenant within fifteen (15) days of completion of construction of
said leasehold improvements, as evidenced by issuance of a certificate of
occupancy with respect thereto or receipt of a request of final payment from
the general contractor, whichever occurs earlier. Recordation of any
mechanics' or other liens or encumbrances against the Leased Premises, which
liens are not released in a timely and prompt fashion or as otherwise
provided in this Lease, shall constitute a default by Tenant under this
Lease, thereby entitling Landlord to pursue any and all remedies which it
may have at law, in equity or pursuant to this Lease.
In the event that the total actual costs of the architectural design and
construction of such leasehold improvements is less than One Thousand Six
Hundred Seventy-Two and 31/100 DOLLARS ($1,672.31), the difference between
such actual cost and One Thousand Six Hundred Seventy-Two and 31/100 DOLLARS
($1,672.31) shall be amortized over the remaining term of this lease at six
percent (6%) per annum in equal monthly amounts, which amounts shall be
credited against the monthly rent due from the Tenant. For example, if the
total actual cost of such leasehold improvements is One Thousand Twenty-One
and 61/100 DOLLARS ($1,021.61) and there are forty-eight (48) months
remaining in the lease term, then
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<PAGE> 3
the savings of Six Hundred Fifty and 70/100 DOLLARS ($650.70) shall be
credited against the rent due from Tenant in the amount of Fifteen and
21/100 DOLLARS ($15.21) per month for forty-eight (48) months.
All other terms of this lease agreement, except as expressed or by necessary
implication modified herein, shall be in full force and effect throughout the
term of this lease agreement.
LANDLORD: TENANT:
Badger II Limited Partnership Alternative Living Services, Inc.
BY: Great Lakes Properties of BY: /s/ William F. Lasky
Wisconsin, Inc. -----------------------------
-------------------------
William F. Lasky
-----------------------------
(Please print name.)
BY: /s/ Jon D. Hammes TITLE: President
-------------------------- --------------------------
Jon D. Hammes (Please print title.)
ITS: President
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<PAGE> 4
EXHIBIT A-4
[BLUE PRINT]
is a floor plan of the third level north wing located in Chancellory Park I,
450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
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<PAGE> 5
SECOND LEASE AMENDMENT
By this SECOND LEASE AMENDMENT dated 5/4/95, that certain Lease
Agreement made and entered into between Badger II Limited Partnership
("Landlord") and Alternative Living Services, Inc. ("Tenant"), EXECUTED the 19th
day of December, 1994; First Lease Amendment dated March 10, 1995, by and
between the same parties (hereinafter collectively referred to as the "Lease")
for the rental of the Leased Premises commonly known as Chancellory Park I, 450
North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005; and
WHEREAS, TENANT desires to expand the Leased Premises, and in accordance
therewith, Landlord and Tenant desire to execute this SECOND LEASE AMENDMENT to
evidence their respective agreements and obligations with respect thereto.
NOW THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. Paragraph 1 of the Lease shall be amended to reflect 9,996 rentable square
feet as approximately shown and outlined on EXHIBITS A, A-3, and A-2.
2. Paragraph 2A of the Lease shall be amended to reflect a rate of Nine
Thousand Nine Hundred Sixty-Eight and 75/100 DOLLARS ($9,968.75) per month,
net of Operating Costs, for the time period commencing on April 24, 1995
and ending January 31, 2000.
3. Paragraph 2B of the Lease shall be amended to reflect the sum of Thirteen
Thousand Seven Hundred Nineteen and 50/100 DOLLARS ($13,719.50).
4. Paragraph 3 of the Lease shall be amended to reflect a Tenant's initial
monthly payment for Operating Costs of Five Thousand Seventy-Two and 97/100
DOLLARS ($5,072.97).
5. Paragraph 21J of the Lease shall be amended to reflect a numerator of 9,996
and a Tenant's Proportionate Share of 12.02%.
6. Notwithstanding the aforementioned Landlord shall contribute Two Thousand
Four Hundred Fifty-Five and 40/100 DOLLARS ($2,455.40) for the
architectural design and construction of certain leasehold improvements to
be approved in writing by Landlord and to be installed in or made to the
space approximately shown and outlined on EXHIBIT A-2, provided the portion
of Landlord's contribution attributable to the cost of architectural design
does not exceed One Hundred Forty-Six and 11/100 DOLLARS ($145.11).
Tenant shall not unreasonably interfere with the general contractor or
otherwise delay the progress of construction, and shall be responsible for
any costs or obligations incurred by Landlord as a result thereof. Tenant
shall not withhold any estoppel certificate required by Landlord's
mortgagee regarding the completion of the tenant improvements.
In the event that the total actual cost of the architectural design and
construction of such leasehold improvements is greater than Two Thousand
Four Hundred Fifty-Five and 40/100 DOLLARS ($2,455.40), the difference
between such actual cost and Two Thousand Four Hundred Fifty-Five and
40/100 DOLLARS ($2,455.40) shall be the sole responsibility of Tenant and
shall be paid in full by Tenant within fifteen (15) days of completion of
construction of said leasehold improvements, as evidenced by issuance of a
certificate of occupancy with respect thereto or receipt of a request of
final payment from the general contractor, whichever occurs earlier.
Recordation of any mechanics' or other liens or encumbrances against the
Leased Premises, which liens are not released in a timely and prompt
fashion or as otherwise provided in this Lease, shall constitute a default
by Tenant under this Lease, thereby entitling Landlord to pursue any and
all remedies which it may have at law, in equity or pursuant to this Lease.
In the event that the total actual costs of the architectural design and
construction of such leasehold improvements is less than Two Thousand Four
Hundred Fifty-Five and 40/100 DOLLARS ($2,455.40), the difference between
such actual cost and Two Thousand Four Hundred Fifty-Five and 40/100
DOLLARS ($2,455.40) shall be amortized over the remaining term of this
lease at six percent (6%) per annum in equal monthly amounts, which amounts
shall be credited against the monthly rent due from the Tenant. For
example, if the total actual cost of such leasehold improvements is One
Thousand Five Hundred and 00/100 DOLLARS ($1,500.00) and there are
fifty-seven (57) months remaining in the lease term, then the savings of
Nine Hundred Fifty-Five and 40/100 DOLLARS ($955.40) shall be credited
against the rent
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<PAGE> 6
due from Tenant in the amount of Nineteen and 21/100 DOLLARS ($19.21) per
month for fifty-seven (57) months.
All other terms of this lease agreement, except as expressed or by necessary
implication modified herein, shall be in full force and effect throughout the
term of this lease agreement.
LANDLORD: TENANT:
Badger II Limited Partnership Alternative Living Services, Inc.
BY: Great Lakes Properties of Wisconsin, Inc. BY: /s/
------------------------------- ---------------------------
BY: /s/ Jon D. Hammes TITLE: Chief Financial Officer
------------------------------- ------------------------
Jon D. Hammes
ITS: President
<PAGE> 7
FIRST LEASE AMENDMENT
By this FIRST LEASE AMENDMENT dated 03/10/95, that certain Lease Agreement
made and entered into between Badger II Limited Partnership ("Landlord") and
Alternative Living Services, Inc. ("Tenant"), EXECUTED the 19th day of
December, 1994; (hereinafter collectively referred to as the "Lease") for the
rental of the Leased Premises commonly known as Chancellory Park I, 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005; and
WHEREAS, TENANT desires to expand the Leased Premises, and in accordance
therewith, Landlord and Tenant desire to execute this FIRST LEASE AMENDMENT to
evidence their respective agreements and obligations with respect thereto.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. Paragraph 1 of the Lease shall be amended to reflect 8,654 rentable square
feet as approximately shown and outlined on EXHIBITS A and A-3.
2. Paragraph 2A of the Lease shall be amended to reflect a rate of Eight
Thousand Five Hundred Ninety-Six and 55/100 DOLLARS ($8,596.55) per month,
net of Operating Costs, for the time period commencing on March 6, 1995 and
ending January 31, 2000.
3. Paragraph 2B of the Lease shall be amended to reflect the sum of Eleven
Thousand Eight Hundred Seventy-Seven and 61/100 DOLLARS ($11,877.61).
4. Paragraph 3 of the Lease shall be amended to reflect a Tenant's initial
monthly payment for Operating Costs of Four Thousand Three Hundred Ninety-
One and 91/100 DOLLARS ($4,391.91).
5. Paragraph 21J of the Lease shall be amended to reflect a numerator of
8,654 and a Tenant's Proportionate Share of 10.402%.
6. Notwithstanding the aforementioned Landlord shall contribute Three Thousand
Three Hundred Sixty-One and 08/100 DOLLARS ($3,361.08) for the
architectural design and construction of certain leasehold improvements to
be approved in writing by Landlord and to be installed in or made to the
leased premises, provided the portion of Landlord's contribution
attributable to the cost of architectural design does not exceed Two
Hundred and 00/100 DOLLARS ($200.00).
Tenant shall not unreasonably interfere with the general contractor or
otherwise delay the progress of construction, and shall be responsible for
any costs or obligations incurred by Landlord as a result thereof. Tenant
shall not withhold any estoppel certificate required by Landlord's
mortgagee regarding the completion of the tenant improvements.
In the event that the total actual cost of the architectural design and
construction of such leasehold improvements is greater than Three Thousand
Three Hundred Sixty-One and 08/100 DOLLARS ($3,361.08), the difference
between such actual cost and Three Thousand Three Hundred Sixty-One and
08/100 DOLLARS ($3,361.08) shall be the sole responsibility of Tenant and
shall be paid in full by Tenant within fifteen (15) days of completion of
construction of said leasehold improvements, as evidenced by issuance of a
certificate of occupancy with respect thereto or receipt of a request of
final payment from the general contractor, whichever occurs earlier.
Recordation of any mechanics' or other liens or encumbrances against the
Leased Premises, which liens are not released in a timely and prompt fashion
or as otherwise provided in this Lease, shall constitute a default by
Tenant under this Lease, thereby entitling Landlord to pursue any and all
remedies which it may have at law, in equity or pursuant to this Lease.
In the event that the total actual costs of the architectural design and
construction of such leasehold improvements is less than Three Thousand
Three Hundred Sixty-One and 08/100 DOLLARS ($3,361.08), the difference
between such actual cost and Three Thousand Three Hundred Sixty-One and
08/100 DOLLARS ($3,361.08) shall be amortized over the remaining term of
this lease at six percent (6%) per annum in equal monthly amounts, which
amounts shall be credited against the monthly rent due from the Tenant.
For example, if the total actual cost of such leasehold improvements is
Two Thousand and 00/100 DOLLARS ($2,000.00) and there are fifty-eight (58)
months remaining in the lease term, then the savings of One Thousand Three
Hundred Sixty-One and 08/100 DOLLARS ($1,361.08) shall be credited against
the rent due from Tenant in the amount of Twenty-Six and 95/100 DOLLARS
($26.95) per month for fifty-eight (58) months.
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<PAGE> 8
All other terms of this lease agreement, except as expressed or by necessary
implication modified herein, shall be in full force and effect throughout the
term of this lease agreement.
LANDLORD: TENANT:
Badger II Limited Partnership Alternative Living Services, Inc.
BY: Great Lakes Properties of Wisconsin, Inc. BY: /s/
----------------------------------------- ----------------------------
BY: /s/ Jon D. Hammes TITLE: Chief Financial Officer
----------------------------------------- --------------------------
Jon D. Hammes
ITS: President
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<PAGE> 9
STANDARD OFFICE LEASE
WISC (5/80)
---------------------------
---------------------------------------
---------------------------------------
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") made and entered into between Badger
II Limited Partnership ("Landlord") and Alternative Living Services, Inc.
("Tenant").
W I T N E S S E T H:
1. PREMISES AND TERM. In consideration of the obligation of Tenant
to pay rent as herein provided, and in consideration of the other terms,
provisions, and covenants hereof, Landlord hereby demises and leases to Tenant,
and Tenant hereby accepts and leases from Landlord, the following described
space, to wit:
6,817 Rentable Square Feet
as approximately shown on the plan attached hereto as EXHIBIT A (the "Leased
Premises") which is located in the building commonly known as Chancellory Park I
(the "Building"), situated on the real property described in EXHIBIT B attached
hereto (the "Property"), and the Leased Premises shall be used for the following
purposes and no others:
GENERAL OFFICE USE
TO HAVE AND TO HOLD the same for a term of sixty (60) months commencing
on December 16, 1994 and ending at midnight on December 31, 1999 unless
terminated or extended pursuant to any provision hereof. Tenant acknowledges
that no representations as to the condition or repair of the Leased Premises,
nor promises to alter, remodel or improve the Leased Premises have been made by
Landlord, unless such are expressly set forth in this lease.
If this Lease is executed before the Leased Premises become vacant or
otherwise available and ready for occupancy and Landlord cannot, using
reasonable efforts, acquire possession and/or deliver the Leased Premises on
the date above recited as the commencement date of this Lease, Landlord shall
not be deemed to be in default, nor in any way liable to Tenant, because of
such failure and Tenant agrees to accept possession of the Leased Premises at
such time as Landlord is able to tender the same, which date shall thenceforth
be deemed the "commencement date"; and the term of this Lease shall
automatically be extended so as to include the full number of months
hereinbefore provided, except that if the commencement date is other than the
first day of a calendar month, such term shall also be extended for a period
equivalent of to the remainder of the calendar month in which possession is
tendered. Landlord hereby waives payment of rent (including such portion of
the additional rent which is related to Tenant's use and occupancy of the
Leased Premises) covering any period prior to such tendering of possession.
In the event that Tenant's possession is delayed because Landlord has
not sufficiently completed the Building or the Leased Premises, the
commencement date shall be the date upon which the Building, other improvements
on the Property and the Leased Premises have been substantially completed in
accordance with the plans and specifications of Landlord (other than any work
which cannot be completed on such date provided such incompletion will not
substantially interfere with Tenant's use of the Leased Premises); and the term
of this Lease shall automatically be extended so as to include the full number
of months hereinbefore provided, except that if the commencement date is other
than the first day of a calendar month, such term shall also be extended for a
period equivalent to the remainder of the calendar month in which possession is
tendered; provided, however, that if Landlord shall be delayed in such
substantial completion as a result of: (i) Tenant's failure to agree to plans
and specifications; (ii) Tenant's request for materials or finishes other than
as expressly set forth on EXHIBIT C attached hereto; (iii) Tenant's changes in
plans; or (iv) the performance, acts or omissions of Tenant or a party employed
by Tenant, the commencement date and the obligation to pay rent hereunder shall
be accelerated by one day for each day of delay resulting, directly or
indirectly, from any of the foregoing. Landlord shall notify Tenant in writing
as soon as Landlord deems the Building, other improvements, and the Leased
Premises to be completed and ready for occupancy as aforesaid, in the event
that the Building, other improvements, or the Leased Premises have not in fact
been substantially completed as aforesaid, Tenant shall notify Landlord in
writing of its objections within five (5) days after Tenant receives the
aforesaid notice from Landlord. Landlord shall have reasonable time after
delivery of such notice in which to take such corrective action as Landlord
deems necessary and shall notify Tenant in writing as soon as it deems such
corrective action, if
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<PAGE> 10
any, has been completed so that the Building, other improvements, and the
Leased Premises are completed and ready for occupancy. In the event Tenant's
possession is delayed, Tenant shall not have any claim against Landlord,
including claims for rent paid on alternative space until the Leased Premises
are delivered to Tenant.
The taking of possession by Tenant shall be deemed conclusively to
establish that the Building, other improvements, and the Leased Premises have
been completed in accordance with the plans and specifications and are in good
and satisfactory condition as of when possession was so taken (except for such
items as Landlord is permitted to complete at a later date, which items shall
be specified by Landlord to Tenant in writing). Upon such "commencement date"
Tenant shall execute and deliver to Landlord a letter of acceptance of delivery
of the Leased Premises, such letter to be on Landlord's or its lender's
standard form therefor. In the event of any dispute as to when and whether the
work performed or required to be performed by Landlord has been substantially
completed, the certificate of an A.I.A. registered architect or a temporary or
final certificate of occupancy issued by the local governmental authority shall
be conclusive evidence of such completion, effective on the date of the
delivery of a copy of any such certificate to Tenant. In the event the leased
premises have not in fact been substantially completed as aforesaid by January
1, 1995. Tenant shall have the option to terminate this lease by giving written
notice to Landlord after January 1, 1995. Fifteen (15) days after Landlord is
in receipt of said written notice, if the leased premises has still not in fact
been substantially completed as aforesaid, the lease could terminate.
2. BASE RENT AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord for the Leased Premises in
lawful money of the United States rent for the entire term hereof at the rate
of Six Thousand Seven Hundred Forty-Eight and 83/100 DOLLARS ($6,748.83) per
month, in advance, without demand or right of set off, whatsoever. The first
monthly installment shall be due on the commencement date. Thereafter one such
monthly installment shall be due and payable on or before the first day of each
calendar month succeeding the commencement date; further provided, that the
rental payment for any fractional calendar month at the commencement or end of
the Lease term shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date
hereof the sum of Nine Thousand Three Hundred Fifty-Six and 33/100 DOLLARS
($9,356.33), which sum shall be held by Landlord, without obligation for
interest, as security for the full, timely and faithful performance of Tenant's
covenants and obligations under this Lease, it being expressly understood and
agreed that such deposit is not an advance rental deposit or a measure of
Landlord's damages in case of Tenant's default. Upon the occurrence of any
event of default by Tenant, Landlord may, from time to time, without prejudice
to any other remedy provided herein or provided by law, use such fund to the
extent necessary to make good any arrears of rent or other payments due Landlord
hereunder, or any other damage, injury, expense or liability caused by any event
of Tenant's default; and Tenant shall pay to Landlord on demand the amount so
applied in order to restore the security deposit to its original amount.
Although the security deposit shall be deemed the property of Landlord, any
remaining balance of such deposit shall be returned by Landlord to Tenant at
such time after termination of this Lease when Landlord shall have determined
that all Tenant's obligations under this Lease have been fulfilled. Subject to
other terms and conditions contained in this Lease, if the Building is conveyed
by Landlord, said deposit may be turned over to Landlord's grantee, and if so,
Tenant hereby releases Landlord from any and all liability with respect to said
deposit and its application or return.
3. OPERATING COSTS.
A. Tenant shall pay upon demand to Landlord for each calendar year,
or any portion thereof, during the term of this Lease, as the same may be
extended or renewed from time to time, as additional rent, its Proportionate
Share of Operating Costs (as hereinafter defined) calculated on the basis of the
ratio set forth in subparagraph 21J.
As used in this Lease, the term "Operating Costs" shall mean any and
all expenses, costs and disbursements (including taxes and assessments) of any
kind and nature whatsoever incurred by Landlord in connection with the
ownership, management, maintenance, operation and repair of the Building or the
Property or any improvements situated on the Property (including, without
limitation, the costs of maintaining and repairing parking lots, parking
structures, and easements), commercially reasonable property management fees,
salaries, fringe benefits and related costs, insurance costs of every kind and
nature, heating and air conditioning costs, common area utility costs, the costs
of repairs, maintenance and decorating, and the Building's or Property's share
of the operating or related costs of the Chancellory Park Development which
Landlord shall pay or become obligated to pay in respect of a calendar year
(regardless of when such operating costs were incurred), except the following:
(i) costs of tenant improvements to other tenant's premises; (ii) costs of
capital improvements and costs of curing construction defects; (iii)
depreciation; (iv) interest and principal payments on mortgages, and other debt
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<PAGE> 11
costs; (v) real estate brokers' leasing commissions or compensations; (vi) any
cost or expenditure (or portion thereof) for which Landlord is reimbursed,
whether by insurance proceeds or otherwise; and (vii) costs of any service
furnished to any other occupant of the Building which Landlord does not provide
to Tenant. Notwithstanding anything contained herein to the contrary,
depreciation of any capital improvements made after the date of this Lease which
are intended to reduce Operating Costs or which are required under any
governmental laws, regulations, or ordinances which were not applicable to the
Building at the time it was constructed, shall be included in Operating Costs.
The useful life of any such improvement shall be reasonably determined by
Landlord. In addition, interest on the undepreciated cost of any such
improvement (at the prevailing construction loan rate available to Landlord on
the date the cost of such improvement was incurred) shall also be included in
Operating Costs. Tenant's initial monthly payment for Operating Costs shall be
Three Thousand Four Hundred Fifty-Nine and 63/100 DOLLARS ($3,459.63).
In the event during all or any portion of any calendar year the Building
is not fully rented and occupied, Landlord may elect to make an appropriate
adjustment in Operating Costs for such year, employing sound accounting and
management principles, to determine Operating Costs that would have been paid or
incurred by Landlord had the Building been fully rented and occupied and the
amount so determined shall be deemed to have been Operating Costs for such year.
In no event shall the adjusted Operating Costs, directly related to the Leased
Premises, result in Tenant paying for Operating Costs higher than that incurred
by Landlord.
Landlord and Tenant acknowledge that certain of the costs of management,
operation and maintenance of Chancellory Park are contractually allocated among
buildings in the complex using methods of allocation that are considered
reasonable and appropriate for the circumstances. The determination of such
costs and the allocation of all or part thereof to Operating Costs hereunder
shall be in accordance with generally accepted accounting principles applied on
a consistent basis.
B. During December of each year or as soon thereafter as
practicable, Landlord shall give Tenant written notice of its estimate of
amounts payable under subparagraph A above for the ensuing calendar year. On or
before the first day of each month thereafter, Tenant shall pay to Landlord as
additional rent one-twelfth (1/12th) of such estimated amounts provided that if
such notice is not given in December, Tenant shall continue to pay on the basis
of the prior year's estimate until the first day of the month after the month in
which such notice is given. If at any time it appears to Landlord that the
amounts payable under subparagraph A above for the then current calendar year
will vary from its estimate by more than five percent (5%), Landlord may, by
written notice to Tenant, revise its estimate for such year, and subsequent
payments by Tenant for such year shall be based upon such revised estimate.
Within ninety (90) days after the close of each calendar year or as soon
thereafter as practicable, Landlord shall deliver to Tenant a statement showing
the total amounts payable under subparagraph A above and Tenant's Proportionate
Share thereof. If such statement shows an amount due from Tenant that is less
than the estimated payments previously paid by Tenant, it shall be accompanied
by a refund of the excess to Tenant. If such statement shows an amount due from
Tenant that is more than the estimated payments previously paid by Tenant,
Tenant shall pay the deficiency to Landlord, as additional rent, within thirty
(30) days after delivery of the statement, subject to possible later adjustment
in the event of a substantiated exception taken by Tenant.
C. Tenant or its representatives shall have the right to examine
Landlord's books and records of Operating Expenses during normal business hours
within forty-five (45) days following the furnishing of the statement to Tenant.
Unless Tenant takes written exception to any item within forty-five (45) days
following the furnishing of the statement to Tenant (which item shall be paid
in any event subject to a possible later adjustment), statement shall be
considered as final and accepted by Tenant. In the event the exception is
taken, the matter may be submitted to a mutually agreed upon independent
certified public accountant at Tenant's expense for resolution. Appropriate
adjustments, if any, shall be made to Landlord or Tenant promptly. If the
mutually agreed upon independent certified public accountant determines that
Landlord has overstated Operating Expenses by 4% or more, then Landlord shall
pay to Tenant, the reasonable cost of such certified public accountant.
D. If Landlord selects the accrual accounting method rather than
the cash accounting method for operating expense purposes, Operating Costs shall
be deemed to have been paid when such expenses have accrued.
4. ALTERATIONS. Landlord agrees to install at Landlord's cost and
expense, the improvements described in EXHIBIT C attached hereto, all of which
shall be and remain the property of Landlord. All other improvements,
alterations, additions, partitions, fixtures, removals and restoration to the
Leased Premises shall be installed at the cost and expense of Tenant (which cost
shall be payable on demand by Landlord as additional rent if Landlord pays said
cost), but only if approved by Landlord in writing; only in accordance with
plans and specifications which have been previously submitted to and approved in
writing by Landlord; only in accordance and in compliance with all governmental
laws,
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<PAGE> 12
ordinances, rules and regulations; only by Landlord or by contractors and
subcontractors approved in writing by Landlord (which said three (3) approvals
shall not be unreasonably withheld); and only in a good workmanlike manner,
diligently prosecuted and so as not to damage the structure or structural
qualities of the Building. All alterations, additions, improvements, fixtures
and partitions erected by Tenant shall be and remain the property of Tenant
during the term of this Lease, provided, however, that, unless Landlord
otherwise elects in the written notice potentially approving such items, all
said alterations, additions, improvements, fixtures and partitions shall, upon
the expiration or termination of this Lease, or the earlier vacation of the
Leased Premises, become and be deemed to the property of Landlord and title
thereto shall pass to Landlord under this Lease as by a bill of sale without
further act or deed on the part of Tenant and Tenant shall, at Landlord's
request, promptly execute and deliver such bills of sale or other documents or
instruments as Landlord may deem necessary or desirable to evidence the
foregoing. Notwithstanding anything to the contrary contained in the foregoing,
if Landlord so elects by notice given thirty (30) days after any earlier
vacation, Tenant shall remove all alterations, additions, improvements, fixtures
and partitions so designated by Landlord in such notice and restore the Leased
Premises to its condition prior to the installation or construction thereof
immediately upon receipt of said notice. Tenant shall, prior to any such
construction or work, provide such reasonable assurances to Landlord, including
but not limited to, waivers of lien, surety company performance bonds and
personal guaranties of individuals of substance, as Landlord shall require to
assure payment of the costs thereof and to protect Landlord against any loss
from any mechanics' laborers', materialmen's or other liens. Tenant hereby
indemnifies and saves Landlord harmless from and against any and all loss,
liability, damage, penalty, cost, expense or fee (including, without
limitation, court costs and reasonable attorneys' fees) incurred by or asserted
against Landlord as a result of the existence or threat of any lien against the
Building, Leased Premises or Property as a result of Tenant's work. At
Landlord's request, Tenant will notify any contractors, subcontractors and
materialmen performing work on, or supplying materials for, the Leased Premises
that Tenant is not acting as the agent of Landlord in connection with any such
work and/or shall post signs on the Leased Premises to that effect.
5. SERVICE. Landlord agrees to furnish Tenant, while occupying the
Leased Premises, water, hot, cold and refrigerated at those points of supply
provided for general use of tenants; heated and refrigerated air conditioning
in season at such times as Landlord normally furnishes these services to all
tenants of the Building, and at such temperatures and in such amounts as are in
accordance with any applicable statutes, rules or regulations and are considered
by Landlord to be standard, such service at other times and on Saturday, Sunday,
and holidays to be optional on the part of Landlord (Landlord hereby reserves
the right to charge Tenant for any such optional service requested by Tenant on
such basis as Landlord, in its reasonable discretion, determines); janitor
service to the Leased Premises on weekdays other than holidays and such window
washing as may from time to time in the Landlord's judgment be reasonably
required; but failure to any extent to furnish or any stoppage or interruption
of these defined services, resulting from any cause not caused by Landlord's
gross negligence or willful action or inaction, shall not render Landlord liable
in any respect for damages to any person, property, or business, nor be
construed as an eviction of Tenant or work an abatement of rent, nor relieve
Tenant from fulfillment of any covenant or agreement hereof. Should any
equipment or machinery furnished by Landlord cease to function properly,
Landlord shall use reasonable diligence to repair the same promptly, but Tenant
shall have not claim for rebate of rent or damages on account of any
interruptions in service occasioned thereby or resulting therefrom. Whenever
heat generating machines or other machines or equipment are used by Tenant in
the Leased Premises which affect the temperature otherwise maintained by the air
conditioning equipment or result in a disproportionate level if use by Tenant of
any service provided by Landlord, Landlord reserves the right to install
supplementary air conditioning units or other supplementary equipment or
machinery in the Leased Premises (or the use of the Leased Premises) and the
expense of such purchase, installation, maintenance, operation and repair shall
be paid by Tenant upon demand as an additional rent and/or, as applicable, to
install, at Tenant's sole cost and expense, meters or similar devises to monitor
such use/or to charge Tenant for such disproportionate use.
Tenant shall not provide any janitorial services without Landlord's
written consent and then only subject to supervision of Landlord and by a
janitorial contractor or employees at all times satisfactory to Landlord. Any
such services provided by Tenant shall be Tenant's sole risk and responsibility.
6. USE OF PREMISES.
A. USE LIMITED. Tenant will not occupy or use, nor permit any
portion of the Leased Premises to be occupied or used, for any business, use or
purpose, whatsoever, other than described above or for any business, use or
purpose which is unlawful in part or in whole or deemed to be disreputable in
any manner, or extra hazardous, including, without limitation, for fire, nor
permit anything to be done which will render void or in any way increase the
rate of fire insurance on the Building or its contents, and Tenant shall
immediately cease and desist from any such use, paying all costs and expense
resulting therefrom.
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B. COMPLIANCE. Tenant shall at its own cost and expense promptly
obtain any and all licenses and permits necessary for its use and occupancy of
the Building. Tenant shall comply with all governmental laws, ordinances,
rules and regulations applicable to the use and its occupancy of the Leased
Premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of any violations or nuisances
caused by Tenant in or upon, or connected with, the Leased Premises, all at
Tenant's sole expense. If, as a result of any change in the governmental laws,
ordinances, rules and regulations, the Leased Premises must be altered to
lawfully accommodate Tenant's use and occupancy, such alterations shall be made
only with the consent of Landlord, but the entire cost shall be borne by Tenant;
provided, that, the necessity of Landlord's consent shall in no way create any
liability against Landlord for failure of Tenant to comply with such laws,
ordinances, rules and regulations.
C. MAINTENANCE. Tenant will maintain the Leased Premises
(including all fixtures installed by Tenant and plate glass) in good order and
repair, reasonable wear and tear excepted, in a clean, secure and healthful
condition, and in compliance with all applicable laws, ordinances, orders,
rules, and regulations (state, federal, municipal, and other agencies or bodies
having any jurisdiction thereof), Tenant shall be responsible for replacing all
light bulbs and ballasts. Any repairs or replacements shall be with materials
and workmanship of the same character, kind and quality as the original. Tenant
will not, without the prior written consent of Landlord, which consent may be
withheld for any reason whatsoever, paint, install lighting or decoration, or
install any signs, window or door lettering or advertising media of any type on
or about the Leased Premises or the Building.
D. NUISANCE. Tenant will conduct its business and control its
agents, employees and invitees in such a manner as not to create any nuisance,
nor interfere with, annoy, or disturb other tenants or Landlord in the
management of the Building.
E. NEGLIGENCE. Tenant shall pay upon demand as additional rent the
full cost of repairing any damage to the Leased Premises, Building or related
facilities resulting from and/or caused in whole or in part by the negligence or
misconduct of Tenant, its agents, employees, patrons, invitees, or any other
person entering upon the property as a result of Tenant's business activities or
resulting from Tenant's default hereunder.
F. RULES AND REGULATIONS. Tenant and Tenant's agents, employees,
patrons, and invitees, will comply fully with all rules and regulations of
Chancellory Park, the Building, parking area and related facilities which are
described in EXHIBIT D attached hereto. Landlord shall at all times have the
right, in its reasonable discretion, to change such rules and regulations or to
promulgate other reasonable rules and regulations as may be deemed advisable
for the safety, care, and cleanliness of the Building or Chancellory Park, or
any part thereof, and for the preservation of good order therein. Copies of all
rules and regulations, changes, and amendments will be forwarded to Tenant in
writing and shall be carried out and observed by Tenant. Tenant shall further
be responsible for the compliance with such rules and regulations by Tenant's
employees, agents, patrons and invitees.
G. ACCESS. Tenant shall permit Landlord (or its designees) access
to the Leased Premises to erect, use, maintain, repair and replace pipes,
cables, conduits, plumbing, vents, telephone, electric and other wires or other
items which pass in, to or through the Leased Premises, as to the extent that
Landlord, in its sole discretion, may deem necessary or appropriate for the
proper operation and maintenance of the Building. In the event that Landlord
requires access to any under-floor duct, Landlord's liability for carpet (or
other floor covering) replacement shall be limited to replacement of the piece
removed. All such work shall be done, as far as practicable, in such a manner
as to minimize interference with Tenant's use of the Leased Premises.
H. SURRENDER. At termination of this Lease, upon its expiration or
otherwise, Tenant shall remove from the Leased Premises all personal property of
Tenant; repair any damage caused by such removal; deliver up the Leased Premises
with all improvements located thereon (except as herein provided) in good repair
and condition, reasonable wear and tear excepted, broom clean and free of all
debris; execute and deliver such conveyance as Landlord may reasonably deem
necessary or desirable to evidence the same and any other conveyances pursuant
to this Lease; and continue to insure all of the same; as otherwise required
pursuant hereto, until this subparagraph H has been complied with.
7. INSPECTIONS. Landlord shall have the right to enter the Leased
Premises at any reasonable time upon reasonable prior notice, for the following
purposes: (i) to ascertain the condition of the Leased Premised; (ii) to
determine whether Tenant is diligently fulfilling Tenant's responsibilities
under this Lease; (iii) to clean and to make such repairs as may be required or
permitted to be made by Landlord under the terms of this Lease; (iv) to show the
Leased Premises to prospective buyers or mortgagees; or (v) to do any other act
or thing which Landlord deems reasonable to preserve the Leased Premises and the
Building. During the twelve (12) months prior to the end of the term hereof and
at any time Tenant is in default hereunder beyond any applicable grace period,
Landlord shall have the right to enter the Leased Premises for the purpose of
showing the Leased Premises to lessees. Tenant shall
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arrange to meet with Landlord for a joint inspection of the Leased
Premises. In the event of Tenant's failure to arrange such joint
inspection, Landlord's inspection at or after Tenant's vacating the
Leased Premises shall be conclusively deemed correct for purposes of
determining Tenant's responsibility for repairs and restoration.
8. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not have the right to assign, encumber or pledge
this Lease or to sublet the whole or any part of the Leased Premises,
whether voluntarily or by operation of law, or permit the use of occupancy
of the Leased Premises by anyone other than Tenant or for any use other
than the use described in paragraph 1 hereof, without the prior written
consent of Landlord, which consent may not be unreasonably withheld, and
such restrictions shall be binding upon any assignee of subtenant to which
Landlord has consented. Except as expressly provided in B below, the
prohibitions of this paragraph shall apply to any merger, consolidation
or the re-organization of Tenant, the transfer of any shares of Tenant,
the transfer of any interest in Tenant by any partner of Tenant or the
transfer of any interest in any partner of any partner of Tenant. In the
event Tenant desires to sublet the Leased Premises, or any portion
thereof, or assign this Lease, Tenant shall give written notice thereof to
Landlord within a reasonable time prior to the proposed commencement date
of such subletting or assignment, which notice shall set forth the name of
the proposed subtenant or assignee, the relevant terms of any sublease and
copies of financial reports and other relevant financial information of
the proposed subtenant or assignee. Notwithstanding any permitted
assignment or subletting, Tenant shall at all times remain directly,
primarily and fully responsible and liable for the payment of the rent
herein specified and for compliance with all of its other obligations
under the terms, provisions and covenants of this Lease. Upon the
occurrence of an "event of default" (as hereinafter defined), if the
Leased Premises or any part thereof are then assigned or sublet, Landlord,
in addition to any other remedies herein provided or provided by law, may,
at its option, collect directly from such assignee or subtenant all rents
due and becoming due to Tenant under such assignment or sublease and apply
such rent against any sums due to Landlord from Tenant hereunder, and no
such collection shall be construed to constitute a novation or a release
of Tenant from the further performance of Tenant's obligations hereunder.
In the event the rent, including, without limitation, base rent and any
additional rent, together with any and all other costs, fees, expenses or
other amounts paid by any such occupant, user, subtenant or assignee in
any month exceeds the rent payable hereunder, after deducting Tenant's
actual, verifiable and reasonable costs for tenant improvements, if any
then the amount of fifty percent (50%) of such excess shall be paid to
Landlord as additional rent hereunder within five (5) business days after
receipt thereof by or on behalf of Tenant.
B. In addition to, but not in limitation of, Landlord's right to
approve of any subtenant or assignee, Landlord shall have the option, in
its sole discretion, in the event of any proposed subletting or
assignment, to terminate this Lease, or in the case of a proposed
subletting of less than the entire Leased Premises, to recapture the
portion of the Leased Premises to be sublet, as of the date the subletting
or assignment is to be effective. The option shall be exercised, if at
all, by Landlord giving Tenant written notice thereof within sixty (60)
days following Landlord's receipt of Tenant's written notice as required
above. If this Lease shall be terminated with respect to the entire
Leased Premises pursuant to this paragraph, the term of this Lease shall
end on the date stated in Tenant's notice as the effective date of the
sublease or assignment as if that date had been originally fixed in this
Lease for the expiration of the term hereof. If Landlord recaptures under
this paragraph only a portion of the Leased Premises, the rent during the
unexpired term shall abate proportionately based on the rent contained in
this Lease as of the date immediately prior to such recapture. Tenant
shall, at Tenant's own cost and expense, discharge in full any outstanding
commission obligation on the part of Landlord with respect to this Lease,
and any commissions which may be due and owing as a result of any proposed
assignment or subletting by Tenant.
Notwithstanding anything contained in A above, a transfer of any shares of
Tenant shall not be considered an event of assignment or subletting,
provided that after such transfer, Evergreen Healthcare, Inc. (which
currently holds a voting share majority interest in Tenant) shall not hold
less than a majority voting share in Tenant. In the event a transfer of
any shares of Tenant is contemplated in which Evergreen Healthcare, Inc.
shall upon completion of the transfer or transaction, own less than a
majority voting shares in Tenant. Landlord's consent shall be required
for such transfer or transaction unless Tenant provides Landlord with
evidence satisfactory to Landlord, prior to such transfer or transaction,
that Tenant has arranged to have and received not less than Ten Million
and 00/100 DOLLARS ($10,000,000.00) of equity capital injected into
Tenant.
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9. FIRE AND CASUALTY DAMAGE.
A. If the Building, improvements, or Leased Premises are rendered
partially or wholly untenantable by fire or other casualty, and if such
damage cannot, in Landlord's reasonable estimation, be materially restored
within ninety (90) days of such damage, then Landlord may, at its sole
option, terminate this Lease as of the date of such fire or casualty.
Landlord shall exercise its option provided herein by written notice to
Tenant within thirty (30) days of such fire or other casualty. For
purposes hereof, the Building, improvements or Leased Premises shall be
deemed "materially restored" if they are in such condition as would not
prevent or materially interfere with Tenant's use of the Leased Premises.
B. If this Lease is not terminated pursuant to paragraph 9A, then
Landlord shall proceed with all due diligence to repair and restore the
Building, improvements or Leased Premises, as the case may be (except that
Landlord may elect not to rebuild if such damage occurs during the last
year of the term exclusive of any option which is unexercised at the date
of such damage).
C. If this Lease shall be terminated pursuant to this paragraph
9, the term of this Lease shall end on the date of such damage as if that
date had been originally fixed in this Lease for the expiration of the
term hereof. If this Lease shall not be terminated by Landlord pursuant
to this paragraph 9 and if the Leased Premises is untenantable in whole or
in part following such damage, the rent payable during the period in which
the Leased Premises is untenantable shall be reduced to such extent, if
any, as may be fair and reasonable under all of the circumstances as of
the same is reasonably determined by Landlord. In the event that Landlord
should fail to complete such repairs and rebuilding within one hundred
eighty (180) days after the date of such damage, Tenant may at its option
and as its sole remedy terminate this Lease by delivering thirty (30)
days' prior written notice to Landlord, whereupon the Lease shall end on
the date thirty (30) days after the giving of such notice as if the date
thirty (30) days after the giving of such notice were the date originally
fixed in this Lease for the expiration of the term hereof, but only if the
repairs and rebuilding have not yet been completed on such date; provided,
however, that if construction is delayed because of changes, deletions, or
additions in construction requested by Tenant, strikes, lockouts,
casualties, acts of God, war, material or labor shortages, governmental
regulation or control or other causes beyond the reasonable control of
Landlord, the period for restoration, repair or rebuilding shall be
extended for the amount of time Landlord is so delayed.
In no event shall Landlord be required to rebuild, repair or replace
any part of the partitions, fixtures, additions and other improvements
which may have been placed in or about the Leased Premises by Tenant. If
is Lease is not terminated pursuant hereto, Tenant shall promptly repair
and restore any such partitions, fixtures, additions or other
improvements that Tenant is required to construct, place or install in,
on or about the Leased Premises pursuant hereto. Tenant hereby agrees to
maintain insurance covering the contents of the Leased Premises, its
personal property, fixtures, machinery, equipment, partitions, additions,
alterations and improvements against all risks, including damage by fire
and other casualty, with extended coverage, vandalism, malicious mischief,
theft and mysterious disappearance endorsements, and covering contractual
liability of Tenant under this Lease, together with such other
endorsements as Landlord may, from time to time, reasonably require in
amounts at least equal to the full replacement cost thereof, without
deduction for depreciation and without coinsurance. All insurance
policies shall include a standard waiver of subrogation endorsement, shall
provide that the coverage shall not be terminated or modified without
thirty (30) days' advance written notice to Landlord, Tenant shall deliver
a certificate of said insurance premium prepaid to Landlord and, in the
case of an insurance policy about to expire, Tenant shall deliver renewal
or replacement certificates not less than thirty (30) days prior to the
date of expiration. Said insurance coverage shall be provided by
insurance carriers reasonably acceptable to Landlord. Any insurance which
may be carried by Landlord or Tenant against loss or damage to the
Building or Leased Premises shall be for the sole benefit of the party
carrying such insurance and under its sole control.
D. Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust
covering the Leased Premises, Building or Property requires that any
insurance proceeds be applied to such indebtedness, then Landlord shall
have the right to terminate this Lease by delivering written notice of
termination to Tenant within fifteen (15) days after such requirement is
made by any such holder, whereupon this Lease shall end on the date of
such damage as if the date of such damage were the date originally fixed
in this Lease for the expiration of the term hereof.
E. Each of Landlord and Tenant hereby releases the other from any
and all liability or responsibility to the other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or
damage to property caused by fire or any other perils insured in policies
of insurance covering such property, even if such loss or damage shall
have been caused by the fault or negligence of the other party, or anyone
for whom such party may be responsible, including any other tenants or
occupants of the remainder of the Building in which the Leased Premises is
located; provided, however, that this release shall be applicable and in
force and effect only to the extent that such release shall be lawful at
that time and in any event only with respect to loss or damage occurring
during such times as the releasor's policies shall
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<PAGE> 16
contain a clause or endorsement to the effect that any such release shall
not adversely affect or impair said policies or prejudice the right of the
releasor to recover thereunder and then only to the extent of the
insurance proceeds payable under such policies. Each of the Landlord and
Tenant agrees that it will request its insurance carriers to include in
its policies such a clause or endorsement. If extra cost shall be charged
therefor, each party shall advise the other thereof and of the amount of
the extra cost, and the other party, at its election, may pay the same,
but shall not be obligated to do so. If such other party fails to pay
such extra cost, the release provisions of this paragraph shall be
inoperative against such other party to the extent necessary to avoid
invalidation of such releasor's insurance.
F. In the event of any damage or destruction to the Building or
the Leased Premises by any peril covered by the provisions of this
paragraph 9, Tenant shall, upon notice from Landlord, remove forthwith, at
its sole cost and expense, such portion of all of the property belonging
to Tenant or his licensees from such portion or all of the Building or the
Leased Premises as Landlord shall reasonably request and Tenant hereby
indemnifies and holds Landlord harmless from any loss, liability, costs,
and expenses, including attorney's fees, arising out of any claim of
damage or injury as a result of any alleged failure to properly secure the
Leased Premises prior to such removal and/or such removal.
10. Liability. Landlord shall not be liable for and Tenant will
indemnify and hold Landlord harmless from and against any loss, liability,
costs and expenses, including, without limitation, court costs and
attorney's fees, arising out of any claim of injury or damage on or about
the Leased Premises caused by the negligence or misconduct by Tenant, its
agents, employees, subtenants, invitees or by any other person entering
the Leased Premises or the Building or Property under express or implied
invitation of Tenant, arising out of Tenant's use or occupancy of the
Leased Premises or arising out of a breach of this Lease by Tenant.
Landlord shall not be liable to Tenant or Tenant's agents, employees,
subtenants, invitees or any person entering upon the Property in whole or
in part because of Tenant's use or occupancy of the Leased Premises for
any damage to persons or property due to condition, design, or defect in
the Building or its mechanical systems which may exist or occur, and
Tenant assumes all risks of damage to such persons or property. Landlord
shall not be liable or responsible for any loss or damage to any property
or person occasioned by theft, fire, act of God, public enemy, injunction,
riot, strike, insurrection, war, court order, requisition or order of
governmental body or authority, or other matter beyond control of
Landlord, or for any injury or damage or inconvenience, which may arise
through repair or alteration of any part of the Building, or failure to
make repairs, or from any cause whatever except Landlord's willful acts
or gross negligence. Tenants shall procure and maintain throughout the
term of this Lease a policy of insurance, in form and substance
satisfactory to Landlord, at Tenant's sole cost and expense, insuring
both Landlord and Tenant against all claims, demands or actions arising
out of or in connection with: (i) the Leased Premises: (ii) the condition
of the Leased Premises; (iii) Tenant's operations in and maintenance and
use of the Leased Premises; and (iv) Tenant's liability assumed under
this Lease; the limits of such policy to be in the amount of not less
than $1,000,000 per occurrence in respect of injury to persons (including
death) and in the amount of not less than $1,000,000 per occurrence in
respect of property damage or destruction, including loss of use thereof.
Such policy shall be procured by Tenant from responsible insurance
companies reasonably satisfactory to Landlord and shall contain a
standard waiver of subrogation endorsement. A certified copy of such
policy, together with receipt evidencing payment of the premium, shall be
delivered to Landlord prior to the commencement date of this Lease. Not
less than thirty (30) days prior to the expiration date of such policy, a
certified copy of a renewal thereof (bearing notations evidencing the
payment of the renewal premium) shall be delivered to Landlord. Such
policy shall further provide that not less than thirty (30) days' written
notice shall be given to Landlord before such policy may be cancelled or
changed to reduce the insurance coverage provided thereby.
11. CONDEMNATION.
A. If, in Landlord's or Tenant's reasonable discretion, any
substantial part of the Building, improvements, or Leased Premises
should be taken for any public or quasi-public use under governmental law,
ordinance or regulation, or by right of eminent domain, or by private
purchase in lieu thereof and the taking would prevent or materially
interfere with the use of the Building or Leased Premises, then this Lease
shall terminate effective when the physical taking shall occur in the same
manner as if the date of such taking were the date originally fixed in
this Lease for the expiration of the term hereof.
B. If part of the Building, Improvements, or Leased Premises
shall be taken for any public or quasi-public use under any governmental
law, ordinance or regulation, or by right of eminent domain, or by private
purchase in lieu thereof, and this Lease is not terminated as provided in
the subparagraph A above, then this Lease shall not terminate but the rent
payable hereunder during the unexpired portion of this Lease shall be
reduced to such extent, if any, as may be fair and reasonable under all of
the circumstances and Landlord shall undertake to restore the Building,
improvements, and Leased Premises to a condition suitable for Tenant's
use, as near to the condition thereof immediately prior to such taking
as is reasonably feasible under all the circumstances.
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<PAGE> 17
C. In the event of any such private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such
separate awards and/or portion of lump sum awards as may be allocated to
their respective interests in any condemnation proceedings; provided
that Tenant shall not be entitled to receive any award for Tenant's loss
of its leasehold interest or any award which would otherwise diminish the
award to Landlord, the right to such award(s) being hereby assigned by
Tenant to Landlord.
12. HOLDING OVER. Tenant will at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession to Landlord.
If Tenant retains possession of the Leased Premises or any part thereof
after such termination, then Landlord may, at its option, serve written
notice upon Tenant that such holding over constitutes any one of (i)
renewal of this Lease for one year, and from year to year thereafter at
the rent Tenant is paying Landlord immediately prior to such termination
for the first year after the termination of this Lease, or (ii) creation
of a month to month tenancy, upon the terms and conditions set forth in
this Lease, or (iii) creation of a tenancy at sufferance; in any case
upon the terms and conditions set forth in this Lease; provided, however,
that the monthly rental (or daily rental under (iii)) shall, in addition
to all other sums which are to be paid by Tenant hereunder, whether or
not as additional rent, be equal to double the rental being paid monthly
to Landlord under this Lease immediately prior to such termination
(prorated in the case of (iii) on the basis of a 365-day year for each
day Tenant remains in possession). If no such notice is served, then a
tenancy at sufferance shall be deemed to be created at the rent in the
preceding sentence. Tenant shall also pay to Landlord all damages
sustained by Landlord resulting from retention of possession by Tenant,
including the loss of any proposed subsequent tenant for any portion of
the Leased Premises. The provisions of this paragraph shall not
constitute a waiver by Landlord of any rights of re-entry as herein set
forth; nor shall receipt of any rent or any other act in apparent
affirmance of the tenancy operate as a waiver of the right to terminate
this Lease for a breach of any of the terms, covenants, or obligations
herein on Tenant's part to be performed.
13. QUIET ENJOYMENT. Landlord represents and warrants that it has
full right and authority to enter into this Lease and that Tenant, while
paying the rental and performing its other covenants and agreements herein
set forth, shall peaceably and quietly have, hold and enjoy the Leased
Premises for the term hereof without hindrance or molestation from
Landlord subject to the terms and provisions of this Lease. In the event
this Lease is a sublease, then Tenant agrees to take the Leased Premises
subject to the provisions of the prior leases. Landlord shall not be
liable for any interference or disturbance by other tenants or third
persons, not shall Tenant be released from any of the obligations of this
Lease because of such interference or disturbance.
14. EVENTS OF DEFAULT. The following events shall be deemed to be
events of default by Tenant under this Lease:
A. Tenant shall fail to pay when or before due any sum of
money becoming due to be paid to Landlord hereunder, whether such
sum or any installment of the rent herein reserved, any other amount
treated as additional rent hereunder, or any other payment or
reimbursement to Landlord required herein, whether or not treated as
additional rent hereunder, and such failure shall continue for a
period of five (5) days from the date such payment was due (Tenant
shall be given one notice per calendar year of its failure to pay);
or
B. Tenant shall fail to comply with any term, provision or
covenant of this Lease other than by failing to pay when or before
due any sum of money becoming due to be paid to Landlord hereunder,
and shall not cure such failure within twenty (20) days (forthwith,
if the default involves a hazardous condition) after written notice
thereof to Tenant provided that if the nature of the default
reasonably takes longer than twenty (20) days to cure, then Tenant
shall have such additional time as reasonably necessary to cure such
default provided that Tenant diligently proceeds with such cure; or
C.
D. Tenant shall fail to vacate the Leased Premises
immediately upon termination of expiration of this Lease, by lapse
of time or otherwise, or upon termination of Tenant's right to
possession only; or
E. The leasehold interest of Tenant shall be levied upon
under execution or be attached by process of law or Tenant shall
fail to contest diligently the validity of any lien or claimed lien
and give sufficient security to Landlord to insure payment thereof
or shall fail to satisfy any judgment rendered thereon and have the
same released, and such default shall continue for ten (10) days
after written notice thereof to Tenant; or
F. Tenant shall become insolvent, admit in writing its
inability to pay its debts generally as they become due, file a
petition in bankruptcy or a petition to take advantage of any
insolvency statue, make an assignment for the benefit of creditors,
make a transfer in fraud of
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<PAGE> 18
creditors, apply for or consent to the appointment of a receiver of
itself or of the whole or any substantial part of its property, or
file a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws, as now in effect or hereafter
amended, or any other applicable law or statute of the United States
or any state thereof; or
G. A court of competent jurisdiction shall enter an order,
judgment or decree adjudicating Tenant a bankrupt, or appointing a
receiver of Tenant, or of the whole or any substantial part of its
property, without the consent of Tenant, or approving a petition
filed against Tenant seeking reorganization or arrangement of Tenant
under the bankruptcy laws of the United States, as now in effect or
hereafter amended, or any state thereof, and such order, judgment or
decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof; or
H. Tenant shall assign, transfer, sublet, or convey, by
operation of law or otherwise, any interest in this Lease, except as
may be expressly permitted by the terms of this Lease.
15. REMEDIES. Upon the occurrence of any of such events of
default described in paragraph 14 hereof or elsewhere in this Lease,
Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever:
A. Landlord may, at its election, terminate this Lease or
terminate Tenant's right to possession only, without terminating the
Lease;
B. Upon any termination of this Lease, whether by lapse of
time or otherwise, or upon any termination of Tenant's right to
possession without termination of the Lease, Tenant shall surrender
possession and vacate the Leased Premises immediately, and delivery
possession thereof to Landlord, and Tenant hereby grants to
Landlord full and free license to enter into and upon the Leased
Premises in such event with or without process of law and to
repossess Landlord of the Leased Premises as of Landlord's former
estate and to expel or remove Tenant and any others who may be
occupying or within the Leased Premises and to remove any and all
property therefrom, without being deemed in any manner guilty of
trespass, eviction or forcible entry or detainer, and without
incurring any liability for any damage resulting therefrom, Tenant
hereby waiving any right to claim damage for such reentry and
expulsion, and without relinquishing Landlord's right to rent or any
other right given to Landlord hereunder or by operation of law;
C. Upon any termination of this Lease, whether by lapse of
time or otherwise, Landlord shall be entitled to recover as damages,
all rent, including any amounts treated as additional rent
hereunder, and other sums due and payable by Tenant on the date of
termination, plus, to the extent permitted by law, the sum of (i) an
amount equal to the then present value of the rent, including any
amounts treated as additional rent hereunder, and other sums
provided herein to be paid by Tenant for the residue of the stated
term hereof, less the fair rental value of the Leased Premises for
such residue (taking into account the time and expense necessary to
obtain a replacement tenant or tenants, including expenses
hereinafter described in subparagraph D. relating to recovery of the
Leased Premises, preparation for reletting and for reletting
itself), and (ii) the cost of performing any other covenants which
would have otherwise been performed by Tenant;
D. (i) Upon any termination of Tenant's right to
possession only without termination of the Lease, Landlord may, at
Landlord's option, enter into the Leased Premises, remove Tenant's
signs and other evidences of tenancy, and take and hold possession
thereof as provided in subparagraph B. above, without such entry and
possession terminating the Lease or releasing Tenant, in whole or in
part, from any obligation, including Tenant's obligation to pay the
rent, including any amounts treated as additional rent, hereunder
for the full term. In any such case until Landlord relets the
Leased Premises or until the expiration of the Lease term which ever
occurs first. Tenant shall continue to pay Landlord monthly on the
first day of each month during the period that Tenant's right of
possession is terminated, a sum equal to the amount of the rent due
under this Lease, including any amounts treated as additional rent
hereunder or any other sums provided herein to be paid by Tenant;
and
(ii) Landlord may, but need not, relet the Leased
Premises or any part thereof for such rent and upon such terms as
Landlord in its sole discretion shall determine (including the right
to relet the Leased Premises for a greater or lesser term than that
remaining under this Lease, the right to relet the Leased Premises
as a part of a larger area, and the right to change the character or
use made of the Leased Premises) and Landlord shall not be required
to accept any
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enforce or defend any of Landlord's rights or remedies hereunder, then Tenant
agrees to pay the reasonable attorney's fees so incurred.
If, on account of any breach or default by Landlord in Landlord's obligations
under the terms and conditions of this Lease, it shall become necessary or
appropriate for Tenant to employ or consult with an attorney concerning or to
enforce or defend any of Tenant's rights or remedies hereunder, then Landlord
agrees to pay the reasonable attorney's fees to incurred.
Without limiting the foregoing, Tenant hereby: (i) expressly waives any
right to trial by jury; and (ii) expressly waives the service of any notice
under any existing or future law of the State of Wisconsin applicable to
landlords and tenants.
16. LANDLORD'S LIEN.
17. MORTGAGES. This Lease is and shall be subject and subordinate
to any mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the Property, or the improvements situated
thereon, provided, however, that if the mortgagee, trustee, or holder of any
such mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien whether
this Lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any such mortgagee for the purpose of
subjecting and subordinating this Lease to the lien of any such mortgage or
for the purpose of evidencing the superiority of this Lease, as may be the case.
As to mortgages granted after the date of this Lease, the foregoing
subordination is contingent upon such mortgagees agreeing to recognize Tenant's
rights under this Lease so long as Tenant is not in default beyond any
applicable grace period.
18. LANDLORD'S LIABILITY. In no event shall Landlord's liability
for any breach of this Lease exceed the lesser of (i) the amount of rental then
remaining unpaid for the then current term (exclusive of any renewal periods
which have not then actually commenced) or (ii) Landlord's equity in the
Building; it being agreed that Landlord (and its partners and/or shareholders)
shall never be personally liable for any judgment. This provision is not
intended to be a measure or agreed amount of Landlord's liability with respect
to any particular breach, and shall not be utilized by any court or otherwise
for the purpose of determining any liability of Landlord hereunder, except only
as a maximum amount not to be exceeded in any event.
19. MECHANIC'S AND OTHER LIENS. Tenant shall have no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind, the interest of Landlord in
the Leased Premises or to charge the rentals payable hereunder for any claim
in favor of any person dealing with Tenant, including those who may furnish
materials or perform labor for any construction or repairs, and each such claim
shall affect and each such lien shall attach to, if at all, only the leasehold
interest granted to Tenant by this Lease. Tenant covenants and agrees that it
will pay or cause to be paid all sums due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the Leased Premises on which any lien is or can be validly and legally asserted
against its leasehold interest in the Leased Premises or the improvements
thereon and that it will save and hold Landlord harmless from and against any
and all loss, liability, cost or expense based on or arising out of asserted
claims or liens against the leasehold estate or against the right, title and
interest of the Landlord in the Leased Premises or under the terms of this
Lease. Tenant will not permit any construction or mechanic's lien or liens or
any other liens which may be imposed by law affecting Landlord's or its
mortgagees' interest in the Leased Premises, the Building or the Property to be
placed upon the Leased Premises or the Building arising out of any action or
claimed action by Tenant, and in case of the filing of any such lien Tenant
will promptly pay same. If any such lien shall remain in force and effect for
twenty (20) days after written notice thereof from Landlord to Tenant, Landlord
shall have the
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tenant offered by Tenant or to observe any instructions given by
Tenant about such reletting. In any such case, Landlord may make
repairs, alterations and additions in or to the Leased Premises, and
redecorate the same to the extent Landlord deems necessary or
desirable, and Tenant shall, upon demand, pay the cost thereof,
together with Landlord's expenses of reletting including, without
limitation, any broker's commission incurred by Landlord. If the
consideration collected by Landlord upon any such reletting plus any
sums previously collected from Tenant are not sufficient to pay the
full amount of all rent, including any amounts treated as additional
rent hereunder and other sums reserved in this Lease for the remaining
term hereof, together with the costs of repairs, alterations,
additions, redecorating, and Landlord's expenses of reletting and the
collection of the rent accruing therefrom (including attorneys' fees
and brokers' commissions), Tenant shall pay to Landlord the amount of
such deficiency upon demand and Tenant agrees that Landlord may file
suit to recover any sums falling due under this section from time to
time;
E. AFTER REASONABLE PRIOR WRITTEN NOTICE. Landlord may,
at Landlord's option, enter into and upon the Leased Premises, with or
without process of law, if Landlord determines in its sole discretion
that Tenant is not acting within a commercially reasonable time to
maintain, repair or replace anything for which Tenant is responsible
hereunder and correct the same, without being deemed in any manner
guilty of trespass, eviction or forcible entry and detainer and
without incurring any liability for any damage resulting therefrom and
Tenant agrees to reimburse Landlord, on demand, as additional rent,
for any expenses which Landlord may incur in thus effecting compliance
with Tenant's obligations under this Lease;
F. Any and all property which may be removed from the
Leased Premises by Landlord pursuant to the authority of the Lease or
of law, to which Tenant is or may be entitled, may be handled,
removed and seized, as the case may be, by or at the direction of
Landlord at the risk, cost and expense of Tenant, and Landlord shall
in no event be responsible for the value, preservation or safekeeping
thereof. Tenant shall pay to Landlord, upon demand, any and all
expenses incurred in such removal and all storage charges against such
property so long as the same shall be in Landlord's possession or
under Landlord's control. Any such property of Tenant not retaken by
Tenant from storage within thirty (30) days after removal from the
Leased Premises shall, at Landlord's option, be deemed conveyed by
Tenant to Landlord under this Lease as by a bill of sale without
further payment or credit by Landlord to Tenant.
G. In the event Tenant fails to pay any installment of
rent, including any amount treated as additional rent hereunder, or
other sums hereunder within five (5) days after such installment or
other charge is due, said rent and other sums due hereunder shall
commence to accrue interest at the Default Rate (as such term is
hereinafter defined) from the date said sums are due until paid in
full, and such default interest shall be additional rent hereunder and
the failure to pay such default interest within ten (10) days after
demand therefor shall be an additional event of default hereunder.
The provision for such default interest shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not
be construed as liquidated damages or as limiting Landlord's remedies
in any manner. The term "Default Rate" shall mean five percent (5%)
over the "prime rate" as such rate is announced from time to time by
Firstar Bank Milwaukee, N.A., its successors or assigns, at its
principle place of business. Event of default A, in Paragraph 14 of
this Lease, and only this event of default, shall be cured upon the
date Tenant's installment of rent, including any amount treated as
additional rent, or other sums, clears processing at Landlord's
financial institution.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by law
(all such remedies being cumulative), nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any rent due to Landlord hereunder
or of any damages accruing to Landlord by reason of the violation of any of the
terms, provisions and covenants herein contained. No act or thing done by
Landlord or its agents during the term hereby granted shall be deemed a
termination of this Lease or an acceptance of the surrender of the Leased
Premises, and no agreement to terminate this Lease or accept a surrender of said
premises shall be valid unless in writing signed by Landlord. No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants herein contained shall be deemed or construed to constitute a waiver
of any other violation or breach of any of the terms, provisions and covenants
herein contained. Landlord's acceptance of the payment of rental or other
payments hereunder after the occurrence of an event of default shall not be
construed as a waiver of such default, unless Landlord so notifies Tenant in
writing. Forbearance by Landlord in enforcing one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default or of Landlord's right to enforce any such
remedies with respect to such default or any subsequent default. If, on account
of any breach or default by Tenant in Tenant's obligations under the terms and
conditions of this Lease, it shall become necessary or appropriate for Landlord
to employ or consult with an attorney concerning or to
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right and privilege of paying and discharging the same or any portion thereof
without inquiry as to the validity thereof, and any amounts so paid, including
expenses and interest, shall be so much additional rent hereunder due from
Tenant to Landlord and shall be paid to Landlord immediately on rendition of
bill therefor. Notwithstanding the foregoing, Tenant shall have the right to
contest any such lien in good faith and with all due diligence so long as any
such contest, or action taken in connection therewith, protects the interest of
Landlord and Landlord's mortgagee in the Leased Premises, and Landlord and any
such mortgagee are, by the expiration of said twenty (20) day period, furnished
such protection, and indemnification against any loss, liability, cost or
expense related to any such lien and the contest thereof as are satisfactory to
Landlord and any such mortgagee.
20. NOTICES. Each provision of this Lease or of any applicable
governmental laws, ordinances, regulations and other requirements, with
reference to the sending, mailing or delivery of any notice or the making of any
payment shall be deemed to be complied with when and if the following steps are
taken:
A. All rent and other payments required to be made by Tenant
to Landlord hereunder shall be payable to Badger II Limited Partnership,
Bin 258, Milwaukee, Wisconsin, 53288 or to such other entity at such
other address as Landlord may specify from time to time by written notice
delivered in accordance herewith.
B. Any notice or other document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not when personally delivered or when deposited in the
continental United States Mail, postage prepaid, certified or registered
mail, or when deposited with a recognized overnight delivery service
addressed to the parties hereto at the respective addresses set out
below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith:
LANDLORD: TENANT:
Badger II Limited Partnership Alternative Living Services, Inc.
c/o Hammes Company 450 North Sunnyslope Road
17975 West Sarah Lane, Suite 100 Suite 300
Brookfield, Wisconsin 53045 Brookfield, Wisconsin 53005
All parties included within the terms "Landlord" and "Tenant," respectively,
shall be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
21. MISCELLANEOUS.
A. INTERPRETATION. Words of any gender used in this Lease
shall be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, unless the context
otherwise requires.
B. SUCCESSORS AND ASSIGNS. The terms, provisions and
covenants and conditions in this Lease shall apply to, inure to the benefit of,
and be binding upon, the parties hereto and upon their respective heirs, legal
representatives, successors and permitted assigns, except as otherwise expressly
provided herein. Landlord shall have the right to assign any of its rights and
obligations under this Lease and Landlord's grantee or Landlord's successor
shall upon such assignment, become "Landlord" hereunder, thereby freeing and
relieving the grantor or assignor of all covenants and obligations of "Landlord"
hereunder; provided, however, that no successor Landlord shall be responsible
for the return of any security deposit provided for pursuant to Paragraph 2B
unless such successor receives the deposit. Tenant agrees to furnish promptly
upon demand, a corporate resolution, proof of due authorization by partners, or
other appropriate documentation evidencing the due authorization of Tenant to
enter into this Lease. Nothing herein contained shall give any other tenant in
the Building of which the Leased Premises is a part any enforceable rights
either against Landlord or Tenant as a result of the covenants and obligations
of either party set forth herein.
C. CAPTIONS. The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof.
D. ESTOPPEL CERTIFICATE. Tenant shall at any time and from
time to time within ten (10) days after written request from Landlord execute
and deliver to Landlord or any prospective Landlord or mortgagee or prospective
mortgagee a sworn and acknowledged estoppel certificate, in form reasonably
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satisfactory to Landlord and/or any prospective Landlord, Landlord's mortgagee
or prospective mortgagee certifying and stating as follows: (i) this Lease has
not been modified or amended (or if modified or amended, setting forth such
modifications or amendments); (ii) this Lease (as so modified or amended) is in
full force and effect (or if not in full force and effect, the reasons
therefor); (iii) the Tenant has no offsets or defenses to its performance of
the terms and provisions of this Lease, including the payment of rent (or if
there are any such defenses or offsets, specifying the same); (iv) Tenant is in
possession of the Leased Premises, if such be the case; (v) if an assignment of
rents or leases has been served upon Tenant by a mortgagee or prospective
mortgagee, Tenant has received such assignment and agrees to be bound by the
provisions thereof; and (vi) any other accurate statements reasonably required
by Landlord or required by its mortgagee or any prospective Landlord or
prospective mortgagee. It is intended that any such statement delivered
pursuant to this subsection may be relied upon by any prospective purchaser or
mortgagee and their respective successors and assigns and Tenant shall be
liable for all loss, cost or expense resulting from the failure of any sale or
funding of any loan caused by any material misstatement contained in such
estoppel certificate or the failure by Tenant to execute and deliver such
estoppel certificate or any subordination agreement requested by such mortgagee
or prospective mortgagee. Tenant hereby irrevocably appoints Landlord or if
Landlord is a trust, Landlord's beneficiary, as attorney-in-fact for the Tenant
with full power and authority to execute and deliver in the name of Tenant such
estoppel certificate if Tenant fails to deliver the same within such ten (10)
day period and such certificate as signed by Landlord or Landlord's
beneficiary, as the case may be, shall be fully binding on Tenant if Tenant
fails to deliver a contrary certificate within five (5) days after receipt by
Tenant of a copy of the certificate executed by Landlord or Landlord's
beneficiary, as the case may be, on behalf of Tenant. In addition to any other
remedy Landlord may have hereunder, Landlord may, at its option, if Tenant does
not deliver to Landlord an estoppel certificate as set forth above within
fifteen (15) days after Tenant is requested so to do, cancel this Lease
effective the last day of the then current month, without incurring any
liability on account thereof, and the term hereby granted is expressly limited
accordingly.
E. MODIFICATION. This Lease may not be altered, changed or
amended except by an instrument in writing signed by both parties hereto.
F. SURVIVAL. All obligations of Tenant hereunder not fully
performed as of the expiration or earlier termination of the term of this Lease
shall survive the expiration or earlier termination of the term hereof,
including without limitation, all payment obligations with respect to taxes and
Operating Costs and all obligations concerning the condition of the Leased
Premises. Upon the expiration or earlier termination of the term hereof, Tenant
shall pay to Landlord the amount, as reasonably estimated by Landlord,
necessary: (i) to repair and restore the Leased Premises as provided herein;
and (ii) to discharge Tenant's obligation for unpaid real estate taxes,
Operating Costs or other amounts due Landlord. All such amount shall be used
and held by Landlord for payment of such obligations of Tenant, with Tenant
being liable for any additional costs upon demand by Landlord, or with any
excess to be returned to Tenant after all such obligations have been determined
and satisfied. Any security deposit held by Landlord may, at Landlord's option,
be credited against the amount payable by Tenant under this subparagraph 21F.
G. SEVERABILITY. If any clause, phrase, provision or portion
of this Lease or the application thereof to any person or circumstance shall be
invalid or unenforceable under applicable law, such event shall not affect,
impair or render invalid or unenforceable the remainder of this Lease nor any
other clause, phrase, provision or portion hereof nor shall it affect the
application of any clause, phrase, provision or portion hereof to other persons
or circumstances, and it is also the intention of the parties to this Lease that
in lieu of each such clause, phrase, provision or portion of this Lease that is
invalid or unenforceable, there be added as a part of this Lease contract a
clause, phrase, provision or portion as similar in terms to such invalid or
unenforceable clause, phrase, provision or portion as may be possible and valid
and enforceable.
H. BINDING OBLIGATION. Submission of this Lease shall not be
deemed to be a reservation of the Leased Premises. Landlord shall not be bound
hereby until its delivery to Tenant of an executed copy hereof signed by
Landlord, already having been signed by Tenant, and until such delivery Landlord
reserves the right to exhibit and lease the Leased Premises to other prospective
tenants. Notwithstanding anything contained herein to the contrary, Landlord
may withhold delivery of possession of the Leased Premises from Tenant until
such time as Tenant has paid to Landlord the security deposit required by
subparagraph 2B hereof, the first month's rent as set forth in subparagraph 2A
hereof, and any sum owed pursuant to paragraph 3 hereof.
I. FORCE MAJEURE. Whenever a period of time is herein
prescribed for action to be taken by Landlord, the Landlord shall not be liable
or responsible for, and there shall be excluded from the computation for any
such period of time, any delays due to causes of any kind whatsoever which are
beyond the control of Landlord.
J. PROPORTIONATE SHARE. Tenant's "Proportionate Share" as
used in this Lease shall mean a fraction, the numerator of which is the gross
leasable area of the Leased Premises and the
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denominator of which is the gross leasable area contained in the Building, in
each case as reasonably determined by Landlord. For purposes hereof the
numerator is 6,817 and the denominator is 83,195 and Tenant's Proportionate
Share is 8.2%.
K. JOINT AND SEVERAL. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several. Any
indemnification of, insurance of, or option granted to Landlord shall also
include or be exercisable by Landlord's trustee, beneficiary, partners, agents
and employees, as the case may be.
L. BROKERS. Each of the parties (i) represents and warrants to the
other that it has not dealt with any broker or finder in connection with this
Lease, except as described on EXHIBIT E attached hereto; and (ii) indemnifies
and holds the other harmless from any and all liability, costs or expenses
(including attorney's fees) incurred as a result of an alleged breach of the
foregoing warranty. Landlord agrees to pay the broker, if any, listed on
EXHIBIT E. The parties hereto acknowledge and agree that Landlord is not and
shall not be responsible for, or have any liability in connection with, any
commissions, payments or other amounts that may be owed or alleged to be owed
any broker or finder, including any and all brokers or finders listed on
EXHIBIT E attached hereto, with respect to a renewal or extension of this
Lease; any relocation of the Tenant or any affiliate of Tenant into any other
premises owned, managed or controlled by Landlord or any affiliate of Landlord;
any expansion into additional space by the Tenant; or any other lease entered
into between Tenant or any affiliate of Tenant and Landlord or any affiliate of
Landlord.
23. CERTAIN RIGHTS RESERVED TO THE LANDLORD. The Landlord reserves
and may exercise the following rights without affecting Tenant's obligations
hereunder:
(a) to change the name or street address of the Building;
(b) to install and maintain a sign or signs on the exterior of the
Building;
(c) to have access for the Landlord and the other tenants of the
Building to any mail chutes located on the Leased Premises
according to the rules of the United States Post Office;
(d) to designate all sources furnishing sign painting and lettering,
ice, drinking water, towels, coffee cart service and toilet
supplies, lamps and bulbs used on the Leased Premises;
(e) to retain at all times pass keys to the Leased Premises;
(f) to grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building;
(g) to close the Building after regular work hours and on the
legal holidays subject, however, to Tenant's right to admittance,
under such reasonable regulations as Landlord may prescribe from
time to time, which may include by way of example but not of
limitation, that persons entering or leaving the Building
identify themselves to a watchman by registration or otherwise
and that said persons establish their right to enter or leave the
Building; and
(h) to take any and all measures, including inspections, repairs,
alterations, decorations, additions and improvements to the
Leased Premises or to the Building, as may be necessary or
desirable for the safety, protection or preservation of the
Leased Premises or the Building or the Landlord's interests, or
as may be necessary or desirable in the operation of the
Building.
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The Landlord may enter upon the Leased Premises and may exercise any or all
of the foregoing rights hereby reserved without being deemed guilty of an
eviction or disturbance of the Tenant's use or possession and without being
liable in any manner to the Tenant and without abatement of rent or affecting
any of the Tenant's obligations hereunder.
24. ENVIRONMENTAL PROVISIONS. Tenant shall not cause or permit any
Hazardous Substance (as hereinafter defined) to be used, stored, generated, or
disposed of on, in or about the Leased Premises, the Building, the Property or
the Chancellory Park Development by Tenant, or any of its agents, employees,
representatives, contractors, suppliers, customers, subtenants, concessionaires,
licensees, or invitees unless Tenant shall have received Landlord's prior
written consent, which Landlord may withhold or at any time revoke in its sole
discretion. Tenant shall indemnify defend and hold harmless Landlord from and
against any and all claims, damages, fines, judgments, penalties, costs,
expenses, liabilities, or losses relating to any violation by Tenant of any
Environmental Law (as hereinafter defined) or of this paragraph 24 (including,
without limitation, a decrease in value of the Leased Premises, damages caused
by loss or restriction of rentable or usable space, damages caused by adverse
impact on marketing of space, and any and all sums paid for settlement of
claims, attorneys' fees, consultant fees, and expert fees) incurred by or
asserted against Landlord arising during or after the term of this Lease as a
result thereof. This indemnification includes, without limitation, any and all
costs incurred because of any investigation of the site or any cleanup,
removal, testing, or restoration mandated or conducted by or on behalf of any
federal, state, or local agency or political subdivision. Without limitation
of the foregoing, if Tenant causes or permits the presence of any Hazardous
Substance on the Leased Premises and that results in any contamination, then
Tenant shall promptly, at its sole expense, take any and all necessary or
appropriate actions to return the Leased Premises to the condition existing
prior to the presence of any such Hazardous Substance. Tenant shall first
obtain Landlord's written approval for any such remedial action.
As used herein, "Hazardous Substance" means any substance that is
regulated by any local government, the State of Wisconsin, the United Stated
government, or any agency, authority and/or instrumentality thereof and includes
any and all material or substances that are defined as "hazardous waste,"
"extremely hazardous waste," or a "hazardous substance" pursuant to any
environmental law. "Hazardous Substance" includes but is not restricted to
asbestos and polychlorobiphenyls ("PCBs").
As used herein, "Environmental Laws" means all federal, state and local
laws, including statutes, regulations, and requirements, relating to the
discharge of air pollutants, water pollutants or process waste water or
otherwise relating to the environment or Hazardous Substances, including, but
not limited to, the Federal Clean Water Act, the Federal Resource Conservation
and Recovery Act of 1976, the Federal Comprehensive Environmental
Responsibility Cleanup and Liability Act of 1980, regulations of the
Environmental Protection Agency, regulations of the Nuclear Regulatory Agency,
and regulations of any state department of natural resources or state
environmental protection agency, as amended or supplemented from time to time,
now or at any time hereafter in effect.
GUARANTY.
26. SPECIAL PROVISIONS.
RIGHTS OF FIRST OFFER OF LEASE.
A. Before entering into a lease for the space as approximately shown on
EXHIBIT A-1 (the "Additional Space") during the initial term, and so
long as Tenant is not then in default under this Lease, beyond any
applicable grace period, and subject to the rights of the below mentioned
tenants, Landlord will notify Tenant of the reasonable monthly fair market
rent, rental increases and terms upon which it would be willing to lease
the Additional Space to Tenant.
If within five(5) days after receipt of Landlord's notice, Tenant
agrees in writing to lease the Additional Space for a term equal to the
remaining initial term of this Lease (However, if Tenant commences paying
full rent for the Additional Space with less than three (3) years
remaining on the initial term, Tenant shall also extend the term of the
Lease of the space as approximately shown on the plan attached hereto as
EXHIBIT A for at lease three (3) years at a monthly rent, rental increases
and terms upon which Landlord would be willing to lease said space to
Tenant.), Landlord and Tenant will execute a lease amendment for the
Additional Space within ten (10) days after Landlord's receipt of Tenant's
notice to intent to lease. If Tenant does not deliver its notice of
intent to lease the Additional Space offered in Landlord's notice within
such subsequent five (5) day period, or if Landlord and Tenant do not
enter into a fully executed lease amendment for the Additional Space
within such ten (10) day period, then, this right of first offer to lease
the Additional Space will lapse and be of no further force and effect and
Landlord will have the right to lease the Additional Space to a third
party on the same or any other terms and conditions, whether or not such
terms and conditions are more or less favorable than those offered to the
Tenant. In the event that Landlord decides to lease said space to a
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third party at an effective rental rate less than that offered to
Tenant, landlord shall explain the difference to Tenant. This right of
first offer to lease the Additional Space is personal to Tenant and is
non-transferable. In the event of any subletting or assignment, this
right of first offer shall become null and void. Furthermore, Tenant
shall be obligated to take at least the same amount of square footage
offered to a third party. A tenant in the building has a Right of
First Offer to Lease on the space as approximately shown on EXHIBIT
A-2. Said tenant has five (5) business days after receipt of notice
from Landlord to lease the space as approximately shown on EXHIBIT A-2.
B. Landlord will provide additional cooling or heating during non-standard
business hours upon Forty-Eight (48) hours notice from Tenant to
Landlord prior to desired services. Tenant shall pay to Landlord a fee
of not to exceed Twenty and 00/100 DOLLARS ($20.00) per hour of said
service.
C. Landlord shall notify Tenant to commence its self-performed
wallcovering at the approximate time, but not less than five (5) days
before the commencement date. The commencement date of this Lease
shall not contingent on the completion of Tenant's self-performed
wallcovering work.
EXECUTED the 19th day of December, 1994.
LANDLORD: TENANT:
Badger II Limited Partnership Alternative Living Services, Inc.
BY: Great Lakes Properties of BY: /s/ William F. Lasky
Wisconsin, Inc. ------------------------------
------------------------- TITLE: President
----------------------------
BY: /s/ Jon D. Hammes
-------------------------
ITS: President
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EXHIBIT A
[BLUE PRINT]
is a floor plan of the third level north wing located in Chancellory Park I,
450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
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EXHIBIT A-1
[BLUE PRINT]
is a floor plan of the third level north wing located in Chancellory Park I,
450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
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EXHIBIT A-2
[BLUE PRINT]
is a floor plan of the third level north wing located in Chancellory Park I,
450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
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EXHIBIT B
Legal Description
Chancellory Park I
A parcel of land being a part of Parcel 17 of Certified Survey Map No. 3532,
located in the South West 1/4 of Section 5, Town 7 North, Range 20 East, City of
Brookfield, Waukesha County, Wisconsin, also being Lot 1 of a proposed certified
survey map, said Lot 1 being bounded and described as follows:
Commencing at a point in the Westerly line of said Parcel 17, 355.00 feet North
00 degrees 12' 31" East of the Southwest corner of said Parcel 17; thence
continuing North 00 degrees 12' 31" East 352.92 feet; thence North 48 degrees
26' 03" East 140.50 feet; thence South 82 degrees 25' 06" East 337.32 feet;
thence South 44 degrees 47' 29" East 306.83 feet; thence South 45 degrees 12'
31" West 320.00 feet; thence North 89 degrees 47' 29" West 200.00 feet; thence
North 44 degrees 47' 29" West 56.57 feet; thence North 89 degrees 47' 29" West
190.00 feet to the point of commencement. Containing 5.515 acres, more or less.
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EXHIBIT C
Tenant Finish Specifications
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EXHIBIT D
Rules and Regulations
1. The sidewalks, halls, passages, elevators and stairways shall not be
obstructed by Tenant or used for any purpose other than for ingress to and
egress from the Leased Premises. The halls, passages, entrances, elevators,
stairways, balconies and roof are not for the use of the general public, and
Landlord shall in all cases retain the right to control and prevent access
thereto of all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation and interests of the Building
and its tenants, provided, that nothing herein contained shall be construed to
prevent such access to persons with whom Tenant normally deals in the ordinary
course of its business unless such persons are engaged in illegal activities.
Tenant and its employee shall not go upon the roof of the Building without the
written consent of the Landlord.
2. The sashes, sash doors, windows, glass lights, and any lights or
skylights that reflect or admit light into the halls or other places of the
Building shall not be covered or obstructed. The toilet rooms, water and wash
closets and other water apparatus shall not be used for any purpose other than
that for which they were constructed, and no foreign substance of any kind
whatsoever shall be thrown therein, and the expenses of any breakage, stoppage
or damage, resulting from the violation of this rule shall be borne by the
tenant who, or whose clerk, agents, servants, or visitors, shall have caused it.
3. If Landlord, by a notice in writing to Tenant, shall object to any
curtain, blind, shade or screen attached to, or hung in, or used in connection
with, any window or door of the Leased Premises, such use of such curtain,
blind, shade or screen shall be discontinued forthwith by Tenant. No awnings
shall be permitted on any part of the Leased Premises; including, without
limitation, windows and doors.
4. No safes or other objects heavier than the lift capacity of the
freight elevators of the Building shall be brought into or installed on the
Leased Premises. Tenants shall not place a load upon any floor of the Leased
Premises which exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. The moving of safes shall occur only between
such hours as may be designated by, and only upon previous notice to Landlord,
and the persons employed to move safes in or out of the Building must be
acceptable to Landlord. No freight, furniture or bulky matter of any description
shall be received into the Building or carried into the elevators except during
hours and in a manner approved by Landlord.
5. Tenant shall not use, keep, or permit to be used or kept any foul or
noxious gas or substance in, on or about the Property, Building or the Leased
Premises, or permit or suffer the Leased Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Building
by reason of noise, odors, and/or vibrations, or interfere in any way with other
tenants or those having business therein, nor shall any animals or birds (except
Seeing Eye Dogs) be brought into or kept in or about the Building. Tenant shall
not place or install any antennae or aerials or similar devices outside of the
Leased Premises or in, on or about the Building.
6. Tenant shall not use or keep in, on or about the Property, the
Building or the Leased Premises any inflammables, including but not limited to
kerosene, gasoline, naphtha and benzine (except cleaning fluids in small
quantities and when in containers approved by the Board of Underwriters), or
explosives or any other articles of intrinsically dangerous nature, or use any
method of heating other than that supplied by Landlord.
7. If Tenant desires telephone or telegraph connections or alarm
systems, Landlord will direct electricians as to where and how the wires are to
be introduced. No boring or cutting for wires or otherwise shall be made without
specific directions from Landlord.
8. Tenant, upon the termination of the tenancy, shall deliver to the
Landlord all the keys to offices, rooms and toilet rooms which shall have been
furnished Tenant or which Tenant shall have had made, and in the event of loss
of any keys so furnished shall pay the Landlord therefor.
9. Tenant shall not put down any floor covering in the Leased Premises
without the Landlord's prior approval of the manner and method of applying such
floor covering.
10. On Sundays and legal holidays, and on other days between the hours of
6 p.m. and 8 a.m., access to the Building, or to the halls, corridors, elevators
or stairways in the Building, or to the Leased Premises may be refused unless
the person seeking access is known to the watchman of the Building in charge and
has a pass or is properly identified. Landlord shall in no case be liable for
damages for the admission to or exclusion from the Building of any person whom
the Landlord has the right to exclude under Rule 1 above. In case of invasion,
mob, riot, public excitement, or other commotion, Landlord reserves the right to
prevent access to the Building during the continuance of the same by closing the
doors or otherwise, for the safety of the tenants or Landlord and protection of
property in the Building.
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11. Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage which includes keeping doors locked and windows and
other means of entry to the Leased Premises closed.
12. Tenant shall not alter any lock or install a new or additional lock
or any bolt on any door of the Leased Premises without prior written consent of
Landlord. If Landlord shall give its consent, Tenant shall in each case furnish
Landlord with a key for any such lock.
13. In advertising or other publicity, without Landlord's prior written
consent, Tenant shall not use the name of the Building except as the address of
its business and shall not use pictures of the Building.
14. Tenant shall not make any room-to-room canvass to solicit business
from other tenants in the Building; and shall not exhibit, sell, or offer to
sell, use, rent or exchange in, on or about the Leased Premises unless
ordinarily embraced within the Tenant's use of the Leased Premises specified
herein.
15. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air conditioning, and shall not allow the
adjustments (except by Landlord's authorized building personnel) of any controls
other than room thermostats installed for Tenant's use. Tenant shall keep
corridor doors closed and shall not open any windows except that if the air
circulation shall not be in operation, windows which are openable may be opened
with Landlord's consent.
16. Tenant shall not do any cooking in the Leased Premises other than
with a microwave for Tenant's employees lunches or engage any coffee cart
service.
17. Any wallpaper or vinyl fabric materials which Tenant may install on
painted walls shall be applied with a strippable adhesive. The use of
nonstrippable adhesives will cause damage to the walls when materials are
removed, and repairs made necessary by such excessive wear and tear shall be
charged to and paid for by Tenant.
18. Tenant shall provide an maintain hard surface protective mats under
all desk chairs which are equipped with casters to avoid excessive wear and
tear to carpeting. If Tenant fails to provide such mats, the cost of carpet
repair or replacement made necessary by such excessive wear and tear shall be
charged to and paid for by Tenant.
19. Tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval and consent before performance of any
contractual service. This provision shall apply to all work performed in the
Building including installations of telephones, telegraph equipment, electrical
devices and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment or any other physical portion of
the Building.
20. Movement in or out of the Building of furniture, office equipment, or
other bulky materials, or movement through the Building entrances or lobby shall
be restricted to hours designated by Landlord. All such movements shall be under
supervision of Landlord and in the manner agreed between Tenant and Landlord by
prearrangement before performance. Such prearrangement initiated by Tenant will
include determination by Landlord and subject to his decision and control, of
the time, method, and routing of movement, limitations imposed by safety or
other concerns which may prohibit any article, equipment, or any other item from
being brought into the Building. Tenant is to assume all risk as to damage to
articles moved and injury to persons or public engaged or not engaged in such
movement, including equipment, property, and personnel or Landlord if damaged or
injured as a result of acts in connection with carrying out this service for
Tenant from time of entering property to completion of work; and Landlord shall
not be liable for acts of any person engaged in, or any damage or loss to any of
said property or persons resulting from any act in connection with such service
performed for Tenant and Tenant hereby agrees to indemnify and hold harmless
Landlord from and against any such damage, injury, or loss, including attorney's
fees.
21. No portion of Tenant's area or any other part of the Building shall
at any time be used or occupied as sleeping or lodging quarters.
22. Landlord will not be responsible for lost or stolen personal
property, equipment, money or jewelry from the Leased Premises or the Building
or any public rooms or common areas regardless of whether such loss occurs when
such area is locked against entry or not.
23. Employees of Landlord shall not receive or carry messages for or to
any tenant or other person, nor contract with or render free or paid services to
any tenant or tenant's agents, employees, or invitees; in the event any of
Landlord's employees perform such services, such employee shall be deemed
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<PAGE> 33
the agent of such tenant regardless of whether or how payment is arranged for
services and Landlord is expressly relieved from any and all liability in
connection with any such services and any associated injury or damage to person
or property.
24. Tenant and its employees, agents, and invitees shall observe and
comply with the driving and parking signs and markers on the property
surrounding the Building.
25. Tenant shall not place, install, or operate on the Leased Premises or
in any part of the Building, any coffee making device or equipment without the
prior written consent of Landlord.
26. Tenant shall give prompt notice to Landlord of any accidents to or
defects in plumbing, electrical fixtures or heating apparatus so that such
accidents or defects may be attended to promptly.
27. Tenant shall be entitled to have its name displayed on the directory
of the Building, if any, but the design and style of such display, the location
of the directory, and the allocation of space on the directory shall be
determined by the Landlord in its sole discretion. Any additional names
requested by Tenant to be displayed on the directory must be approved by
Landlord and, if approved, will be provided at the sole expense of Tenant.
Tenant shall not, without Landlord's prior written consent, install, affix or
use (a) any signs, lettering or advertising media of any kind, blinds, shades,
curtains, draperies or similar items on the exterior of the Leased Premises or
in the interior of the Leased Premises in such a manner as shall be visible from
outside the Leased Premises, or (b) any awnings, radio or television antennae or
any other object or equipment of any nature whatsoever on the exterior of the
Leased Premises. No symbol, mark, design or insignia adopted by Landlord for use
in connection with the Building or the Park shall be used by Tenant without the
prior written consent of Landlord. Tenant shall not refer to the Building by any
name other than that designated by Landlord from time to time and Tenant may use
such designated name solely for the address of its business. All rights to and
use of the exterior walls of the Leased Premises and the roof of the Building
are reserved to Landlord.
28. No vending machines of any description shall be installed,
maintained or operated in any part of the Building, including, without
limitation, the Leased Premises, without the written consent of Landlord.
29. Landlord reserves the right to make such other and reasonable rules
and regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building, and the preservation of good order
therein.
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EXHIBIT E
BROKERS
MS. KAREN GERALDSON
MOONEY, LESAGE & ASSOCIATES, LTD.
16620 WEST BLUEMOUND ROAD
SUITE 500
BROOKFIELD, WISCONSIN 53005
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EXHIBIT F
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EXHIBIT 10.33
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made as of
December 15, 1995, by and between CROSSINGS INTERNATIONAL CORPORATION, a
Washington corporation ("SELLER"), NEW CROSSINGS INTERNATIONAL CORPORATION, a
Nevada corporation ("TENANT"), 2010 UNION LIMITED PARTNERSHIP, a Washington
limited partnership ("UNION LIMITED PARTNERSHIP"), and NATIONWIDE HEALTH
PROPERTIES, INC., a Maryland corporation ("BUYER").
RECITALS
A. Seller is the fee owner (or is under contract with
one or more of its Affiliates to become the fee owner) of those certain parcels
of real property more particularly described in Exhibit A attached hereto and
by this reference incorporated herein (each individually, a "FEE PARCEL").
B. Seller and Union Limited Partnership are (or, in the
case of Seller, is under contract with its Affiliate to become) the owners of
leasehold estates as to those certain parcels of real property more
particularly described in Exhibit B attached hereto and by this reference
incorporated herein (each individually, a "LEASEHOLD PARCEL") pursuant to
ground leases as described in said Exhibit B (each individually, a "GROUND
LEASE"). The Leasehold Parcels are referred to as the "MT. HOOD PARCEL" and the
"ALLENMORE PARCEL" in keeping with the facility name shown for such Leasehold
Parcels on said Exhibit B. Seller is (or will become) the lessee of the Mt.
Hood Parcel and Union Limited Partnership, an Affiliate of Seller, is the
lessee of the Allenmore Parcel.
C. Each Fee Parcel and each Leasehold Parcel shall
sometimes be referred to individually herein as a "PARCEL" and collectively as
the "LAND."
D. The Land is improved with certain buildings and other
Improvements (as hereinafter defined) and each Parcel together with the
Improvements thereon is operated as an assisted living facility.
E. Seller desires to sell, and Buyer desires to buy, all
of the Property (as hereinafter defined) other than the Allenmore Parcel.
Effective immediately following the sale of the Property, the shareholders of
Seller intend to contribute their shares of stock of Seller to Tenant in
exchange for all of the shares of capital stock of Tenant, with Seller becoming
a wholly-owned subsidiary of Tenant. In addition, Buyer desires to make a loan
to Union Limited Partnership and Union Limited Partnership desires to accept
such loan with respect to the Allenmore Parcel, all upon the terms and
conditions set forth herein.
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<PAGE> 2
AGREEMENT
NOW, THEREFORE, taking the foregoing Recitals into account,
and in consideration of the mutual covenants, agreements and conditions set
forth herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used herein (including any Exhibits attached hereto), the
following terms shall have the following meanings:
"AFFILIATE" shall mean, with respect to any person or entity,
any other person or entity which controls, is controlled by or is under common
control with the first person or entity.
"ALLENMORE PARCEL" shall have the meaning given such term in
Recital B hereof.
"ASSUMED INDEBTEDNESS" shall mean the loans to be assumed by
Buyer as part of the Purchase Price as provided herein, as such loans are
described on Exhibit C attached hereto and by this reference incorporated
herein.
"BILL OF SALE" shall mean a bill or bills of sale in the form
attached as Exhibit D hereto and sufficient to transfer to Buyer all Personal
Property.
"BUSINESS AGREEMENT" shall mean any lease, rental agreement,
management agreement, loan agreement, mortgage, easement, covenant, restriction
or other agreement or instrument affecting all or a portion of the Property and
which is presently in effect or binding upon Seller or all or any portion of
the Property.
"CERTIFICATE OF NON-FOREIGN STATUS" shall mean a certificate
or certificates dated as of the Closing Date, addressed to Buyer and duly
executed by Seller or its applicable Affiliates, in the form of Exhibit E
attached hereto.
"CLAIM" shall mean any obligation, liability, lien,
encumbrance, loss, damage, cost, expense or claim, including, without
limitation, any claim for damage to property or injury to or death of any
person or persons.
"CLOSING" shall mean the consummation of the sale and purchase
provided for herein.
2
<PAGE> 3
"CLOSING CONFERENCE" shall mean a conference held in Seattle,
Washington, on the Closing Date in order to bring about the Closing at the
offices of Seller's counsel, or such other place as the parties hereto may
hereafter mutually agree.
"CLOSING DATE" shall mean December 20, 1995, or such earlier
or later date as shall be hereafter agreed upon by the parties hereto.
"CLOSING PROCEDURE LETTER" shall mean a letter to the Title
Company executed by Seller and Buyer setting forth directions for the Title
Company in connection with the Closing and in the form of Exhibit F attached
hereto.
"DEBT SERVICE RESERVE" shall mean cash in the amount of One
Hundred Sixty Seven Thousand One Hundred Forty-Nine and 25/100 Dollars
($167,149.25) to be held by Buyer as additional security for Union Limited
Partnership's obligations under the Loan Documents, as further described in
such Loan Documents.
"DEED" shall mean a deed or deeds substantially in the form of
Exhibit G attached hereto, executed by Seller or its applicable Affiliates, as
grantor, in favor of Buyer, as grantee, conveying the Land and Improvements to
Buyer with respect to the Fee Parcels in their entirety and with respect to the
Improvements located on the Mt. Hood Parcel, subject only to the Permitted
Exceptions.
"EXISTING ENCUMBRANCES" shall have the meaning given such term
in Section 4.1(c).
"FACILITY LEASE" shall mean the following in form and
substance satisfactory to Buyer: (i) a lease of each Fee Parcel from Buyer as
lessor to Tenant as lessee; (ii) a sublease of the Mt. Hood Parcel from Buyer
as sublessor to Tenant as sublessee; and (iii) a sublease of the Allenmore
Parcel from Union Limited Partnership as sublessor to Tenant as sublessee.
"FEE PARCEL" shall have the meaning given to such term in
Recital A hereof
"FINANCING STATEMENT" shall mean a financing statement or
statements (applicable UCC form) executed by Tenant, as debtor, in favor of
Buyer, as secured party, to be filed in connection with the Facility Leases
(other than for the Allenmore Parcel).
"FIXTURE" shall mean all property now or upon the Closing Date
located on or about the Property which is attached or appurtenant thereto.
"FIXTURE FILING" shall mean a financing statement or
statements (applicable UCC form) executed by Tenant, as debtor, in favor of
Buyer, as secured party, to be filed in connection with the Facility Leases
(other than for the Allenmore Parcel).
3
<PAGE> 4
"HAZARDOUS MATERIALS" shall mean (i) any petroleum products
and/or byproducts (including any fraction thereof), flammable substances,
explosives, radioactive materials, hazardous or toxic wastes, substances or
materials, known carcinogens or any other materials, contaminants or pollutants
which pose a hazard to the Property or to persons on or about the Property or
cause the Property to be in violation of any Hazardous Materials Laws: (ii)
asbestos in any form which is friable; (iii) urea formaldehyde in foam
insulation or any other form; (iv) transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty (50) parts per million or any other more restrictive standard
then prevailing; (v) medical wastes and biohazards; (vi) radon gas; and (vii)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or may or could pose a
hazard to the health and safety of the occupants of the Property or the owners
and/or occupants of property adjacent to or surrounding the Property.
"IMPROVEMENTS" shall mean all buildings, improvements,
structures and Fixtures now or on the Closing Date located on the Land,
including, without limitation, parking lots and structures, roads, drainage and
other utility structures and other so called "infrastructure" improvements.
"INTANGIBLE PROPERTY" means all Permits and other intangible
property or any interest therein now or on the Closing Date owned or held by
Seller or Tenant or any of their Affiliates in connection with the Land, the
Improvements or the Fixtures, or any business or businesses now or hereafter
conducted by Seller, Tenant or any of their Affiliates thereon or with the use
thereof, including all rights of Seller or Tenant in and to all leases,
contract rights, agreements, trade or other names associated with the operation
of the Property by Seller or Tenant (including, without limitation, the names
"Albany Residential", "The Atrium", "Canterbury Gardens", "The Inn at
Canterbury", "Columbia Edgewater", "Courtyard Village", "Forest Grove
Residential", "Heritage, Mt. Hood", "The Heritage at Rogue Valley", "McMinnville
Residential", "Ridge Point" and "River Place"), water rights and reservations,
zoning rights, business licenses and warranties (including those relating to
construction or fabrication) related to the Land, the Improvements or the
Fixtures, or any part thereof; provided, however, "Intangible Property" shall
not include the general corporate trademarks, service marks, logos or insignia
or books and records of Seller, Tenant or any of their Affiliates, nor any
cash, accounts receivable or bank accounts of Seller or Tenant.
"LAND" shall have the meaning given such term in Recital C
hereof.
"LAWS" means all federal, state and local laws, moratoria,
initiatives, referenda, ordinances, rules, regulations, standards, orders and
other governmental requirements, including, without limitation, those relating
to the environment, health and safety, or handicapped persons, where the
failure to abide by the same would have a material adverse effect on Buyer,
Seller or the Property or the operation or use thereof
4
<PAGE> 5
"LEASEHOLD PARCEL" shall have the meaning given such term in
Recital A hereof.
"LEASE ASSIGNMENT AGREEMENT" shall mean an instrument
assigning the leasehold estate in the Mt. Hood Parcel under the applicable
Ground Lease to Buyer in form and substance satisfactory to Buyer, including
without limitation the approval of the ground lessor for such assignment and
for the sublease of the Mt. Hood Parcel pursuant to a Facility Lease.
"LEASE GUARANTY" shall mean a guaranty or guaranties of
Tenant's obligations as lessee (or sublessee, as applicable) under the Facility
Leases executed by Seller in favor of Buyer in form and substance acceptable to
Buyer; provided, however, in the case of the Allenmore Facility, the Lease
Guarantee shall guarantee Tenant's obligations as lessee in favor of Union
Limited Partnership as landlord and the benefit of the same shall run also in
favor of Buyer.
"MEMORANDUM OF LEASE" shall mean a memorandum or memoranda of
the Facility Leases in form and substance acceptable to Buyer to be recorded in
the official records of each county in which a Parcel is located.
"MT. HOOD PARCEL" shall have the meaning given such term in
Recital B hereof.
"LOAN" shall mean a loan from Buyer, as lender, to Union
Limited Partnership, as borrower, in the original principal amount of Six
Million Five Hundred Fifty Thousand Dollars ($6,550,000.00) secured by, among
other things, the leasehold estate of Union Limited Partnership under the
Ground Lease covering the Allenmore Parcel.
"NHP LOAN DOCUMENTS" shall mean the instruments which evidence
and secure the NHP Loan, all in form and substance satisfactory to Buyer.
"PARCEL" shall have the meaning given such term in Recital C
hereof.
"PERMITS" means all permits, licenses, approvals, entitlements
and other governmental and quasi-governmental authorizations including,
without limitation, certificates of occupancy, required in connection with the
ownership, planning, development, construction, use, operation or maintenance
of the Property for the purpose as described in the Facility Leases. As used
herein, "quasi-governmental" shall include the providers of all utilities
services to the Property.
"PERMITTED EXCEPTIONS" shall mean those title exceptions or
defects which have been approved in writing by Buyer to appear as exceptions on
the Title Policies.
5
<PAGE> 6
"PERSONAL PROPERTY" shall mean all Intangible Property and all
furnishings, equipment, tools, machinery, fixtures, appliances and all other
tangible personal property, other than the Fixtures, now or on the Closing Date
located on or about the Land or Improvements or used in connection with the
operation thereof which is owned by Seller or its applicable Affiliates,
specifically excluding computer equipment, food, linens, clothing, medical
records, vehicles and other personal property owned by Seller or Tenant and
personal property owned by residents and employees of Seller or Tenant.
"PROPERTY" means, collectively, the Land and all rights,
titles, and appurtenant interests, the Improvements, the Fixtures, the Personal
Property and the Intangible Property. As used in the foregoing, "appurtenant
interests" shall mean those interests which pass by operation of law with the
conveyance of the fee simple estate in the Land and Improvements.
"PURCHASE PRICE" shall mean an amount equal to Fifty-Four
Million Six Hundred Twenty-Three Thousand Dollars ($54,623,000.00).
"REAL PROPERTY" shall mean the Land, the Improvements and the
Fixtures.
"SECURITY DEPOSIT" shall mean cash in the total amount of One
Million ed Hundred Eighty-One Thousand Three Hundred Seventy-One and 71/100
Dollars ($1,381,371.71) to be held by Buyer as additional security for
performance by Seller under the Facility Leases, and to be divided between the
Facility Leases as set forth in the Facility Leases.
"SUBDIVISION MAP ACT" shall mean the applicable statutes of
the States of Colorado, Idaho, Oregon and Washington which govern the
subdivision of real property.
"TITLE COMPANY" shall mean the underwriter of the Title
Policies and shall be Chicago Title Insurance Company, whose address is
National Business Unit, 16969 Von Karman, Irvine, California 92714.
"TITLE POLICIES" shall mean ALTA Extended Coverage Owner's and
Lender's Policies of Title Insurance (1970 Form B) without modification,
together with such endorsements thereto as are reasonably requested by Buyer.
The owner's policies shall insure Buyer's fee ownership of the Fee Parcels and
the leasehold estate of Buyer in the Mt. Hood Parcel, with liability in the
amount of the Purchase Price. The lender's policy shall insure Buyer as the
holder of a first lien mortgage under the NHP Loan Documents. Both the owner's
and the lender's policies shall be dated as of the Closing Date, shall be
issued by the Title Company subject only to the Permitted Exceptions and to the
standard printed exceptions included in the ALTA standard form owner's and
lender's extended coverage policies of title insurance, as applicable.
"WARRANTIES" shall mean all warranties, representations and
guaranties with respect to the Property (other than the Allenmore Parcel),
whether express or implied,
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which Seller or any of its Affiliates now holds or under which Seller or any of
its Affiliates is the beneficiary.
"WRITTEN AUTHORIZATION TO CLOSE" shall mean a letter to the
Title Company, in the form of Exhibit H, executed by Buyer, Tenant, Union
Limited Partnership and Seller, directing the Title Company to comply with the
instructions in the Closing Procedure Letter.
ARTICLE 11
AGREEMENT OF PURCHASE AND SALE
2.1. AGREEMENT TO PURCHASE AND SELL. Seller hereby agrees
to sell, convey and assign the Property (other than the Allenmore Parcel) to
Buyer, Buyer agrees to buy and accept the Property (other than the Allenmore
Parcel) from Seller, and Buyer and Union Limited Partnership agree to enter
into the NHP Loan Documents as to the Allenmore Parcel, all on the terms and
conditions as hereinafter set forth.
ARTICLE III
CLOSING AND CONDITIONS
3.1. CLOSING CONFERENCE. The Closing shall take place at
the Closing Conference on or before the Closing Date.
3.2. DELIVERY TO TITLE COMPANY.
(a) DELIVERIES BY SELLER AND AFFILIATES. On or
before the Closing Date, Seller, Tenant or Union Limited Partnership,
as indicated below, shall deliver or cause to be delivered to Title
Company:
(i) from Seller or its applicable
Affiliates, a duly executed and acknowledged Deed for each Fee
Parcel;
(ii) from Seller or its applicable
Affiliate, a duly executed and acknowledged Lease Assignment
Agreement with respect to the leasehold estate under the
Ground Lease applicable to the Mt. Hood Parcel;
(iii) from Seller or its applicable
Affiliate, a duly executed and acknowledged Deed with respect
to the Improvements located on the Mt. Hood Parcel;
(iv) from Seller, payoff letters from the
holders or claimants of, or with respect to, any encumbrance
or monetary lien affecting the Fee Parcels, the leasehold
estate under the Ground Lease as to the Mt. Hood
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Parcel and the Improvements located on the Mt. Hood Parcel,
other than the Assumed Indebtedness;
(v) from Union Limited Partnership, each
of the NHP Loan Documents which is to be recorded or filed, in
each case duly executed and acknowledged; and
(vi) any and all transfer declarations or
disclosure documents, duly executed by the appropriate
parties, required in connection with the Deeds, the Lease
Assignment Agreement and/or the NHP Loan Documents by any
state, city or county agency having jurisdiction over the same
or the transactions contemplated hereby.
(b) DELIVERIES BY BUYER. On or before the Closing
Date Buyer shall deliver or cause to be delivered to Title Company the
Purchase Price and the amount of the NHP Loan in same day available
funds less all amounts outstanding under the Assumed Indebtedness and
(at Buyer's option) net of all prorated or other amounts credited to
Buyer hereunder.
(c) CLOSING PROCEDURE LETTER. The deliveries to
be made to Title Company under this Section 3.2 shall be made in
accordance with and subject to, the Closing Procedure Letter.
3.3. DELIVERY TO PARTIES AT CLOSING CONFERENCE. Upon
satisfaction of all the conditions in the Closing Procedure Letter for
recordation of the instruments described above and upon receipt by Buyer and
Seller of written advice from Title Company that such conditions have been
satisfied and that Title Company is prepared to record and/or file the
instruments delivered to Title Company pursuant to Section 3.2(a) above,
disburse funds and issue its unconditional, irrevocable commitment to issue the
Title Policies, the following items are to be delivered at the Closing
Conference:
(a) ITEMS TO BE DELIVERED BY SELLER AND
AFFILIATES. Seller, Tenant or Union Limited Partnership, as
indicated below, shall deliver to Buyer the following items, all of
which shall be in form and substance acceptable to Buyer, and each of
which shall be executed by the Applicable of Seller, Tenant or Union
Limited Partnership (or other appropriate party) and acknowledged by a
notary public where applicable:
(i) The Bills of Sale executed by Seller
or its applicable Affiliates;
(ii) The following duly executed (and
acknowledged if required by the Title Company or Buyer) by the
lessor under the Ground Lease of the Allenmore Parcel all in
form and substance satisfactory to Buyer: (a) an approval with
respect to the assignment of the leasehold estate under such
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Ground Lease to Buyer as security for the NHP Loan pursuant to
the NHP Loan Documents, (B) a lessor's estoppel certificate
from such lessor in favor of Buyer, and (C) an approval of the
assignment to Buyer of the landlord's interest under the
Facility Lease for the Allenmore Facility to Seller as
additional security for the NHP Loan pursuant to the NHP Loan
Documents;
(iii) The Lease Guaranty;
(iv) A lessor's estoppel certificate in
favor of Buyer from the lessor under the Ground Lease of the
Mt. Hood Parcel in form and substance acceptable to Buyer;
(v) The Security Deposit and the Debt
Service Reserve in same day funds;
(vi) Any prorated rent under the Facility
Leases (other than for the Allenmore Parcel) or prorated
interest under the NHP Loan Documents for partial payments for
the period after the Closing Date until the next applicable
payment dates together with the first full month's payment
under the Facility Leases (other than for the Allenmore
Parcel) and under the NHP Loan Documents;
(vii) The Facility Lease between Union
Limited Partnership and Tenant with respect to the Allenmore
Parcel;
(viii) Financing Statements and Fixture
Filings with respect to the Personal Property and Fixtures;
(ix) The Certificates of Non-Foreign
Status;
(x) Agreements, consents and estoppels
in form and substance satisfactory to Buyer whereby the
holders of the Assumed Indebtedness acknowledge and consent to
the assumption of the Assumed Indebtedness by Buyer and
setting forth the amount outstanding under the Assumed
Indebtedness;
(xi) Certificates of casualty and fire
insurance for each of the Parcels as are required pursuant to
the Facility Leases and/or the NHP Loan Documents showing
Buyer as an additional insured and loss payee thereunder, with
appropriate provisions for prior notice to Buyer in the event
of cancellation or termination of such policies;
(xii) Such evidence of the due execution,
delivery and authorization of documents executed by Seller and
its applicable Affiliates,
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Tenant and Union Limited Partnership in connection with this
Agreement and the transactions contemplated hereunder as Buyer
may reasonably request;
(xiii) copies of any management agreements
required by the Facility Leases with respect to the licensing
of the various Parcels.
(b) ITEMS TO BE DELIVERED BY BUYER. Buyer shall
deliver to Seller, Tenant or Union Limited Partnership such evidence
of the due execution, delivery and authorization of documents executed
by Buyer in connection with this Agreement and the transactions
contemplated hereunder as Seller, Tenant or Union Limited Partnership
may reasonably request.
(c) ITEMS TO BE DELIVERED BY ALL PARTIES. Buyer
and Seller, Tenant or Union Limited Partnership shall jointly deliver
the following items, all of which shall be in form and substance
acceptable to Seller, and each of which shall be executed by Buyer and
Seller, Tenant or Union Limited Partnership (or other appropriate
party) and acknowledged by a notary public where applicable:
(i) All notices of change of ownership
or other similar notices required by any governmental or
quasi-governmental authority or agency having jurisdiction
over the Property or any portion thereof or any activities
occurring on the Property or deemed reasonably advisable by
Buyer; and
(ii) Facility Leases executed by Buyer
and Tenant for all of the Property other than the Allenmore
Parcel.
(d) WRITTEN AUTHORIZATION TO CLOSE. Upon receipt
of the items described in this Section 3.3, and upon compliance with
the other terms and conditions of this Agreement, Seller, Tenant,
Union Limited Partnership and Buyer shall execute and deliver to Title
Company the Written Authorization to Close.
3.4. TITLE INSURANCE. As a condition to Buyer's obligation
to consummate the transactions herein contemplated, Buyer shall receive on the
Closing Date a pro forma of the Title Policies and an unconditional,
irrevocable commitment from the Title Company to issue the Title Policies in
conformity with the aforementioned pro forma. Seller, Tenant and Union
Limited Partnership shall deliver to Title Company such instruments,
documents, payments, indemnities, releases and agreements and shall perform
such other acts as Title Company shall reasonably require in order to issue the
Title Policies.
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3.5. ADDITIONAL CONDITIONS.
(a) MUTUAL CONDITIONS. In addition to the
conditions provided in other provisions of this Agreement, each
party's obligation to perform its undertakings provided in this
Agreement is conditioned upon the following:
(i) PERFORMANCE BY OTHER PARTIES. The
due performance by the other parties of each and every
material undertaking and agreement to be performed by them
hereunder (including the delivery by such other parties of the
items specified in Sections 3.2 and 3.3 above).
(ii) REPRESENTATIONS AND WARRANTIES. Each
representation and warranty made by the other parties in this
Agreement shall be true and correct in all material respects
on the date hereof and at all times up to and including the
Closing Date.
(iii) NO BANKRUPTCY OR DISSOLUTION. As of
the Closing Date, none of the following shall have been done
by, against or with respect to Buyer, Seller (or any Affiliate
of either of them), any constituent general partner in Seller,
Old Crossings, any lessor under the Ground Leases or any
person or entity as to which any of the foregoing or their
principals have effective management control: (A) the
commencement of a case under Title 11 of the U.S. Code, as
now constituted or hereafter amended, or under any other
applicable federal or state bankruptcy law or other similar
law; (B) the appointment of a trustee or receiver of any
property interest other than the existing receivership with
respect to Seller's facility known as "The Palms" (which is not
a portion of the Property); (C) an assignment for the benefit
of creditors; (D) an attachment, execution or other judicial
seizure of a substantial property interest; (E) the taking of,
failure to take, or submission to any action indicating an
inability to meet its financial obligations as they accrue; or
(F) a dissolution or liquidation.
(b) CONDITIONS TO BUYER'S PERFORMANCE. In
addition to the conditions provided elsewhere in this Agreement,
Buyer's obligation to perform its undertakings provided in this
Agreement is conditioned upon the following:
(i) NO DAMAGE. Between September 25,
1995 and the Closing Date, inclusive, no destruction of or
damage or loss from any cause whatsoever, shall have occurred
with respect to the Property which, according to Buyer's
reasonable estimate, would cost, in the aggregate, more than
One Million Dollars ($1,000,000) to repair, restore and
replace or would cost more than Two Hundred Fifty Thousand
Dollars ($250,000) to repair, restore and replace with respect
to any single Parcel or would take longer than sixty (60) days
to repair, restore and replace. Notwithstanding the foregoing,
in the event that, despite destruction of or loss or damage to
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the Property or any Parcel, the transaction herein provided
shall be consummated, Seller and Tenant shall, at their sole
cost and expense, repair such destruction, loss or damage as
soon as possible using the proceeds of any insurance covering
the same to reimburse them up to the amount of their cost in
effecting such repairs.
(ii) NO TAKING. No taking, threatened
taking (or consideration by a governmental authority of a
taking) of any Parcel or any material part thereof by eminent
domain shall have occurred which would allow any lessee to
terminate any lease or to abate any rent due under any lease
or would otherwise materially and adversely affect the value
or use of the Property or portion thereof
(iii) APPROVAL OF DUE DILIGENCE RESULTS.
On or before the Closing Date, Buyer shall have completed and
approved its review of the conditions precedent set forth in
the letter agreement dated September 25, 1995 between Buyer
and Seller.
(iv) CCI INVESTMENT. On or before the
Closing Date, evidence satisfactory to Buyer that Capital
Consultants, Inc., an Oregon corporation, has completed its
acquisition of preferred stock in Tenant.
3.6. WAIVER OF CONDITIONS. Any party may at any time or
times, in its sole discretion, waive any of the conditions to its obligations
hereunder, but any such waiver shall be effective only if contained in a
writing signed by such party. No waiver by a party of any breach of this
Agreement or of any warranty or representation hereunder by the other party
shall be deemed to be a waiver of any other breach by such other party (whether
preceding or succeeding and whether or not of the same or similar nature), and
no acceptance of payment or performance by a party after any breach by the
other party shall be deemed to be a waiver of any breach of this Agreement or
of any representation or warranty hereunder by such other party, whether or not
the first party knows of such breach at the time it accepts such payment or
performance. No failure or delay by a party to exercise any right it may have
by reason of the default of the other party shall operate as a waiver of such
default or as a modification of this Agreement nor shall any such failure or
delay prevent the exercise of any right by the nonbreaching party while the
default continues. Without limiting the generality of the foregoing, in the
event that for any reason any item required to be delivered to Buyer or Seller,
Tenant or Union Limited Partnership hereunder shall not be delivered when
required, then the party obligated to make such delivery shall nevertheless
remain obligated to deliver the same to the party entitled to receive such
delivery provided the other party delivers a written request for such delivery
within six (6) months following the Closing Date and nothing (including the
closing of the transaction hereunder) shall be deemed a waiver by the party
entitled to receive such delivery of any such requirement, except an express
written waiver or a failure to make such request within the foregoing time
period.
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3.7. OUTSIDE DATE. In the event that for any reason the
transactions contemplated hereby shall not be consummated on or before the
Closing Date, either party hereto may extend the Closing Date to December 27,
1995, by delivering written notice of such election to the other party. In the
event that for any reason the transactions contemplated hereby shall not be
consummated on or before December ___, 1995, then (unless Buyer commences an
action to specifically enforce this Agreement within 30 days thereafter) either
party may at any time after the Closing Date, by written notice to the other
party, terminate this Agreement and the obligations of the parties hereunder;
provided, however, that such termination shall not release any party from
liability for any breach of this Agreement occurring prior to such termination.
ARTICLE IV
COSTS AND PRORATIONS
4.1. CLOSING COSTS.
(a) SELLER'S COSTS. Seller shall pay:
(i) any and all state, municipal or
other documentary, transfer, sales or use taxes payable in
connection with the delivery of any instrument or document
provided in or contemplated by this Agreement, any agreement
or commitment described or referred to herein or the
transactions contemplated herein;
(ii) all expenses of or related to the
issuance of the Title Policies (including, but not limited to,
insurance premiums, but not including the costs of any surveys
required by Buyer and the Title Company) and all escrow fees
and charges;
(iii) the charges for or in connection
with the recording and/or filing of any instrument or document
provided herein or contemplated by this Agreement or any
agreement or document described or referred to herein;
(iv) any and all broker's fees or similar
fees claimed by any party employed by Seller in connection
with the transactions contemplated herein;
(v) Seller's legal, accounting and other
professional fees and expenses and the cost of all opinions,
certificates, instruments, documents and papers required to be
delivered, or to cause to be delivered, by Seller hereunder,
including without limitation, the cost of all performances by
Seller of its obligations hereunder; and
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(vi) any and all assumption fees, charges
or other sums payable in connection with Buyer's assumption of
the Assumed Indebtedness.
(b) BUYER'S COSTS. Buyer shall pay:
(i) any and all broker's fees or similar
fees claimed by any party employed by Buyer in connection with
the transactions hereunder, provide however, Buyer shall not
be deemed to have employed any party by merely receiving
information concerning Seller, Tenant, the Property or related
to the transactions contemplated hereunder or by executing any
agreement to hold such information confidential;
(ii) all costs of any site inspections,
title surveys or environmental audits performed by or on
behalf of Buyer, including travel and out-of-pocket expenses
for such inspections or audits; and
(iii) Buyer's legal, accounting, and other
professional fees and expenses and the cost of all opinions,
certificates, instruments, documents and papers required to be
delivered, or to cause to be delivered, by Buyer hereunder,
including without limitation the cost of all performances by
Buyer of its obligations hereunder.
(c) EXISTING FINANCING. The Property is presently
encumbered by certain deeds of trust and certain other security
instruments other than the Assumed Indebtedness (individually and
collectively, the "EXISTING ENCUMBRANCES"). Seller shall cause the
Existing Encumbrances and all indebtedness secured thereby to be fully
satisfied, released and discharged of record on or prior to the
Closing Date (recognizing that Seller may use the proceeds of the sale
contemplated hereby to satisfy the same) so that Buyer shall take
title to the Property free of the Existing Encumbrances. Seller
acknowledges that such satisfaction, release and discharge may involve
prepayment penalties or premiums and other costs or expenses, all of
which shall be paid by Seller at its sole cost and expense on or
before the Closing Date; provided, however, Buyer agrees to pay
one-half of the prepayment penalty for paying off the Existing
Encumbrance on the Mt. Hood Parcel so long as Buyer's share of such
prepayment penalty does not exceed approximately $60,000.
4.2. PRORATIONS.
(a) NO ITEMS TO BE PRORATED. Except as provided
in Section 4.2(c) below, the income and expenses of the Property shall
not be prorated between Seller and Buyer on the Closing Date as the
Property is currently owned by Seller or Affiliates of Seller and as
Tenant will be responsible for such matters under the Facility Leases
after the Closing Date.
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(b) PROCEDURE. The prorations and payments to be
made at the Closing Conference pursuant to this Section 4.2 shall be
made on the basis of a written statement or statements provided to
Buyer by Seller prior to the Closing Conference and approved by Buyer.
In the event any prorations, apportionments or computations made under
this Section 4.2 shall prove to be incorrect for any reason, then
either party shall be entitled to an adjustment to correct the same,
provided that it makes written demand on the one from whom it is
entitled to such adjustment within one (1) year after the Closing
Date.
(c) GROUND LEASES AND INDEBTEDNESS. Seller shall
pay all amounts which are due or accrue under the Assumed
Indebtedness, the Existing Encumbrances and the Ground Leases prior to
and including the Closing Date, including, without limitation, all
interest or rent accrued on all of the same prior to and including the
Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller and
Tenant jointly and severally represent and warrant to Buyer the following:
(a) TITLE. Buyer will acquire hereunder good,
marketable and insurable title to, and the entire right, title, and
interest in, the Property, other than the Allenmore Parcel, free and
clear of any and all leases, liens, encumbrances, or other
liabilities, subject only to the Assumed Indebtedness, the Facility
Leases and the Permitted Exceptions. Such title shall be (i), fee
title as to the Fee Parcels, (ii) leasehold title to the Land under
the applicable Ground Lease as to the Mt. Hood Parcel and (iii) fee
title to the Improvements to the Mt. Hood Parcel. In addition, Buyer
will acquire hereunder a valid first mortgage lien under the NHP Loan
Documents as to good, marketable and insurable title and the entire
right, title and interest (x) in the leasehold estate under the
applicable Ground Lease as to the Land of the Allenmore Parcel, and
(y) fee title to the Improvements on the Allenmore Parcel, in both
cases free and clear of any and all leases, liens, encumbrances, or
other liabilities, subject only to the Permitted Exceptions.
(b) UTILITIES. To the best of Seller's and
Tenant's knowledge after due inquiry, the Property has available to
its boundaries adequate utilities, including without limitation,
adequate water supply, storm and sanitary sewage facilities,
telephone, gas, electricity and fire protection, as is required for
the operation of the Property as contemplated under the Facility
Leases and the NHP Loan Documents.
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(c) PHYSICAL CONDITION; COMPLETENESS.
(i) To the best of Seller's and Tenant's
knowledge after due inquiry, the Property has been constructed
in a good, workmanlike and substantial manner, free from
material defects and in accordance with all applicable Laws.
(ii) To the best of Seller's and Tenant's
knowledge after due inquiry, neither the zoning nor any other
right to construct upon or to use the Property is to any
extent dependent upon or related to any real estate other than
the Property, the improvement of such other real estate or the
payment of any fees for the improvement of such other real
estate.
(iii) To the best of Seller's and Tenant's
knowledge after due inquiry, the Property, and each portion
thereof, is in good condition and repair and is free from
material defects. Seller and Tenant will each use its best
efforts to maintain the Property in good condition and repair,
except for ordinary wear and tear, between the date hereof and
the Closing Date.
(iv) To the best of Seller's and Tenant's
knowledge after due inquiry, there are no soil conditions
adversely affecting the Property, except with respect to the
sink hole located on the Mt. Hood Parcel.
(v) To the best of Seller's and Tenant's
knowledge after due inquiry, except as disclosed in the
environmental audit reports identified on Exhibit I attached
hereto procured by Buyer (the "Environmental Audit Reports"),
copies of which have been provided to Seller, there are and
have been no Hazardous Materials installed or stored in or
otherwise existing at, on, in or under the Property which are
or have been at any time in violation of any applicable Laws
or which are or have been at any time in amounts or
concentrations sufficient to require the reporting of such
materials to any governmental authority.
(d) COMPLIANCE.
(i) Seller, Tenant or Union Limited
Partnership have obtained all consents, approvals, licenses,
permits and other permissions related to the transactions
contemplated herein as are required under any Business
Agreement or Laws. Notwithstanding the foregoing, if any
additional consents, approvals, licenses, permits or other
permissions are required in connection with such transactions,
Seller, Tenant and Union Limited Partnership hereby jointly
and severally agree that Seller, Tenant or Union Limited
Partnership, as applicable shall, as promptly as practical,
use their best efforts to obtain all such additional consents,
approvals, licenses, permits
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and other permissions related to the transactions contemplated
herein and required under any Business Agreement or Law.
(ii) To the best of Seller's and Tenant's
knowledge after due inquiry, Seller, Tenant, Union Limited
Partnership and/or their Affiliates have all Permits which are
necessary for the use and operation of the Property for its
current and intended use, which Permits shall authorize such
use by Seller, Tenant and/or Union Limited Partnership, as
applicable, after the Closing Date.
(e) ZONING. To the best of Seller's knowledge
after due inquiry, the Property is properly and full zoned for its
current use and the Property and the operation and use thereof,
including, without limitation, all boundary line adjustments to the
Property, comply with all applicable Laws including, without
limitation, the Subdivision Map Act.
(f) NO NOTICES OF NON-COMPLIANCE. Seller has
received no notice that and, after due inquiry Seller has no knowledge
that (i) any government agency or any employee or official thereof
considers that the operation or use of the Property for the current
use has failed or will fail to comply with any Law, (ii) any
investigation has been commenced or is contemplated respecting any
such possible or actual failure of the operation or use of the
Property for the current use to comply with any Law, and (iii) there
are any unsatisfied requests for repairs, restorations or alterations
with regard to the Property from any person, entity or authority,
including, but not limited to, any tenant, lender, insurance carrier
or government authority.
(g) DUE AUTHORIZATION, EXECUTION, ORGANIZATION,
ETC.
(i) This Agreement and all agreements,
instruments and documents herein provided to be executed or to
be caused to be executed by Seller, Tenant and/or Union
Limited Partnership and/or any Affiliate of any of the
foregoing which signs any Deed or Bill of Sale are, and on the
Closing Date will be, duly authorized, executed and delivered
by and are binding in accordance with their terms upon Seller,
Tenant and/or Union Limited Partnership and/or any such
Affiliate, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
application and of legal or equitable principles generally and
covenants of good faith and fair dealing.
(ii) Seller is a corporation, duly
organized, validly existing and in good standing under the
laws of the State of Washington and is duly qualified to do
business in each State where the Parcels are located. Tenant
is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly
qualified to do business in each
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State where the Parcels are located. Any Affiliate of Seller
which executes a Deed is a partnership duly organized, validly
existing and in good standing under the laws of the state of
its formation as shown on the applicable Deed and is duly
qualified to do business in the state in which the Parcel
conveyed by the applicable Deed is located. Seller and each
such Affiliate each have the power and authority to enter into
this Agreement (or the pertinent Deed and Bill of Sale, as
applicable) and all agreements, instruments and documents
herein provided and to consummate the transactions
contemplated hereby and thereby.
(iii) Union Limited Partnership is a
limited partnership duly organized, validly existing and in
good standing under the laws of the State of Washington and is
duly qualified to do business in the State of Washington.
Union Limited Partnership has the power and authority to enter
into the NHP Loan Documents and all agreements, instruments and
documents therein provided and to consummate the transactions
contemplated thereby.
(iv) Neither this Agreement, the NHP Loan
Documents nor any agreement, document or instrument executed
or to be executed in connection with this Agreement or the NHP
Loan Documents, nor anything provided in or contemplated by
this Agreement or the NHP Loan Documents or any such other
agreement, document or instrument, does now or shall hereafter
breach, invalidate, cancel, make inoperative or interfere
with, or result in the acceleration or maturity of, any
agreement, document, instrument, right or interest, affecting
or relating to Seller, Tenant, Union Limited Partnership, any
Affiliate of Seller executing a Deed or the Property.
(h) TRUE, CORRECT AND COMPLETE INFORMATION.
(i) To the best of Seller's and Tenant's
knowledge after due inquiry, all documents, plans, surveys and
other data or information prepared by parties other than
Seller or Tenant or the agents or employees of either of them
and provided to Buyer in connection herewith, are true,
correct and complete in all material respects and disclose all
material facts with no material omissions with respect
thereto.
(ii) All documents and other data or
information provided to Buyer by Seller, Tenant, Union Limited
Partnership or any of their respective Affiliates are true,
correct and complete in all material respects with no material
omissions with respect thereto.
(i) EXISTING AGREEMENTS. There are no material
agreements or understandings (whether written or oral) to which
Seller, Tenant or Union Limited Partnership is a party or is bound,
including, without limitation, any Business
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Agreements, relating to the Property or the operation or use thereof
other than the Permitted Exceptions and those documents and
instruments which have been delivered to Buyer by Seller, Tenant or
Union Limited Partnership prior to the Closing Date.
(j) DEFAULT. As of the Closing Date, neither
Seller, Tenant nor Union Limited Partnership is in default with
respect to any of its respective material obligations or liabilities
pertaining to the Property. Without limiting the foregoing, the
Permitted Exceptions (or will be at the Closing Date) are free from
material default by Seller, Tenant or Union Limited Partnership and,
to the best of Seller's and Tenant's actual knowledge, by any other
party thereto. Seller and Tenant represent and warrant that all of the
defaults which have been disclosed to Buyer pursuant to the foregoing
will be cured and satisfied by Seller or Tenant prior to or at the
Closing.
(k) LITIGATION; CONDEMNATION. To the best of
Seller's and Tenant's knowledge after due inquiry, there are no
material actions, suits or proceedings pending or threatened before or
by any judicial, administrative or union body, any arbiter or any
governmental authority, against or affecting Seller, Tenant or Union
Limited Partnership or the Property or any portion thereof. To the best
of Seller's and Tenant's knowledge after due inquiry, there are no
existing, proposed or threatened eminent domain or similar proceedings
which would affect the Land or Improvements in any manner whatsoever.
(l) NO INTANGIBLE PROPERTY. Other than any right
that Seller, Tenant or Union Limited Partnership may have to use the
names of the assisted living facilities located on the Property, and
other than the Permits required for such use, there is no Intangible
Property owned or held by any third party necessary in any material
way to the use or operation of the Property.
(m) ASSUMED INDEBTEDNESS. Seller, Tenant, or
Union Limited Partnership have delivered to Buyer true, correct and
complete copies of all material documents evidencing or relating to
the Assumed Indebtedness. No default exists under any of the Assumed
Indebtedness nor has any event occurred which, with the passage of
time or giving of notice, or both, would constitute a default under the
Assumed Indebtedness.
(n) WARRANTIES. Seller has delivered to Buyer
true, correct and complete copies of all material Warranties. To the
best of Seller's and Tenant's knowledge after due inquiry, the
Warranties are in full force and effect with no defaults thereunder.
The Warranties have not been assigned to or by any other party and
Seller has the right and authority to assign the Warranties to Buyer.
(o) WHOLLY-OWNED SUBSIDIARY; CONVEYANCE.
Effective as of the Closing Date, Seller shall be a wholly-owned
subsidiary of Tenant. Prior to the
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<PAGE> 20
Closing Date, Seller at its expense shall cause the fee or leasehold
title, as the case may be, to the Property (other than the Allenmore
Parcel) to vest in Seller. Alternatively, for the purpose of
administrative convenience, Seller may cause its Affiliates to convey
such title directly to Buyer in the condition required under this
Agreement.
(p) GROUND LEASES; ASSUMED INDEBTEDNESS. Seller
and Tenant have reviewed the instruments to be delivered to Buyer
pursuant to Section 3.2 and Section 3.3 above and represent to Buyer
that no further consent or approval by any ground lessor, lender or
other party is required to effectuate the transfers and assignments
contemplated by this Agreement.
5.2. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller, Tenant and Union Limited Partnership as
follows:
(a) This Agreement and all agreements,
instruments and documents herein provided to be executed or to be
caused to be executed by Buyer are and on the Closing Date will be
duly authorized, executed and delivered by and are binding upon Buyer,
subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application and by legal
or equitable principles relating to, Limiting or affecting the
enforceability of creditors' rights generally.
(b) Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and duly authorized and qualified to do all things required
of it under this Agreement.
(c) Buyer has the authority to enter into this
Agreement and consummate the transactions herein provided and nothing
prohibits or restricts the right or ability of Buyer to close the
transactions contemplated hereunder and carry out the terms hereof
5.3. INDEMNIFICATIONS.
(a) INDEMNIFICATION BY SELLER. Seller and Tenant
shall jointly and severally hold harmless, indemnify and defend Buyer
and the Property from and against any Claim that (i) is inconsistent
with (or results from any actual or alleged fact that is inconsistent
with) any representation or warranty of Seller, Tenant or Union
Limited Partnership contained in this Agreement or in any document
executed in connection with this Agreement, (ii) results from any
breach or default by Seller, Tenant or Union Limited Partnership under
this Agreement, or (iii) arises out of the negligent or intentional
act or omission of Seller, Tenant or Union Limited Partnership to the
extent such Claim arises out of such negligent or intentional act or
omission. Nothing in this Agreement shall be construed to relieve
Seller, Tenant or Union Limited Partnership of any liability which
Seller,
20
<PAGE> 21
Tenant or Union Limited Partnership may have to Buyer under any Laws
relating to Hazardous Materials.
(b) INDEMNIFICATION BY BUYER. Buyer shall hold
harmless, indemnify and defend Seller, Tenant and Union Limited
Partnership from and against any Claim that (i) is inconsistent with
(or results from any actual or alleged fact that is inconsistent with)
any representation or warranty of Buyer contained in this Agreement or
in any document executed in connection with this Agreement, (ii)
results from any breach or default by Buyer under this Agreement,
(iii) arises out of the negligent or intentional act or omission of
Buyer, to the extent such Claim arises out of such negligent or
intentional act or omission of Buyer occurring after the Closing Date
or occurring during the course of Buyer's inspection of the Property
prior to the Closing Date, or (iv) arises solely out of any act, event
or omission of Buyer occurring or arising after the Closing Date and
imposing any liability under any Laws relating to Hazardous Materials.
(c) GENERAL INDEMNITY PROVISIONS. Each indemnity
provided for under this Agreement shall be subject to the following
provisions:
(i) The indemnity shall cover the costs
and expenses of the indemnitee, including reasonable
attorneys' fees and costs (including expert fees), related to
any actions, suits or judgments incident to any of the matters
covered by such indemnity.
(ii) The indemnitee shall notify the
indemnitor of any Claim against the indemnitee covered by the
indemnity within one hundred eighty (180) days after it has
notice of such Claim, but failure to notify the indemnitor
shall in no case prejudice the rights of the indemnitee under
this Agreement unless the indemnitor shall be prejudiced by
such failure and then only to the extent the indemnitor shall
be prejudiced by such failure. Should the indemnitor fail to
discharge or undertake to defend the indemnitee against such
liability upon learning of the same, then the indemnitee may
settle such liability, and the liability of the indemnitor
hereunder shall be conclusively established by such
settlement, the amount of such liability to include both the
settlement consideration and the reasonable costs and
expenses, including attorneys' fees and costs (including
expert fees), incurred by the indemnitee in effecting such
settlement.
(iii) The indemnity shall also run in
favor of any officer, director, employee, advisor, accountant,
attorney, partner or shareholder of the indemnitee or any
person or entity having a direct or indirect ownership
interest in the indemnitee.
21
<PAGE> 22
ARTICLE VI MISCELLANEOUS
6.1. BROKERS AND CONSULTANTS. Seller represents and
warrants to Buyer that Seller shall be solely responsible for the payment of
any brokerage commissions or finder's fee due or claimed to be due in
connection with the transactions contemplated hereby, and Seller shall
indemnify, defend and save Buyer harmless from and against any such liability.
Notwithstanding the foregoing, Buyer represents and warrants to Seller that no
broker or finder has been engaged by Buyer in connection with any of the
transactions contemplated by this Agreement. In the event of a claim for
broker's or finder's fee or commissions in connection herewith based upon any
agreement inconsistent with the foregoing representation and warranty by Buyer,
Buyer shall indemnify and defend Seller from such claim. For purposes of this
Section 6.1, Buyer shall not be deemed to have engaged any broker or finder by
merely receiving information concerning Seller, the Property or related to the
transactions contemplated hereunder or by executing any agreement to hold such
information confidential.
6.2. SURVIVAL. All warranties, representations, covenants,
obligations and agreements contained in this Agreement shall survive the
Closing hereunder and the transfer and conveyance of the Property hereunder and
any and all performances hereunder. All warranties and representations shall be
effective regardless of any investigation made or which could have been made.
6.3. FURTHER INSTRUMENTS. Each party will, whenever and as
often as it shall be reasonably requested so to do by the other, cause to be
executed, acknowledged or delivered, any and all such further instruments and
documents as may be necessary or proper, in the reasonable opinion of the
requesting party, in order to carry out the intent and purpose of this
Agreement.
6.4. LIMITATION OF LIABILITY. No advisor, trustee,
director, officer, employee, accountant, attorney, beneficiary, shareholder,
partner, participant or agent of or in Buyer, Seller, Tenant or Union Limited
Partnership (other than the general partner in Union Limited Partnership) shall
have any personal liability, directly or indirectly, under or in connection
with this Agreement or any agreement made or entered into under or pursuant to
the provisions of this Agreement, or any amendment or amendments to any of the
foregoing made at any time or times, heretofore or hereafter. Buyer, Seller,
Tenant and Union limited Partnership and their respective successors and
assigns and, without limitation, all other persons and entities, shall look
solely to Seller's Tenant's or Union Limited Partnership's (or the general
partner in Union Limited Partnership) or Buyer's, as applicable, assets for the
payment of any claim or for any performance, and Buyer, Seller, Tenant and
Union Limited Partnership hereby waive any and all such personal liability
except as set forth herein. The limitations of liability provided in this
Section are in addition to, and not in limitation of, any limitation on
liability applicable to the parties as provided by law or by any other
contract, agreement or instrument.
22
<PAGE> 23
6.5. ENTIRE AGREEMENT; AMENDMENT; CAPTIONS. This Agreement
contains the entire agreement between the parties respecting the matters herein
set forth and supersedes all prior or contemporaneous agreements or
understandings, verbal or written, between the parties hereto respecting such
matters. This Agreement may be amended by written agreement of amendment
executed by both parties hereto, but not otherwise. Section headings shall not
be used in construing this Agreement.
6.6. CONSENTS AND APPROVALS. Except as otherwise expressly
provided herein, any approval or consent provided to be given by a party
hereunder may be given or withheld in the absolute discretion of such party.
6.7. INCORPORATION OF EXHIBITS AND RECITALS. All exhibits
attached and referred to in this Agreement and all Recitals set forth at the
beginning of this Agreement are hereby incorporated herein as fully set forth
in this Agreement.
6.8. TIME OF THE ESSENCE; NON-BUSINESS DAYS. Subject to
the next full sentence, time is of the essence of this Agreement. Whenever
action must be taken (including the giving of notice or the delivery of
documents) under this Agreement during a certain period of time or by a
particular date that ends or occurs on a non-business day, then such period or
date shall be extended until the immediately following business day. As used
herein, "business day" means any day other than Saturday, Sunday or a federal
holiday.
6.9. TERMINOLOGY. Whenever the words "including",
"include" or "includes" are used in this Agreement, they should be interpreted
in a non-exclusive manner as though the words, "without limitation,"
immediately followed the same. Except as otherwise indicated, all Section and
Exhibit references in this Agreement shall be deemed to refer to the Sections
and Exhibits in or to this Agreement.
6.10. ATTORNEYS' FEES. In the event any legal action or
proceeding is commenced to interpret or enforce the terms of, or obligations
arising out of, this Agreement, or to recover damages for the breach thereof,
the party prevailing in any such action or proceeding shall be entitled to
recover from the non-prevailing party all reasonable attorneys' fees and
reasonable costs and expenses incurred by the prevailing party, including such
fees and costs incurred with respect to appeals, arbitrations and bankruptcy
proceedings. As used herein, "attorneys' fees" shall mean the reasonable fees
and expenses of counsel to the parties hereto, which may include printing,
photostating, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals, librarians and others not admitted to the
bar but performing services under the supervision of an attorney.
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<PAGE> 24
6.11. CUMULATIVE REMEDIES. No remedy conferred upon a party
in this Agreement is intended to be exclusive of any other remedy herein or by
law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute (except as otherwise expressly herein provided).
6.12. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of Washington,
without regard to the rules governing choice of law.
6.13. SUCCESSORS AND ASSIGNS. Neither Buyer nor any of
Seller, Tenant or Union Limited Partnership may assign or transfer its rights
or obligations under this Agreement without the prior written consent of the
other party (in which event such transferee shall assume in writing all of the
transferor's obligations hereunder, but such transferor shall not be released
from its obligations hereunder). No consent given by any party hereto to any
transfer or assignment of the other party's or parties' rights or obligations
hereunder shall be construed as a consent to any other transfer or assignment
of such other party's rights or obligations hereunder. No transfer or
assignment in violation of the provisions hereof shall be valid or enforceable.
Subject to the foregoing, this Agreement and the terms and provisions hereof
shall inure to the benefit of and be binding upon the successors and assigns of
the parties.
6.14. NOTICES. Any notice which a party is required or may
desire to give the other shall be in writing and shall be sent by personal
delivery or by any of the following means: (a) United States registered or
certified mail, return receipt requested, postage prepaid; (b) Federal Express
or similar generally recognized overnight carrier regularly providing proof of
delivery; or (c) electronic telecopying (if confirmed in writing sent by
personal delivery or by either of the means specified in (a) or (b) above),
addressed as follows:
24
<PAGE> 25
To Seller, Tenant or Union: To Buyer:
Limited Partnership ---------
- ---------------------------
Nationwide Health Properties, Inc.
c/o Crossings International 4675 MacArthur Court
Corporation Suite 1170
1201 Pacific Avenue, Suite 1800 Newport Beach, CA 92660
Tacoma, Washington 98402 Attn: Mr. R. Bruce Andrews,
Attn: President President
Facsimile: (206) 383-9979 Facsimile: (714) 251-9644
With Copy To: With Copy To:
- ------------- -------------
Bogle & Gates, P.L.L.C. O'Melveny & Myers
4700 Two Union Square 610 Newport Center Drive
Seattle, Washington 98101 Suite 1700
Attn: Bryce L. Holland, Esq. Newport Beach, CA 92660
Facsimile: (206) 621-2660 Attn: Chairman, Real Estate Dept.
Facsimile: (714) 669-6994
Any notice so given by mail shall be deemed to have been given as of the date
of delivery (whether accepted or refused) established by U.S. Post Office
return receipt or the overnight carrier's proof of delivery, as the case may
be, whether accepted or refused. Any notice so given by electronic telecopying
shall be deemed to have been given as of the date of dispatch by electronic
means. Any such notice not so given as set forth in the two preceding sentences
shall be deemed given upon receipt of the same by the party to whom the same is
to be given. Any party hereto may designate a different address for itself by
notice to the other party in accordance with this Section 6.14. In the event a
party is not a natural person, delivery to an officer, director or partner of
such party shall be deemed delivery to such party.
6.15. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
6.16. EXCLUSIVE RIGHTS.
(a) AGREEMENT OF SELLER. Seller hereby agrees
that Seller, its agents, employees, directors, partners, and directors
and officers of such partners shall not negotiate with or discuss the
sale, financing or other disposition of the Property with any person
or entity other than Buyer, nor take any steps to initiate,
consummate, encourage or document the sale, financing or other
disposition of the Property, or any portion thereof, to any person or
entity other than Buyer until the earlier to occur of: (i) Seller's
receipt of written notification from Buyer that Buyer
25
<PAGE> 26
is withdrawing from the transactions contemplated hereby; or (ii)
after continuous good faith negotiations, the Closing Date does not
occur on or before December 29, 1995. The period commencing September
25, 1995, and extending until the first to occur of the events
specified in subsections 6.16(a)(i) and (ii) shall be hereinafter
referred to as the "Exclusivity Period".
(b) NOTICE OF OTHER OFFERS. Seller agrees to
notify Buyer in writing within one (1) business day of any offer
received by, delivered to or communicated to Seller or any of its
general partners, agents or employees for the purchase, sale,
financing, acquisition or other disposition of the Property or any
interest in Seller.
6.17. INTERPRETATION. Both Buyer and Seller have been
represented by counsel and this Agreement has been freely and fairly
negotiated. Consequently, all provisions of this Agreement shall be interpreted
according to their fair meaning and shall not be strictly construed against any
party.
6.18. NO THIRD PARTIES BENEFITTED. This Agreement is made
and entered into for the sole protection and benefit of Buyer and Seller and
their permitted successors and assigns. No other persons or entities shall have
any right of action under this Agreement.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: /s/ T. Andrew Stokes
-----------------------------------
Name: T. Andrew Stokes
-----------------------------
Title: Vice President
----------------------------
"SELLER"
CROSSINGS INTERNATIONAL
CORPORATION,
a Washington corporation
By: /s/ Richard W. Boehlke
-----------------------------------
Richard W. Boehlke,
President
"TENANT"
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By: /s/ Richard W. Boehlke
-----------------------------------
Richard W. Boehlke,
President
"UNION LIMITED PARTNERS"
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
By: /s/ Richard W. Boehlke
-----------------------------------
Richard W. Boehlke,
its general partner
<PAGE> 28
EXHIBIT A
LEGAL DESCRIPTION OF FEE PARCELS
THE ATRIUM
3350 30th Street
Boulder, Colorado 80301
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF COLORADO, COUNTY OF
BOULDER, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 1, REMINGTON POST, COUNTY OF BOULDER, STATE OF COLORADO.
CANTERBURY GARDENS
11265 E. Mississippi Ave.
Aurora, Colorado 80012
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF COLORADO, COUNTY OF
ARAPAHOE, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
LOT 3, BLOCK 1, CANTERBURY GARDENS SUBDIVISION FILING NO. 1, COUNTY OF
ARAPAHOE, STATE OF COLORADO.
PARCEL B:
AN EASEMENT FOR PRIVATE DRIVE, UTILITIES AND FIRE LANE CREATED BY INSTRUMENT
RECORDED MAY 17, 1979 IN BOOK 2993 AT PAGE 368 OVER THE WEST 30 FEET OF LOT 1,
BLOCK 1 AND THE EAST 16.60 FEET OF LOT 2, BLOCK 1, CANTERBURY GARDENS
SUBDIVISION FILING NO. 1, COUNTY OF ARAPAHO, STATE OF COLORADO.
PARCEL C:
LOT 2, BLOCK 1, CANTERBURY GARDENS SUBDIVISION FILING NO. 2, COUNTY OF ARAPAHO,
STATE OF COLORADO.
A-1
<PAGE> 29
RIDGE POINT
3375 34th Street
Boulder, Colorado 80301
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF COLORADO, COUNTY OF
BOULDER, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 7, REMINGTON POST REPLAT A, COUNTY OF BOULDER, STATE OF COLORADO.
RIVER PLACE
739 E. Parkcenter Blvd.
Boise, Idaho 83706
PARCEL A:
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF IDAHO, COUNTY OF ADA,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A PARCEL OF LAND LYING IN PORTIONS OF LOTS 1 AND 2 OF H.G. MYERS COUNTRY ACRES
SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY RECORDER,
BOISE, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184, AND LYING IN A PORTION
OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 3 NORTH, RANGE 2 EAST, BOISE
MERIDIAN, BOISE, ADA COUNTY, IDAHO BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SECTION CORNER COMMON TO SECTIONS 13, 14, 24 AND SAID SECTION
23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23 BEARS SOUTH 0 (DEGREES) 19'
34" WEST; THENCE NORTH 87 (DEGREES) 19' 10" WEST FOR A DISTANCE OF 431.35 FEET
TO A POINT ON CURVE MARKED BY AN ALUMINUM PIPE BEING ON THE SOUTHWESTERLY
RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD; THENCE SOUTHEASTERLY ALONG SAID
SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.02 FEET, SAID
CURVE HAVING A RADIUS OF 1,372.40 FEET, A CENTRAL ANGLE OF 8 (DEGREES) 46' 04",
TANGENTS OF 105.21 FEET AND A CHORD LENGTH OF 209.81 FEET BEARING SOUTH 38
(DEGREES) 23' 37" EAST TO A POINT ON CURVE MARKED BY AN IRON PIN, SAID POINT
BEING THE POINT OF BEGINNING; THENCE LEAVING SAID SOUTHWESTERLY RIGHT-OF-WAY
LINE OF EAST PARKCENTER BOULEVARD SOUTH 45 (DEGREES) 27' 07" WEST FOR A DISTANCE
OF 460.87 FEET TO AN IRON PIN; THENCE SOUTH 44 (DEGREES) 32' 53" EAST FOR A
DISTANCE OF 382.38 FEET TO AN IRON PIN; THENCE NORTH 45 (DEGREES) 27' 07" EAST
FOR A DISTANCE OF 332.78 FEET TO AN IRON PIN ON
A-2
<PAGE> 30
SOUTHWESTERLY RIGHT-OF-WAY OF SAID EAST PARKCENTER (BOULEVARD); THENCE NORTH 21
(DEGREES) 04' 52" WEST ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE FOR A
DISTANCE OF 101.11 FEET TO AN IRON PIN MARKING A POINT OF CURVATURE; THENCE
ALONG A CURVE TO THE LEFT ON SAID SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST
PARKCENTER BOULEVARD FOR A DISTANCE OF 303.28 FEET, SAID CURVE HAVING A RADIUS
OF 1,372.40 FEET, A CENTRAL ANGLE OF 12 (DEGREES) 39' 41", TANGENTS OF 152.26
FEET, AND A CHORD LENGTH OF 302.66 FEET BEARING NORTH 27 (DEGREES) 40'44" WEST
TO THE POINT OF BEGINNING.
PARCEL A-1:
EASEMENT RIGHTS FOR INGRESS AND EGRESS AS CREATED UNDER THAT CERTAIN
CROSS-EASEMENT AGREEMENT RECORDED MAY 3, 1990 AS INSTRUMENT NO. 9023531,
RECORDS OF ADA COUNTY, IDAHO.
PARCEL B:
A PARCEL OF LAND LYING IN A PORTION OF LOT 1 OF H.G. MYERS COUNTRY ACRES
SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY
RECORDER, BOISE, IDAHO IN BOOK 18, OF PLATS AT PAGES 1183 AND 1184, AND LYING
IN A PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 3 NORTH, RANGE 2
EAST, BOISE MERIDIAN, BOISE, ADA COUNTY, IDAHO AND MORE PARTICULARLY DESCRIBED
AS FOLLOWS: COMMENCING AT THE SECTION CORNER COMMON TO SECTIONS 13,14,24 AND
SAID SECTION 23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23 BEARS SOUTH 0
(DEGREES) 19' 34" WEST, THENCE; NORTH 87 (DEGREES) 19' 10" WEST A DISTANCE OF
431.35 FEET TO A POINT ON CURVE ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST
PARKCENTER BOULEVARD, THENCE SOUTHWESTERLY ALONG SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.02 FEET, SAID CURVE HAVING A
CENTRAL ANGLE OF 8 (DEGREES) 46' 04", A RADIUS OF 1,372.40 FEET, TANGENTS OF
105.21 FEET AND A LONG CHORD OF 209.81 FEET BEARING SOUTH 38 (DEGREES) 23' 37"
EAST TO A POINT ON CURVE, THENCE; SOUTH 45 (DEGREES) 27' 07" WEST A DISTANCE OF
366.83 FEET TO THE TRUE POINT OF BEGINNING, THENCE; NORTH 44 (DEGREES) 32' 53"
WEST A DISTANCE OF 252.56 FEET TO A POINT ON THE NORTHEASTERLY BOUNDARY OF SAID
LOT 1 OF H.G. MYERS COUNTRY ACRES SUBDIVISION NO. 2., THENCE; NORTH 65 (DEGREES)
09' 16" WEST A DISTANCE OF 126.68 FEET ALONG SAID NORTHEASTERLY BOUNDARY TO A
POINT, THENCE; SOUTH 6 (DEGREES) 30' 29" EAST A DISTANCE OF 322.54 FEET TO A
POINT ON THE NORTHEASTERLY BOUNDARY OF LOGGER'S CREEK COVE SUBDIVISION, AS
FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY RECORDER, BOISE IDAHO IN BOOK
56 OF PLATS AT PAGES 5204,5205, AND 5206, THENCE SOUTHEASTERLY ALONG SAID
NORTHEASTERLY BOUNDARY OF
A-3
<PAGE> 31
LOGGER'S CREEK COVE SUBDIVISION FOR THE NEXT 3 COURSES, SOUTH 41 (DEGREES) 16'
01" EAST (FORMERLY DESCRIBED AS SOUTH 41 (DEGREES) 15' 21" EAST) A DISTANCE OF
158.93 FEET, SOUTH 48 (DEGREES) 10' 31" EAST (FORMERLY DESCRIBED AS SOUTH 48
(DEGREES) 09' 51" EAST) A DISTANCE OF 147.55 FEET, SOUTH 59 (DEGREES) 22' 31"
EAST (FORMERLY DESCRIBED AS SOUTH 59 (DEGREES) 21' 51" EAST) A DISTANCE OF
107.43 FEET, THENCE; NORTH 45 (DEGREES) 27' 07" EAST A DISTANCE OF 121.57 FEET
TO A POINT, THENCE; NORTH 44 (DEGREES) 32' 53" WEST A DISTANCE OF 292.65 FEET
TO A POINT, THENCE; NORTH 45 (DEGREES) 27' 07" EAST A DISTANCE OF 94.04 FEET TO
THE TRUE POINT OF BEGINNING.
PARCEL C:
A PARCEL OF LAND LYING IN A PORTION OF LOT 2 OF H.G. MYERS COUNTRY ACRES
SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY
RECORDER, BOISE, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184, AND LYING IN
A PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 3 NORTH RANGE 2
EAST, BOISE, MERIDIAN, BOISE, ADA COUNTY, IDAHO, AND MORE PARTICULARLY
DESCRIBED AS FOLLOWS: COMMENCING AT THE SECTION CORNER COMMON TO SECTION 13,
14, 24 AND SAID SECTION 23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23
BEARS SOUTH 0 (DEGREES) 19' 34" WEST, THENCE; NORTH 87 (DEGREES) 19' 10" WEST A
DISTANCE OF 431.35 FEET TO A POINT ON CURVE ON THE SOUTHWESTERLY RIGHT-OF-WAY
LINE OF EAST PARKCENTER BOULEVARD, THENCE SOUTHEASTERLY ALONG SAID
SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.02 FEET, SAID
CURVE HAVING A CENTRAL ANGLE OF 8 (DEGREES) 46' 04", A RADIUS OF 1,372.40 FEET,
TANGENTS OF 105.21 FEET AND A LONG CHORD OF 209.81 FEET BEARING SOUTH 38
(DEGREES) 23' 37" EAST TO A POINT ON CURVE, THENCE; SOUTH 45 (DEGREES) 27' 07"
WEST A DISTANCE OF 271.87 FEET TO A POINT ON THE SOUTHWESTERLY BOUNDARY OF SAID
LOT 2 OF H.G. MYERS COUNTRY ACRES SUBDIVISION NO. 2, THENCE; NORTH 65 (DEGREES)
09' 16" WEST A DISTANCE OF 269.82 FEET ALONG SAID SOUTHWESTERLY BOUNDARY OF LOT
2 TO TRUE POINT OF BEGINNING, THENCE; NORTH 44 (DEGREES) 32' 53" WEST A
DISTANCE OF 135.34 FEET TO A POINT, THENCE SOUTH 24 (DEGREES) 50' 45" WEST
47.63 FEET TO A POINT, THENCE SOUTH 65 (DEGREES) 09' 16" EAST A DISTANCE OF
126.68 FEET ALONG SAID SOUTHWESTERLY BOUNDARY OF LOT 2 TO THE TRUE POINT OF
BEGINNING.
PARCEL D:
A PARCEL OF LYING IN A PORTION OF LOT 1 OF H.G. MYERS COUNTRY ACRES SUBDIVISION
NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY RECORDER, BOISE, ADA
COUNTY, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184, AND MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
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<PAGE> 32
COMMENCING AT THE SECTION CORNER COMMON TO SECTION 13, 14, 24 AND SAID SECTION
23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23 BEARS SOUTH 0 (DEGREES) 19'
34" WEST; THENCE NORTH 87 (DEGREES) 19' 10" WEST 431.35 FEET TO A POINT ON
CURVE ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD;
THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE
TO THE RIGHT 513.29 FEET, SAID CURVE HAVING A CENTRAL ANGLE OF 21 (DEGREES) 25'
45", A RADIUS OF 1,372.40 FEET, TANGENTS OF 259.68 FEET AND A LONG CHORD OF
510.31 FEET BEARING SOUTH 32 (DEGREES) 03' 47" EAST TO A NON-TANGENT POINT ON
CURVE; THENCE CONTINUING ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE SOUTH 21
(DEGREES) 04' 52" EAST 101.11 FEET TO A POINT ON THE NORTHEASTERLY BOUNDARY OF
SAID LOT 1 OF H.G. MYERS COUNTRY ACRES SUBDIVISION NO. 2, ALSO SAID POINT BEING
THE TRUE POINT OF BEGINNING; THENCE SOUTH 45 (DEGREES) 27' 07" WEST 332.78 FEET
TO A POINT; THENCE NORTH 44 (DEGREES) 32' 53" WEST 89.73 FEET TO A POINT;
THENCE SOUTH 45 (DEGREES) 27' 07" WEST 121.57 FEET TO A POINT ON THE
NORTHEASTERLY BOUNDARY OF LOGGER'S CREEK COVE SUBDIVISION, AS FILED FOR RECORD
IN THE OFFICE OF THE ADA COUNTY RECORDER, BOISE, IDAHO IN BOOK 56 OF PLATS AT
PAGES 5204, 5205 AND 5206; THENCE SOUTHEASTERLY ALONG SAID NORTHEASTERLY
BOUNDARY OF LOGGER'S CREEK COVE SUBDIVISION FOR THE NEXT 4 COURSES SOUTH 59
(DEGREES) 22' 31" EAST (FORMERLY DESCRIBED AS SOUTH 59 (DEGREES) 21' 51" EAST)
190.12 FEET SOUTH 75 (DEGREES) 38' 31" EAST (FORMERLY DESCRIBED AS SOUTH 75
(DEGREES) 37' 51" EAST) 208.63 FEET NORTH 58 (DEGREES) 37' 29" EAST (FORMERLY
DESCRIBED AS NORTH 58 (DEGREES) 39' 09" EAST) 38.79 FEET NORTH 61 (DEGREES) 59'
29" EAST (FORMERLY DESCRIBED AS NORTH 62 (DEGREES) 00' 09" EAST) 59.78 FEET TO
A POINT ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD;
THENCE NORTH 2 (DEGREES) 46' 26" EAST 24.04 FEET ALONG SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE TO A POINT; THENCE NORTHERLY ALONG SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE ALONG A NON-TANGENT CURVE TO THE LEFT 267.21 FEET, SAID
CURVE HAVING A CENTRAL ANGLE OF 11 (DEGREES) 04' 29", A RADIUS OF 1,382.40
FEET, TANGENTS OF 134.02 FEET, AND A LONG CHORD OF 266.79 FEET BEARING NORTH 8
(DEGREES) 38' 29" WEST TO A POINT; THENCE CONTINUING ALONG SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE NORTH 21 (DEGREES) 04' 51" WEST 72.16 FEET TO THE TRUE POINT
OF BEGINNING.
ALBANY RESIDENTIAL
1560 Davidson St. SE
Albany, Oregon 97321
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF LINN,
CITY OF ALBANY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A-5
<PAGE> 33
BEGINNING AT A POINT WHICH IS ON THE NORTH RIGHT-OF-WAY OF 16TH AVENUE IN THE
CITY OF ALBANY, LINN COUNTY, OREGON, SAID POINT BEING 1899.48 FEET NORTH 88
(DEGREES) 51' EAST, 390.16 FEET NORTH 1 (DEGREE) 25' 10" WEST AND 70 FEET NORTH
89 (DEGREES) 48' 05" WEST OF THE SOUTHEAST CORNER OF THE ABRAM HACKLEMAN
DONATION LAND CLAIM NO. 62 IN SECTION 8, TOWNSHIP 11 SOUTH, RANGE 3 WEST,
WILLAMETTE MERIDIAN, LINN COUNTY, OREGON; THENCE ALONG SAID NORTHERLY LINE OF
16TH AVENUE, NORTH 89 (DEGREES) 48' 05" WEST 1.97 FEET; THENCE ALONG SAID
NORTHERLY LINE ON A 250 FOOT RADIUS CURVE TO THE RIGHT, THE LONG CHORD OF WHICH
BEARS NORTH 65 (DEGREES) 49' 13" WEST 203.22 FEET; THENCE ALONG SAID NORTHERLY
LINE, ON A 250 FOOT RADIUS CURVE TO THE LEFT, THE LONG CHORD OF WHICH BEARS
NORTH 56 (DEGREES) 06' 27" WEST 123.23 FEET; THENCE NORTH 1 (DEGREE) 25' 10"
WEST 189.79 FEET; THENCE NORTH 88 (DEGREES) 34' 50" EAST 324.73 FEET TO THE
WESTERLY RIGHT-OF-WAY LINE OF DAVIDSON STREET; THENCE ALONG SAID WESTERLY LINE
ON A 375 FOOT RADIUS CURVE TO THE RIGHT, THE LONG CHORD OF WHICH BEARS SOUTH 9
(DEGREES) 40' 05" WEST 51.20 FEET; THENCE ALONG SAID WESTERLY LINE ON A 430
FOOT RADIUS CURVE TO THE LEFT, THE LONG CHORD OF WHICH BEARS SOUTH 7 (DEGREES)
31' 44" WEST 90.70 FEET; THENCE ALONG SAID WESTERLY LINE, SOUTH 1 (DEGREE) 28'
29" WEST 198.05 FEET AND SOUTH 22 (DEGREES) 29' 06" TO THE POINT OF BEGINNING.
COURTYARD VILLAGE
1929 Grand Prairie Rd SE
Albany, Oregon 97321
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF LINN,
CITY OF ALBANY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A: (TL 502)
BEGINNING ON THE NORTH LINE OF AND SOUTH 89 (DEGREES) 49' EAST 30.0 FEET FROM
THE NORTHWEST CORNER OF THE JOHN BURKHART DONATION LAND CLAIM 51, IN TOWNSHIP
11 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON, SAID
BEGINNING POINT BEING ON THE EAST LINE OF A COUNTY ROAD AND RUNNING THENCE
SOUTH 89 (DEGREES) 49' EAST ALONG THE NORTH LINE OF SAID CLAIM, A DISTANCE OF
450.0 FEET; THENCE SOUTH 1 (DEGREE) 36' EAST PARALLEL TO THE WEST LINE OF SAID
CLAIM A DISTANCE OF 807.31 FEET TO THE NORTHERLY RIGHT OF WAY LINE OF A COUNTY
ROAD; THENCE NORTH 65 (DEGREES) 58' WEST ALONG SAID RIGHT OF WAY 379.06 FEET TO
A POINT OF CURVE ON SAID RIGHT OF WAY; THENCE ALONG SAID RIGHT OF WAY ON A
190.4 FOOT RADIUS CURVE TO RIGHT LONG CHORD OF
A-6
<PAGE> 34
WHICH BEARS NORTH 44 (DEGREES) 21.4' WEST 140.24 FEET) A DISTANCE OF 143.63
FEET; THENCE SOUTH 89 (DEGREES) 49' EAST PARALLEL WITH THE NORTH LINE OF
DONATION LAND CLAIM 51, A DISTANCE OF 112.15 FEET; THENCE NORTH 1 (DEGREE) 36'
WEST PARALLEL WITH THE WEST LINE OF SAID CLAIM 51, A DISTANCE OF 130.0 FEET;
THENCE NORTH 89 (DEGREES) 49' WEST PARALLEL THE NORTH LINE OF SAID CLAIM 51 A
DISTANCE OF 125.0 FEET TO THE EAST LINE OF A COUNTY ROAD; THENCE NORTH 1
(DEGREE) 36' WEST 424.0 FEET TO THE PLACE OF BEGINNING.
EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR PERIWINKLE CREEK RIGHT
OF WAY IN DEED RECORDED JUNE 28,1973 IN MF VOLUME 66, PAGE 61, MICROFILM
RECORDS, LINN COUNTY, OREGON.
ALSO EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR GEARY STREET RIGHT
OF WAY BY DEEDS RECORDED MAY 27, 1975 IN MF VOLUME 109, PAGE 22 AND MF VOLUME
109, PAGE 23, MICROFILM RECORDS, LINN COUNTY, OREGON.
ALSO EXCEPT (TL 501) BEGINNING SOUTH 1 (DEGREE) 36' EAST 424.0 FEET FROM A
POINT ON THE NORTH LINE OF AND SOUTH 89 (DEGREES) 49' EAST 30.0 FEET FROM THE
NORTHWEST CORNER OF THE JOHN BURKHART DONATION CLAIM NO. 51, IN TOWNSHIP 11
SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; SAID
BEGINNING POINT BEING ON THE EAST LINE OF A COUNTY ROAD; AND RUNNING THENCE
SOUTH 89 (DEGREES) 49' EAST PARALLEL WITH THE NORTH LINE OF SAID CLAIM, A
DISTANCE OF 125.0 FEET; THENCE SOUTH 1 (DEGREE) 36' EAST PARALLEL WITH THE WEST
LINE OF SAID CLAIM, A DISTANCE OF 130.0 FEET; THENCE NORTH 89 (DEGREES) 49'
WEST PARALLEL WITH THE NORTH LINE OF SAID CLAIM, A DISTANCE OF 112.15 FEET TO
THE EASTERLY RIGHT OF WAY OF SAID COUNTY ROAD; THENCE ALONG SAID RIGHT OF WAY
ON A 190.4 FOOT RADIUS CURVE TO THE RIGHT (THE LONG CHORD OF WHICH BEARS NORTH
12 (DEGREES) 10.4' WEST 69.88 FEET) A DISTANCE OF 70.27 FEET; THENCE NORTH 1
(DEGREE) 36' WEST 61.68 FEET TO THE PLACE OF BEGINNING.
SAVE AND EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR GEARY STREET
RIGHT OF WAY RECORDED SEPTEMBER 18, 1973 IN VOLUME 71, PAGE 524, LINN COUNTY
MICROFILM RECORDS.
ALSO EXCEPT THE FOLLOWING: (TL 506) BEGINNING AT A POINT ON NORTHERLY RIGHT OF
WAY OF GRAND PRAIRIE ROAD, SAID POINT ALSO BEING NORTH 11 (DEGREES) 55' 59"
EAST 5.11 FEET AND NORTH 65 (DEGREES) 58' 43" WEST A DISTANCE OF 208.03 FEET
FROM THE SOUTHEAST CORNER OF TRACT 12 OF JASON WHEELER'S HOME FARM IN TOWNSHIP
11 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; AND
RUNNING THENCE NORTH 11 (DEGREES) 55' 59" EAST A DISTANCE OF 208.03 FEET;
A-7
<PAGE> 35
THENCE SOUTH 65 (DEGREES) 58' 43" EAST 82.06 FEET THENCE NORTH 12 (DEGREES) 59'
24" EAST 259.86 FEET; THENCE NORTH 77 (DEGREES) 00' 36" WEST 400.00 FEET;
THENCE SOUTH 83 (DEGREES) 32' 42" WEST 120.37 FEET; THENCE NORTH 77 (DEGREES)
00' 36" WEST 84.00 FEET; THENCE SOUTH 12 (DEGREES) 59' 24" WEST 38.00 FEET;
THENCE NORTH 77 (DEGREES) 00' 36" WEST 110.0 FEET; THENCE NORTH 54 (DEGREES)
13' 39" WEST 108.46 FEET; THENCE NORTH 77 (DEGREES) 00' 36" WEST 120.00 FEET;
THENCE SOUTH 44 (DEGREES) 19' 26" WEST 38.80 FEET TO THE NORTHEAST CORNER OF
THAT CERTAIN DESCRIBED TRACT IN MICROFILM VOLUME MF 338-89 OF THE LINN COUNTY
MICROFILM RECORDS; THENCE SOUTH 01 (DEGREE) 36' 00" EAST ALONG SAID EAST LINE
130.00 FEET TO THE SOUTHEAST CORNER THEREOF; THENCE NORTH 89 (DEGREES) 51' 14"
WEST ALONG THE SOUTH LINE OF SAID TRACT 112.13 FEET TO THE EASTERLY RIGHT OF
WAY OF GEARY STREET; THENCE SOUTHEASTERLY ON A 190.37 FOOT RADIUS CURVE LEFT A
DISTANCE OF 117.68 FEET (THE LONG CHORD OF WHICH BEARS SOUTH 40 (DEGREES) 28'
54" EAST 115.82 FEET); THENCE NORTH 24 (DEGREES) 01' 17" EAST 3.24 FEET TO A
5/8" IRON ROD ON THE NORTH LINE OF GRAND PRAIRIE ROAD; THENCE SOUTH 65
(DEGREES) 58' 43" EAST ALONG SAID NORTH LINE 869.94 FEET TO THE TRUE PLACE OF
BEGINNING.
PARCEL C: (TL 506 & 507)
BEGINNING AT A POINT ON THE NORTHERLY RIGHT OF WAY OF GRAND PRAIRIE ROAD, SAID
POINT ALSO BEING NORTH 11 (DEGREES) 55' 59" EAST 5.11 FEET AND NORTH 65
(DEGREES) 58' 43" WEST A DISTANCE OF 208.03 FEET FROM THE SOUTHEAST CORNER OF
TRACT 12 OF JASON WHEELER'S HOME FARM IN TOWNSHIP 11 SOUTH, RANGE 3 WEST OF THE
WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; AND RUNNING THENCE NORTH 11
(DEGREES) 55' 59" EAST A DISTANCE OF 208.03 FEET; THENCE SOUTH 65 (DEGREES) 58'
43" EAST 82.06 FEET; THENCE NORTH 12 (DEGREES) 59' 24" EAST 259.86 FEET; THENCE
NORTH 77 (DEGREES) 00' 36" WEST 400.00 FEET; THENCE SOUTH 83 (DEGREES) 32' 42"
WEST 120.37 FEET; THENCE NORTH 77 (DEGREES) 00' 36" WEST 84.00 FEET; THENCE
SOUTH 12 (DEGREES) 59' 24" WEST 38.00 FEET; THENCE NORTH 77 (DEGREES) 00' 36"
WEST 110.0 FEET; THENCE NORTH 54 (DEGREES) 13' 39" WEST 108.46 FEET; THENCE
NORTH 77 (DEGREES) 00' 36" WEST 120.00 FEET, THENCE SOUTH 44 (DEGREES) 19' 26"
WEST 38.80 FEET TO THE NORTHEAST CORNER OF THAT CERTAIN DESCRIBED TRACT IN
MICROFILM VOLUME MT 338-89 OF THE LINN COUNTY MICROFILM RECORDS: THENCE SOUTH
01 (DEGREE) 36' 00" EAST ALONG SAID EAST LINE 130.00 FEET TO THE SOUTHEAST
CORNER THEREOF; THENCE NORTH 89 (DEGREES) 51' 14" WEST ALONG THE SOUTH LINE OF
SAID TRACT 112.13 FEET TO THE EASTERLY RIGHT OF WAY OF GEARY STREET; THENCE
SOUTHEASTERLY ON A 190.37 FOOT RADIUS CURVE LEFT A DISTANCE OF 117.68 FEET (THE
LONG CHORD OF WHICH BEARS SOUTH 40 (DEGREES) 28' 54" EAST 115.82 FEET); THENCE
NORTH 24 (DEGREES) 01' 17" EAST 3.24 FEET TO A 5/8" IRON ROD ON THE NORTH LINE
OF GRAND PRAIRIE ROAD; THENCE SOUTH 65 (DEGREES) 58' 43" EAST ALONG SAID NORTH
LINE 869.94 FEET TO THE TRUE PLACE OF BEGINNING.
A-8
<PAGE> 36
PARCEL D: (TL 501)
BEGINNING SOUTH 1 (DEGREE) 36" EAST 424.0 FEET FROM A POINT ON THE NORTH LINE
OF AND SOUTH 89 (DEGREES) 49' EAST 30.0 FEET FROM THE NORTHWEST CORNER OF THE
JOHN BURKHART DONATION LAND CLAIM NO. 51, IN TOWNSHIP 11 SOUTH, RANGE 3
WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; SAID BEGINNING POINT
BEING ON THE EAST LINE OF A COUNTY ROAD; AND RUNNING THENCE SOUTH 89 (DEGREES)
49' EAST PARALLEL WITH THE NORTH LINE OF SAID CLAIM, A DISTANCE OF 125.0 FEET;
THENCE SOUTH 1 (DEGREE) 36' EAST PARALLEL WITH THE WEST LINE OF SAID CLAIM, A
DISTANCE OF 130.0 FEET; THENCE NORTH 89 (DEGREES) 49' WEST PARALLEL WITH THE
NORTH LINE OF SAID CLAIM, A DISTANCE OF 112.15 FEET TO THE EASTERLY RIGHT OF
WAY OF SAID COUNTY ROAD; THENCE ALONG SAID RIGHT OF WAY ON A 190.4 FOOT RADIUS
CURVE TO THE RIGHT (THE LONG CHORD OF WHICH BEARS NORTH 12 (DEGREES) 10.4' WEST
69.88 FEET) A DISTANCE OF 70.27 FEET; THENCE NORTH 1 (DEGREE) 36' WEST 61.68
FEET TO THE PLACE OF BEGINNING.
SAVE AND EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR GEARY STREET
RIGHT OF WAY RECORDED SEPTEMBER 18, 1973 IN VOLUME 71, PAGE 524, LINN COUNTY
MICROFILM RECORDS.
FOREST GROVE RESIDENTIAL
3110 19th Ave.
Forest Grove, Oregon 97116
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
WASHINGTON, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
A PARCEL OF LAND SITUATED IN THE NORTHWEST QUARTER OF THE NORTHWEST QUARTER OF
SECTION 5, TOWNSHIP 1 SOUTH, RANGE 3 WEST OF THE WILLIAMETTE MERIDIAN, IN THE
CITY OF FOREST GROVE, COUNTY OF WASHINGTON AND STATE OF OREGON, DESCRIBED AS
FOLLOWS:
BEGINNING AT A 5/8 INCH IRON ROD LOCATED AT THE INTERSECTION OF THE CENTER
LINES OF 19TH AVENUE (FORMERLY FIRST AVENUE) AND MAPLE STREET; THENCE NORTH 89
(DEGREES) 43' 13" WEST ALONG CENTER LINE OF 19TH AVENUE A DISTANCE OF 404.75
FEET; THENCE SOUTH 00 (DEGREES) 29' 47" WEST 33.00 FEET TO A POINT ON THE SOUTH
RIGHT OF WAY LINE OF 19TH AVENUE AND THE TRUE POINT OF BEGINNING OF THE TRACT
TO BE DESCRIBED; THENCE ALONG SAID SOUTH RIGHT OF WAY LINE
A-9
<PAGE> 37
SOUTH 89 (DEGREES) 43' 13" EAST 374.57 FEET TO THE WEST RIGHT OF WAY LINE OF
MAPLE STREET (30.00 FEET WESTERLY OF THE CENTER LINE THEREOF); THENCE ALONG
SAID WEST RIGHT OF WAY LINE SOUTH 00 (DEGREES) 48' 00" WEST 293.51 FEET TO THE
SOUTH LINE OF THAT CERTAIN TRACT DESCRIBED IN DEED RECORDED IN BOOK 809, PAGE
372, WASHINGTON COUNTY RECORDS; THENCE PARALLEL WITH THE CENTER LINE OF 19TH
AVENUE, NORTH 89 (DEGREES) 43' 13" WEST 317.08 FEET TO THE EAST LINE OF THAT
CERTAIN TRACT CONVEYED TO T.E. MILLER BY DEED RECORDED IN BOOK 227, PAGE 669,
WASHINGTON COUNTY RECORDS; THENCE ALONG THE EAST LINE OF SAID MILLER TRACT
NORTH 00 (DEGREES) 29' 47" EAST 90.00 FEET TO THE NORTHEAST CORNER OF THAT
CERTAIN TRACT CONVEYED TO WILLIAM DAVID AND MARGIE LOUISE HOWARTH BY DEED
RECORDED IN BOOK 422, PAGE 468, WASHINGTON COUNTY RECORDS; THENCE ALONG THE
NORTH LINE OF THE SAID HOWARTH TRACT NORTH 89 (DEGREES) 43' 13" WEST 55.94
FEET; THENCE NORTH 00 (DEGREES) 29' 47" EAST 203.50 FEET TO THE TRUE POINT OF
BEGINNING.
PARCEL B:
A PARCEL OF LAND SITUATED IN THE NORTHWEST QUARTER OF THE NORTHWEST QUARTER OF
SECTION 5, TOWNSHIP 1 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN, IN THE
CITY OF FOREST GROVE, COUNTY OF WASHINGTON AND STATE OF OREGON, DESCRIBED AS
FOLLOWS:
BEGINNING AT A 5/8 INCH IRON ROD LOCATED AT THE INTERSECTION OF THE CENTER
LINES OF 19TH AVENUE (FORMERLY FIRST AVENUE) AND MAPLE STREET; THENCE ALONG THE
CENTER LINE OF 19TH AVENUE NORTH 89 (DEGREES) 43' 13" WEST 404.75 FEET; THENCE
SOUTH 00 (DEGREES) 29' 47" WEST 33.00 FEET TO A POINT ON THE SOUTH RIGHT OF WAY
LINE OF 19TH AVE AND THE TRUE POINT OF BEGINNING OF THE TRACT TO BE DESCRIBED;
THENCE SOUTH 00 (DEGREES) 29' 47" WEST 203.50 FEET TO THE NORTH LINE OF THAT
CERTAIN TRACT CONVEYED TO WILLIAM DAVID AND MARGIE LOUISE HOWARTH BY DEED
RECORDED IN BOOK 422, PAGE 468, WASHINGTON COUNTY RECORDS; THENCE NORTH 89
(DEGREES) 43' 13" WEST ALONG THE NORTH LINE OF THE SAID HOWARTH TRACT 44.06
FEET TO THE NORTHWEST CORNER THEREOF, SAID POINT ALSO BEING ON THE EAST LINE OF
A TRACT DESCRIBED IN DEED BOOK 404, PAGE 164, WASHINGTON COUNTY RECORDS; THENCE
ALONG SAID LAST DESCRIBED EAST LINE NORTH 00 (DEGREES) 29' 47" EAST 1.75 FEET
TO THE SOUTHEAST CORNER OF THAT CERTAIN TRACT OF LAND DESCRIBED IN CONTRACT OF
SALE TO 74 VENTURES, A PARTNERSHIP, RECORDED DOCUMENT 85043483, DEED RECORDS OF
WASHINGTON COUNTY; THENCE ALONG THE SOUTH LINE OF SAID 74 VENTURES TRACT NORTH
89 (DEGREES) 43' 13" WEST 100.00 FEET TO THE SOUTHWEST CORNER THEREOF; THENCE
NORTH 00 (DEGREES) 29' 47" EAST ALONG
A-10
<PAGE> 38
THE WEST LINE OF SAID 74 VENTURES TRACT 201.75 FEET TO THE SOUTH RIGHT OF WAY
LINE OF 19TH AVENUE; THENCE SOUTH 89 (DEGREES) 43' 13" EAST ALONG SAID SOUTH
RIGHT OF WAY LINE 144.06 FEET TO THE TRUE POINT OF BEGINNING.
THE HERITAGE AT ROGUE VALLEY
3033 Barnett Rd.
Medford, Oregon 97504
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
JACKSON, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
PARCEL 1 OF MINOR LAND PARTITION FILED AUGUST 8, 1990 AS PARTITION PLAT NO.
P-70-1990 IN VOLUME 1 OF MINOR LAND PARTITIONS, PAGE 70, JACKSON COUNTY,
OREGON, COUNTY SURVEY NO. 12136.
PARCEL B:
PARCEL 2 OF MINOR LAND PARTITION FILED AUGUST 8, 1990 AS PARTITION PLAT NO.
P-70-1990 IN VOLUME 1 OF MINOR LAND PARTITIONS, PAGE 70, JACKSON COUNTY,
OREGON, COUNTY SURVEY NO. 12136.
McMINNVILLE RESIDENTIAL
775 E 27th Street
McMinnville, Oregon 97128
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
YAMHILL AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 21, BLOCK 2, O.M.I. ACRES; ACCORDING TO THE RECORDED PLAT THEREOF, FILED
JULY 10, 1990 IN VOLUME 3, PAGES 16-18 INCLUSIVE, PLAT RECORDS OF YAMHILL
COUNTY, SITUATED IN THE CITY OF McMINVILLE, YAMHILL COUNTY, OREGON.
COLUMBIA EDGEWATER
1629 George Washington Way
Richland, Washington 99352
A-11
<PAGE> 39
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF WASHINGTON, COUNTY OF
BENTON, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
ALL OF THAT PORTION OF LOT 1, BLOCK 733, PLAT OF RICHLAND, ACCORDING TO THE
PLAT THEREOF RECORDED IN VOLUMES 6 AND 7 OF PLATS, RECORDS OF BENTON COUNTY,
WASHINGTON, WHICH LIES NORTH AND EAST OF THE FOLLOWING DESCRIBED LINE:
BEGINNING AT A POINT ON THE EAST LINE OF SAID LOT 1, A DISTANCE OF 299.83 FEET
SOUTH OF THE NORTHEAST CORNER OF SAID LOT 1; THENCE SOUTH 88 (DEGREES) 54' 12"
WEST A DISTANCE OF 508.0 FEET; THENCE NORTHWESTERLY TO THE NORTH LINE OF SAID
LOT 1, TO A POINT WHICH IS 640.00 FEET WEST OF SAID NORTHEAST CORNER AND
TERMINUS OF SAID LINE.
PARCEL B:
AN EASEMENT FOR VEHICULAR AND PEDESTRIAN TRAFFIC OVER AND ACROSS A STRIP OF
LAND 30.00 FEET WIDE, WHICH LIES SOUTH OF AND IS CONTIGUOUS TO THE SOUTH
BOUNDARY OF THE PROPERTY HEREINABOVE DESCRIBED.
A-12
<PAGE> 40
EXHIBIT B
LEGAL DESCRIPTION OF LEASEHOLD PARCELS
UNION PARK AT ALLENMORE
2010 South Union Ave.
Tacoma, Washington 98405
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF WASHINGTON, COUNTY OF
PIERCE, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LEASEHOLD INTEREST CREATED PURSUANT TO LEASE AGREEMENT OF VETERANS OF FOREIGN
WARS POST 91, DATED DECEMBER 2, 1985, BY AND BETWEEN WILD WEST POST NO. 91
VETERANS OF FOREIGN WARS OF THE UNITED STATES, A CORPORATION, AS LESSOR, AND
2010 UNION LIMITED PARTNERSHIP, A WASHINGTON LIMITED PARTNERSHIP, AS LESSEE,
RECORDED ON OCTOBER 29, 1987 AS INSTRUMENT NO. 8710290147 OF THE OFFICIAL
RECORDS OF PIERCE COUNTY, WASHINGTON, AS AMENDED BY THAT CERTAIN AMENDMENT OF
LEASE AGREEMENT DATED APRIL 15, 1993, THAT CERTAIN AMENDMENT TO LEASE AGREEMENT
DATED SEPTEMBER 3, 1986, AND THAT CERTAIN LEASE AMENDMENT DATED AS OF THE DATE
HEREOF.
PARCEL A:
BEGINNING 362 FEET SOUTH OF THE NORTHWEST CORNER OF GOVERNMENT LOT 1, IN
SECTION 7, TOWNSHIP 20 NORTH, RANGE 3 EAST OF THE WILLAMETTE MERIDIAN; THENCE
EAST PARALLEL WITH THE NORTH LINE OF SAID LOT 1, 38.00 FEET; THENCE SOUTH
PARALLEL WITH THE WEST LINE OF SAID LOT 1, 180.00 FEET; THENCE EAST PARALLEL
WITH THE NORTH LINE OF SAID LOT 1, 18.00 FEET; THENCE SOUTH PARALLEL WITH THE
WEST LINE OF SAID LOT 1, 18.00 FEET; THENCE EAST PARALLEL NORTH LINE OF SAID
LOT 1, 142.00 FEET; THENCE NORTH PARALLEL WITH THE WEST LINE OF SAID LOT 1,
158.00 FEET; THENCE EAST PARALLEL WITH THE NORTH LINE OF SAID LOT 1, 9.00 FEET;
THENCE NORTH PARALLEL WITH THE WEST LINE OF SAID LOT 1, 40.00 FEET; THENCE EAST
PARALLEL WITH THE NORTH LINE OF SAID LOT 1, 47.91 FEET TO THE WESTERLY RIGHT OF
WAY LINE OF UNION AVE. AS CONVEYED TO THE CITY OF TACOMA BY DEED RECORDED
DECEMBER 6, 1966, UNDER RECORDING NUMBER 2171084; THENCE SOUTHERLY ALONG SAID
WESTERLY RIGHT OF WAY LINE 321.34 FEET TO THE SOUTH LINE OF THE NORTH 679.00
FEET, AS MEASURED ALONG THE WEST LINE OF SAID GOVERNMENT LOT 1; THENCE WEST
PARALLEL WITH THE
B-1
<PAGE> 41
NORTH LINE OF SAID LOT 1, 310.25 FEET TO THE WEST LINE OF SAID LOT 1; THENCE
NORTH ALONG SAID WEST LINE OF LOT 1, 317.00 FEET TO THE BEGINNING.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
PARCEL B:
BEGINNING AT A POINT 412.50 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12,
TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE WILLAMETTE MERIDIAN IN PIERCE COUNTY,
WASHINGTON; SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE SOUTH 165
FEET; THENCE WEST 264 FEET; THENCE NORTH 165 FEET; THENCE EAST 264 FEET TO THE
POINT OF BEGINNING.
EXCEPT THE WEST 15 FEET OF THE NORTH 82.5 FEET THEREOF, CONVEYED TO THE CITY OF
TACOMA BY DEED RECORDED MAY 07,1947 UNDER RECORDING NUMBER 1448676, RECORDS OF
PIERCE COUNTY, WASHINGTON.
EXCEPT THE WEST 15 FEET OF THE SOUTH 82.5 FEET THEREOF, CONVEYED TO THE CITY OF
TACOMA, BY DEED RECORDED JANUARY 28, 1947 UNDER RECORDING NUMBER 1439030,
RECORDS OF PIERCE COUNTY, WASHINGTON.
ALSO EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED UNDER RECORDING NUMBER 8610060308, RECORDS OF PIERCE COUNTY,
WASHINGTON.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
PARCEL C:
BEGINNING 577.50 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12, TOWNSHIP 20
NORTH, RANGE 2 EAST OF THE WILLAMETTE MERIDIAN IN PIERCE COUNTY, WASHINGTON;
SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE SOUTH 82.5 FEET; THENCE
WEST 264 FEET; THENCE NORTH 82.5 FEET; THENCE EAST 264 FEET TO THE TRUE POINT
OF BEGINNING.
EXCEPT THE WEST 15 FEET THEREOF, CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED APRIL 12, 1954, UNDER RECORDING NUMBER 1678966, RECORDS OF PIERCE
COUNTY, WASHINGTON; AND
B-2
<PAGE> 42
ALSO EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED UNDER RECORDING NUMBER 8610060308, RECORDS OF PIERCE COUNTY,
WASHINGTON.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
PARCEL D:
BEGINNING 660 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12, TOWNSHIP 20
NORTH, RANGE 2 EAST OF THE W.M. IN PIERCE COUNTY, WASHINGTON; SAID POINT BEING
THE TRUE POINT OF BEGINNING; THENCE SOUTH 165 FEET; THENCE WEST 264 FEET;
THENCE NORTH 165 FEET; THENCE EAST 264 FEET TO THE TRUE POINT OF BEGINNING.
EXCEPT THE WEST 30 FEET THEREOF, CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED UNDER RECORDING NUMBER 8610060308, RECORDS OF PIERCE COUNTY,
WASHINGTON.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
HERITAGE, MT. HOOD
25200 S.E. Stark Street
Gresham, Oregon 97030
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
MULTNOMAH, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LEASEHOLD INTEREST CREATED PURSUANT TO GROUND LEASE DATED MARCH 6, 1989 BY AND
BETWEEN HEALTHLINK, AN OREGON NON-PROFIT CORPORATION, CURRENTLY KNOWN AS
LEGACY HEALTH SYSTEM, AS LESSOR, AND CROSSINGS INTERNATIONAL CORPORATION, A
WASHINGTON CORPORATION ("CROSSINGS"), AS LESSEE, AS EVIDENCED BY THAT CERTAIN
MEMORANDUM OF LEASE DATED MARCH 6, 1989 BY AND BETWEEN HEALTHLINK, AS LESSOR,
AND CROSSINGS, AS LESSEE, AND RECORDED ON MARCH 9, 1989 IN BOOK 2184, PAGE 1304
OF THE OFFICIAL RECORDS OF MULTNOMAH COUNTY, OREGON.
PARCEL I:
A TRACT OF LAND LYING IN THE NORTHEAST QUARTER OF SECTION 2, TOWNSHIP 1 SOUTH,
RANGE 3 EAST OF THE WILLAMETTE MERIDIAN, IN
B-3
<PAGE> 43
THE CITY OF GRESHAM, COUNTY OF MULTNOMAH AND STATE OF OREGON, SAID TRACT BEING
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTHERLY RIGHT OF WAY LINE OF SE STARK STREET,
SAID POINT ALSO LYING SOUTH 0 (DEGREE) 19'42" EAST 45.00 FEET AND NORTH 89
(DEGREE) 40'13" EAST, A DISTANCE OF 150.02 FEET FROM THE NORTHWEST CORNER OF
SAID NORTHEAST QUARTER OF SECTION 2; AND RUNNING THENCE NORTH 89 (DEGREE)
40'13" EAST ALONG THE SOUTHERLY RIGHT OF WAY LINE OF SAID SE STARK STREET, A
DISTANCE OF 355.00 FEET TO A 5/8 INCH IRON ROD AT THE NORTHWEST CORNER OF LOT
9, BLOCK 6 OF SANDPIPER EAST, DULY RECORDED SUBDIVISION IN MULTNOMAH COUNTY
PLAT BOOK 1209, PAGES 55 AND 56; THENCE SOUTH 1 (DEGREE) O4'42" EAST ALONG THE
WEST BOUNDARY OF SAID BLOCK 6 A DISTANCE OF 445.04 FEET TO A POINT; THENCE
LEAVING SAID WEST BOUNDARY SOUTH 89 (DEGREE) 40'13" WEST 425.07 FEET TO A
POINT; THENCE NORTH 63 (DEGREE) 16'25" WEST 24.15 FEET TO A POINT OF NON
TANGENT CURVATURE, THE RADIAL CENTER OF WHICH BEARS NORTH 43 (DEGREE) 35'38"
WEST; THENCE NORTHEASTERLY ALONG THE ARC OF A 282.00 FOOT RADIUS CURVE TO THE
LEFT, THROUGH A CENTRAL ANGLE OF 47 (DEGREE) 29'04", AN ARC DISTANCE OF 233.71
FEET (THE LONG CHORD OF WHICH BEARS NORTH 22 (DEGREE) 39'50" EAST 227.08 FEET)
TO A POINT OF TANGENCY; THENCE NORTH 1 (DEGREE) 04'42" WEST 225.00 FEET TO THE
POINT OF BEGINNING.
PARCEL II:
UTILITY EASEMENTS RECORDED MARCH 9, 1989 IN BOOK 2184, PAGE 1316, DEED RECORDS,
OVER THE FOLLOWING DESCRIBED TRACT:
A TRACT OF LAND LYING IN THE NORTHEAST QUARTER OF SECTION 2, TOWNSHIP 1 SOUTH,
RANGE 3 EAST OF THE WILLAMETTE MERIDIAN, IN THE CITY OF GRESHAM, COUNTY OF
MULTNOMAH AND STATE OF OREGON, SAID TRACT BEING DESCRIBED AS FOLLOWS:
COMMENCING AT A 5/8 INCH IRON ROD AT THE NORTHWEST CORNER OF LOT 9 IN BLOCK 6
OF SANDPIPER EAST, A DULY RECORDED SUBMISSION IN MULTNOMAH COUNTY PLAT BOOK
1209, PAGES 55 AND 56; THENCE SOUTH 01 (DEGREE) 04'42" EAST ALONG THE WEST
BOUNDARY OF SAID BLOCK 6, A DISTANCE OF 445.04 FEET; THENCE LEAVING SAID WEST
BOUNDARY, SOUTH 89 (DEGREE) 40'13 WEST, 81.23 FEET TO THE TRUE POINT OF
BEGINNING OF THE TRACT OF LAND TO BE DESCRIBED; THENCE SOUTH 18 (DEGREE) 22'37"
EAST, 193.32 FEET TO THE WEST LINE OF LOT 1, BLOCK 6 OF SAID SANDPIPER EAST;
THENCE SOUTH 18 (DEGREE) 40'22" WEST ALONG THE WEST LINE OF SAID LOT 1, BLOCK
6, A DISTANCE OF 27.22 FEET TO THE MOST WESTERLY CORNER OF SAID LOT 1, BLOCK 6;
THENCE SOUTH 26 (DEGREE) 43'35" WEST ALONG THE WEST BOUNDARY OF SAID SANDPIPER
EAST, A DISTANCE OF 47.00 FEET;
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THENCE LEAVING THE BOUNDARY OF SAID SANDPIPER EAST, NORTH 63 (DEGREE) 16'25"
WEST, 26.75 FEET; THENCE NORTH 26 (DEGREE) 43'35" EAST, 17.00 FEET; THENCE
NORTH 63 (DEGREE) 16'25" WEST, 69.35 FEET; THENCE NORTH 00 (DEGREE) 29'50"
WEST, 192.55 FEET; THENCE NORTH 89 (DEGREE) 40'13" EAST, 20.00 FEET; THENCE
SOUTH 00 (DEGREE) 29'50" EAST, 180.29 FEET; THENCE SOUTH 63 (DEGREE) 16'25"
EAST, 57.15 FEET; THENCE NORTH 26 (DEGREE) 43'35" EAST, 28.75 FEET; THENCE
NORTH 18 (DEGREE) 22'37" WEST, 190.03 FEET; THENCE NORTH 89 (DEGREE) 40'13"
EAST, 23.14 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL III:
ACCESS EASEMENT RECORDED MARCH 9, 1989 IN BOOK 2184, PAGE 1311, DEED RECORDS,
OVER THE FOLLOWING DESCRIBED TRACT:
A TRACT OF LAND LYING IN THE NORTH QUARTER OF SECTION 2, TOWNSHIP 1 SOUTH,
RANGE 3 EAST OF THE WILLAMETTE MERIDIAN, IN THE CITY OF GRESHAM, COUNTY OF
MULTNOMAH AND STATE OF OREGON, SAID TRACT BEING DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTHERLY RIGHT OF WAY LINE OF SE STARK STREET,
SAID POINT ALSO LYING SOUTH 0 (DEGREE) 19'42" EAST, 45.00 FEET AND NORTH 89
(DEGREE) 40'13" EAST, A DISTANCE OF 150.02 FEET FROM THE NORTHWEST CORNER OF
SAID NORTH QUARTER OF SECTION 2; AND RUNNING THENCE SOUTH 01 (DEGREE) 04'42"
EAST, 151.88 FEET; THENCE SOUTH 88 (DEGREE) 55'18" WEST, 54.00 FEET; THENCE
NORTH 01 (DEGREE) 04'42" WEST, 152.58 FEET TO THE SOUTHERLY RIGHT OF WAY LINE
OF SE STARK STREET; THENCE NORTH 89 (DEGREE) 40'13" EAST, ALONG THE SOUTHERLY
RIGHT OF WAY LINE OF SE STARK STREET, A DISTANCE OF 54.00 FEET TO THE POINT OF
BEGINNING.
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<PAGE> 45
EXHIBIT C
DESCRIPTION OF ASSUMED INDEBTEDNESS
1. That certain loan from the Oregon Housing & Community Services
Department, State of Oregon (formerly known as the Oregon Housing
Agency) made on May 30, 1984, in the original principal amount of Two
Million Two Hundred Thousand Dollars ($2,200,000.00), for the purposes
of developing that certain real property located in the County of
Linn, State of Oregon, and legally described in Exhibit A of this
Agreement under the commonly known name of "Albany Residential".
2. That certain loan from the Oregon Housing & Community Services
Department, State of Oregon (formerly known as the Oregon Housing
Agency) made on October 31, 1988, in the original principal amount of
Three Million Five Hundred Twenty-Seven Thousand Five Hundred Dollars
($3,527,500.00), for the purposes of developing that certain real
property located in the County of Washington, State of Oregon, and
legally described in Exhibit A of this Agreement under the commonly
known name of "Forest Grove Residential".
3. That certain loan from the Oregon Housing & Community Services
Department, State of Oregon (formerly known as the Oregon Housing
Agency) made on March 22, 1991, in the original principal amount of
Three Million Nine Hundred Thousand Dollars ($3,900,000.00), for the
purposes of developing that certain real property located in the
County of Yamhill, State of Oregon, and legally described in Exhibit A
of this Agreement under the commonly known name of "McMinnville
Residential".
C-1
<PAGE> 46
EXHIBIT D
FORM OF BILL OF SALE AND ASSIGNMENT
THIS BILL OF SALE AND ASSIGNMENT is made as of December __, 1995, by
__________________________, a ______________________ ("SELLER"), in favor of
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation ("BUYER"), pursuant
to that certain Purchase and Sale Agreement of even date herewith, by and among
Buyer, Crossings International Corporation, a Washington corporation, New
Crossings International Corporation, a Nevada corporation, and 2010 Union
Limited Partnership, a Washington limited partnership (the "PURCHASE
AGREEMENT"). All initially-capitalized terms used herein and not otherwise
defined herein shall have the same meaning given such terms in the Purchase
Agreement.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Seller
does hereby grant, bargain, sell, convey, assign, transfer, set over, deliver
to and vest in Buyer, its successors and assigns forever, all of Seller's
right, title and interest in and to all of the following property, whether now
existing or hereafter arising:
(a) All Personal Property which relate in any way to the
construction, use, occupancy, operation, development or
marketing of the Land, which real property is more
particularly described on Schedule 1 attached hereto, or the
improvements or the Fixtures (collectively, the "REAL
PROPERTY") wherever the same may be located, on the Land or
otherwise;
(b) All Warranties;
(c) All deposits and bonds of Seller relating to the Property or
any portion thereof, including, without limitation, deposits
and bonds provided to any governmental agency for
construction, use or operation of the Property;
(d) All original reports, drawings, plans, blueprints, studies,
specifications, certificates of occupancy, building permits
and grading permits relating to all or any part of the Real
Property and all amendments, modifications, supplements,
general conditions and addenda thereto. In the event Buyer
reasonably requires copies thereof, Seller hereby covenants
and agrees that it shall cooperate and comply in a timely
manner with Buyer's reasonable requests for delivery of copies
of all financial documents, instruments, bills, checks,
invoices and all other books and records relating to all or
any part of the Property; and
D-1
<PAGE> 47
(e) All of Seller's legal and equitable claims, causes of action,
and rights against the architects, engineers, designers,
contractors, subcontractors, suppliers and materialmen and any
other party who has supplied labor, services, materials or
equipment, directly or indirectly, in connection with the
design, planning, marketing, construction, manufacturing or
operation of all or any part of the Property.
Seller hereby represents and warrants to Buyer that Seller is the
owner of all right, title and interest in and to the above property, that,
except with respect to the Assumed Indebtedness, said property is free and
clear of all liens, charges and encumbrances created by or imposed against
Seller and that Seller has full right, power and authority to sell said
property and to make this Bill of Sale and Assignment. Seller shall warrant
and forever defend title to said property unto Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale and
Assignment as of the day and year first above written.
"SELLER"
[signature block]
D-2
<PAGE> 48
SCHEDULE 1
LEGAL DESCRIPTION OF REAL PROPERTY
D-3
<PAGE> 49
EXHIBIT E
FORM OF CERTIFICATE OF NON-FOREIGN STATUS
___________________________________, a ______________________________
("SELLER"), is the owner of that certain real property more particularly
described in Schedule 1 attached hereto and incorporated herein by this
reference (the "PROPERTY"). This Certificate of Non-Foreign Status is made
pursuant to that certain Purchase and Sale Agreement of even date herewith
("PURCHASE AND SALE AGREEMENT"), with respect to the Property, by and among
CROSSINGS INTERNATIONAL CORPORATION, a Washington corporation, NATIONWIDE
HEALTH PROPERTIES, INC., a Maryland corporation ("BUYER"), NEW CROSSINGS
INTERNATIONAL CORPORATION, a Nevada corporation and 2010 UNION LIMITED
PARTNERSHIP, a Washington limited partnership.
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"CODE") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform Buyer that
withholding of tax will not be required when the Property is transferred
pursuant to the Purchase and Sale Agreement, the undersigned hereby certifies
the following on behalf of Seller:
1. Seller is not a foreign corporation, foreign partnership,
foreign trust, estate, as those terms are defined in the Code and the Income
Tax Regulations promulgated thereunder;
2. Seller's U.S. employer identification number is
_____________________________________; and
3. Seller's office address is 1201 Pacific Avenue, Suite 1800,
Tacoma, Washington 98402.
Seller understands that this Certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement contained herein
could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct
and complete, and I further declare that I have authority to sign this document
on behalf of Seller.
Dated as of: December __, 1995
"SELLER"
[signature block]
E-1
<PAGE> 50
SCHEDULE 1
LEGAL DESCRIPTION OF PROPERTY
E-2
<PAGE> 51
EXHIBIT F
FORM OF CLOSING PROCEDURE LETTER
December
15th
1 9 9 5
Chicago Title Insurance Company
National Business Unit
16969 Von Karman
Irvine, California 92714
Attn: Joy Eaton
Re: Purchase and Sale Agreement dated December 15, 1995, (the
"Purchase Agreement") by and between Crossings International
Corporation, a Washington corporation ("Seller"), Nationwide
Health Properties, Inc., a Maryland corporation ("Buyer"), New
Crossings International Corporation, a Nevada corporation
("Tenant"), and 2010 Union Partnership, a Washington limited
partnership ("Union Partnership"); Your Order Nos.: NBU 148041
(Albany Residential - No. 19-26221), NBU 148042 (The Atrium -
No. 1029353); NBU.748043 (Canterbury Gardens - No. 1029348);
NBU 148044 (Columbia Edgewater - No. 46957-SW); NBU 148045
(Courtyard Village No. 19-26220); NBU 148046 (Forest Grove
Residential - No. 145187); NBU 148047 (Heritage Mt. Hood -
No. 145219); NBU 1480489 (McMinnville Residential Estates -
No. 3676574); NBU 148049 (Ridge Point - No. 1029352); NBU
148050 (River Place - No. P42614); NBU 148051 (The Heritage at
Rogue Valley - No. 03-30651); and NBU 148052 (Union Park at
Allenmore - No. 131438)
Ladies and Gentlemen:
Please refer to the Purchase Agreement, a copy of which is being
delivered to you with this letter. Except as otherwise defined herein, all
initially-capitalized terms used herein shall have the same meaning given such
terms in the Purchase Agreement.
This letter shall constitute your instructions with respect to the
"Funds" and "Documents" described herein.
A. Delivery of Funds.
1. On or before December 20, 1995, (the "Closing Date"), Buyer
shall wire-transfer to you funds required pursuant to Section
3.2(b) of the Purchase Agreement (the "Funds").
F-1
<PAGE> 52
2. On or before the Closing Date, Tenant shall wire transfer to
you in same day funds and/or direct same day available funds
to be delivered to you, in the amount of $1,381,197.00
representing the Security Deposit under Section 3.3(a)(v) of
the Purchase Agreement (the "Lease Security Deposit").
3. On or before the Closing Date, Tenant shall wire transfer to
you in same day funds and/or direct same day available funds
to be delivered to you, in the amount of $163,105.00
representing the Debt Service Reserve under Section 3.3(a)(v)
of the Purchase Agreement (the "Debt Service Reserve").
4. The Lease Security Deposit and the Debt Service Reserve shall
be collectively referred to as the "Security Deposit").
5. On or before the Closing Date, Tenant and Union Limited
Partnership shall wire transfer to you in same day funds an
amount sufficient to make all rent and interest payments due
under the Ground Leases and the Assumed Indebtedness before
the Closing Date and/or within ten (10) calendar days
thereafter (the "Third Party Monthly Payments").
6. On or before the Closing Date, Tenant shall wire transfer to
you in same day funds an amount sufficient to pay the
"Deferred Rent" due and payable to the ground lessor of the
Mt. Hood Parcel (the "Mt. Hood Deferred Rent").
B. Delivery of Documents.
1. Delivery of Recordation Documents. On or before the Closing
Date, Seller, Buyer, Tenant or Union Limited Partnership shall
deliver to you, or to your respective local agent for the
Parcels, one fully executed and acknowledged original of each
of the following documents (the "Recordation Documents"):
(a) A Deed conveying each of the Fee Parcels and the
Improvements on the Mt. Hood Parcel to Buyer, in each case
executed and acknowledged by Seller or an Affiliate of Seller
(the "Deeds");
(b) The Lease Assignment Agreement for the Mt. Hood
Parcel;
(c) An Amendment to Lease by and between Legacy Health
Systems ("Legacy") and Buyer for the Mt. Hood Parcel, in the
form attached as Schedule 3 hereto (the "Mt. Hood Lease
Amendment");
F-2
<PAGE> 53
(d) A Consent Agreement by and among Legacy, Seller and
Buyer for the Mt. Hood Parcel, in the form attached as Schedule 4
hereto (the "Mt. Hood Consent Agreement");
(e) An Assumption Agreement by and among Seller, Tenant,
the Oregon Housing & Community Services Department, State of Oregon
(the "Agency") and Buyer for the assumption by Buyer of the Albany
Residential Center Assumed Indebtedness, in the form attached as
Schedule 5 hereto (the "Albany Residential Assumption Agreement");
(f) A Memorandum of Lease Approval Agreement by and among
Buyer, Tenant and the Agency, in the form attached as Schedule 6
hereto (the "Albany Memorandum of Lease Approval Agreement");
(g) An Assumption Agreement by and among Seller, Tenant,
the Agency and Buyer for the assumption by Buyer of the Forest Grove
Residential Center Assumed Indebtedness, in the form attached as
Schedule 7 hereto (the "Forest Grove Assumption Agreement");
(h) A Memorandum of Lease Approval Agreement by and among
Buyer, Tenant and the Agency, in the form attached as Schedule 8
hereto (the "Forest Grove Memorandum of Lease Approval Agreement");
(i) An Assumption Agreement by and among McMinnville
Residential Center Limited Partnership, an Oregon limited partnership
("McMinnville"), Seller, Tenant, the Agency and Buyer for the
assumption by Buyer of the McMinnville Residential Center Assumed
Indebtedness, in the form attached as Schedule 9 hereto (the
"McMinnville Assumption Agreement");
(j) A Memorandum of Lease Approval Agreement by and among
Buyer, Tenant and the Agency, in the form attached as Schedule 10
hereto (the "Mc Minnville Memorandum of Lease Approval Agreement");
(k) A Memorandum of Lease for each Facility Lease; and
(l) The Fixture Filings.
2. Delivery of Non-Recordation Documents. On or before the
Closing Date, Seller, Buyer, Tenant or Union Limited
Partnership shall deliver to you, or to your respective local
agent for the Parcels, one fully executed original of each of
the following documents (the "Non-Recordation Documents"):
F-3
<PAGE> 54
(a) Pay-off letters or demands (the "Pay-Off Letters")
from the then record holders or claimants of any encumbrance or
monetary lien affecting the Property, other than the Assumed
Indebtedness, stating the cash amount required to be paid and where
and to whom such amount is to be paid in order to satisfy and
discharge of record such encumbrances; and
(b) Lessor Estoppel Certificate by Legacy, to Buyer, with
respect to the Mt. Hood Parcel, in the form attached as Schedule 11
hereto (the "Mt. Hood Estoppel Certificate");
(c) A Lease Approval Agreement by and among Tenant, the
Agency and Buyer for the Albany Residential Center, in the form
attached as Schedule 12 hereto (the "Albany Lease Approval
Agreement");
(d) A Side Letter Agreement by the Agency, and Accepted
and Agreed to by Buyer, Seller and Tenant, in the form attached as
Schedule hereto (the "Albany Side Letter Agreement");
(e) A Lease Approval Agreement by and among Tenant, the
Agency and Buyer for the Forest Grove Residential Center, in the form
attached as Schedule 11 hereto (the "Forest Grove Lease Approval
Agreement");
(f) A Side Letter Agreement by the Agency, and Accepted
and Agreed to by Buyer, Seller and Tenant, in the form attached as
Schedule hereto (the "Forest Grove Side Letter Agreement");
(g) A Lease Approval Agreement by and among Tenant, the
Agency and Buyer for the McMinnville Residential Center, in the form
attached as Schedule 15 hereto (the "McMinnville Lease Approval
Agreement"); and
(h) A Side Letter Agreement by the Agency, and Accepted
and Agreed to by Buyer, Seller and Tenant, in the form attached as
Schedule 17 hereto (the "McMinnville Side Letter Agreement");
3. Delivery and Approval of Closing Statement. On or before the
Closing Date, you shall prepare and Seller, Buyer, Tenant and
Union Limited Partnership shall approve and execute a closing
statement showing the source and application of funds received
by you and the costs and expenses incurred in connection
herewith (the "Closing Statement").
F-4
<PAGE> 55
4. Definition of Documents. As used herein, "Documents" shall
mean, collectively, the Recordation Documents, the
Non-Recordation Documents and the Closing Statement.
C. Conditions to Closing. The Funds shall not be disbursed and the
Documents shall not be recorded or delivered to any person or entity
until each of the following conditions are satisfied:
1. You have received the Funds, the Security Deposit, the Third
Party Monthly Payments and the Mt. Hood Deferred Rent and are
unconditionally and irrevocably prepared to wire the same in
accordance with Paragraph 12 hereof.
2. You have received the Documents and are unconditionally and
irrevocably prepared to record the Recordation Documents in
accordance with Paragraph 2 hereof.
3. You are unconditionally and irrevocably committed to issue the
Title Policies subject only to those exceptions (the
"Permitted Exceptions") which appear on the pro forma title
policies attached hereto as Schedule 1.
4. You have received from Tenant and/or Union Limited
Partnership, by check payable to Buyer or wire transfer for
the account of Buyer, the amount of $__________________,
representing the first full month's rent (and any proration
for the first partial month) as required by the Facility
Leases (other than for the Allenmore Parcel) and the interest
as required by the NHP Loan Documents (the "Facilities
Payment").
5. You have received the Written Authorization to Close.
6. You have received all the necessary information for filing the
form then required to be filed pursuant to Section 6045 of the
Internal Revenue Code (the "Information Return") with respect
to the transactions contemplated by the Purchase Agreement and
you are unconditionally and irrevocably prepared to file the
same. Buyer, Seller, Tenant and Union Limited Partnership
hereby agree, as between themselves, to cooperate in providing
any information within their possession or control that is
necessary for filing. The purchase and sale of the Property is
the sale of "reportable real estate" within the meaning of
U.S. Treasury Regulations Section 1.605-4 (the "Regulations").
YOU ARE THE "REAL ESTATE REPORTING PERSON" WITHIN THE MEANING OF THE
REGULATIONS AND SHALL MAKE ALL REPORTS TO THE FEDERAL GOVERNMENT AS
REQUIRED BY THE REGULATIONS.
F-5
<PAGE> 56
D. Closing. If the conditions specified in Paragraph C above are
satisfied on or before the Closing Date, then you shall immediately
deliver to Buyer, Seller, Tenant and Union Limited Partnership a
written confirmation of such satisfaction in the form of Schedule 2
hereto (which confirmation shall evidence your agreement to
immediately take or cause to be taken the actions hereinafter
specified), and thereafter you shall immediately:
1. Record the Recordation Documents in the order listed in
Paragraph B(1) above.
2. Wire the respective amounts due to third parties (e.g., lien
holders) under the Closing Statement in accordance with the
respective instructions (the "Third Party Instructions") from
such third parties.
3. Wire the amount due Seller under the Closing Statement in
accordance with the wiring instructions to be provided by
Seller (the "Seller Wiring Instructions").
4. Wire the Facilities Payment, the Lease Security Deposit and
any amounts due Buyer under the Closing Statement in
accordance with the following wiring instructions (the "Buyer
Wiring Instructions") (or if the same is made by check,
deliver the same to Buyer via overnight courier at Tenant's
expense to Nationwide Health Properties, Inc., 4675 MacArthur
Court, Suite 510, Newport Beach, California 92660, Attention:
Mr. Mark Desmond):
Wells Fargo Bank
420 Montgomery Street
San Francisco, California
ABA No. 121000248
for the benefit of
Nationwide Health Properties, Inc.
Account No. 4692089329
Upon receipt, notify Mark Desmond
by telephone at (714) 251-1211
5. Wire the Debt Service Reserve in accordance with the wiring
instructions to be provided by Buyer (the "Debt Service
Reserve Wiring Instructions").
6. Transmit the Third Party Monthly Payments to the parties
entitled thereto and at the addresses specified to you in
written instructions delivered to you by Buyer, Tenant and
Union Limited Partnership.
F-6
<PAGE> 57
7. Transmit the Mt. Hood Deferred Rent to the party entitled
thereto and at the address specified to you in written
instructions delivered to you by Legacy
8. Issue the Title Policies subject only to those exceptions
which appear on the pro forma title policy attached hereto as
Schedule 1 and deliver the same to O'Melveny & Myers, at the
address specified in Paragraph E hereof, within 20 business
days.
9. File the Informational Return and all other filings and
reports required pursuant to the Regulations and deliver
copies of the same to counsel for Buyer and Seller (at the
respective addresses set forth below) within 3 business days.
E. Delivery of Documents. As soon as they are available, please deliver
the Documents as follows:
1. To O'Melveny & Myers, 610 Newport Center Drive, Suite 1700,
Newport Beach, California 92660, Attention: Tracy D. Johnson,
Esq., the following:
(a) The recorded original of each of the Recordation
Documents; and
(b) The originals of the Documents other than the
Recordation Documents.
2. To Bogle & Gates, Two Union Square, 601 Union Street, Seattle,
Washington 98101-2346, Attention: Felicia L. Gittleman, Esq.
(a) A copy of each of the Recordation Documents, as
recorded.
(b) A copy of the Documents other than the Recordation
Documents.
F. Closing Costs, All closing costs incurred in carrying out your duties
under this letter are to be billed in accordance with Section 4.1 of
the Purchase Agreement.
G. Investment of Funds.
1. Buyer's Funds. As soon as you receive any portion of the
Funds, you shall notify Buyer of such fact. If Buyer gives you
written instructions to do so, you shall invest the Funds in
treasury bills (or such other short term investment as may be
authorized by Buyer) for the benefit of Buyer.
F-7
<PAGE> 58
2. If No Closing. If the Closing fails to occur and you receive
cancellation instructions pursuant to Paragraph H below, the
interest accrued on the Funds shall be delivered to Buyer, in
accordance with the Buyer Wiring Instructions.
3. If Closing Occurs. The Closing Statement shall provide that
Buyer is entitled to rent under the Facility Lease (other than
for the Allenmore Parcel) from the date that Buyer disburses
the Funds to you. If the transactions described herein close,
Tenant shall be entitled to a credit against such rent equal
to interest accrued on the funds up to the Closing Date and
you shall deliver such accrued interest to Tenant according to
the Seller Wiring Instructions.
H. Cancellation of Instructions. Notwithstanding anything to the contrary
herein, if the conditions specified in Paragraph C hereof are not
satisfied on or before the Closing Date, then, if you receive written
instructions to cancel this transaction from either of the
undersigned, the instructions set forth in Paragraphs A through.E
above shall be deemed cancelled, you shall immediately return the
Funds (and any interest thereon) to Buyer, in accordance with the
Buyer Wiring Instructions and you shall destroy the Documents on the
next business day thereafter.
I. Limitation of Liability. You are acting solely as closing agent, and
you shall be liable solely for your failure to comply with the terms
of this letter. The foregoing will not limit your liability as title
insurer under the terms of the Title Policies (such liability being in
accordance with the terms of such policy).
J. Execution by Counterparts; Facsimile Signatures. This letter of
instructions may be executed in two or more counterparts, each of
which shall be an original, but all of which shall constitute one and
the same letter of instructions. You are hereby authorized to accept
facsimile signatures on this letter of instructions as original
signatures, and such facsimile signatures are hereby deemed originals.
K. Interpleader. Buyer, Seller, Tenant and Union Limited Partnership
expressly agree that if they give you contradictory instructions, you
shall have the right, at your election, to file an action in
interpleader requiring the Buyer, Seller, Tenant and Union Limited
Partnership to answer and litigate their several claims and rights
between themselves and you are authorized to deposit with the clerk of
the court all documents and funds held by you. In the event such
action is filed, Buyer, Seller, Tenant and Union Limited Partnership
agree to pay your cancellation charges and costs, expenses and
reasonable attorneys' fees which you are required to expend or incur
in the interpleader action, the amount thereof to be fixed and
judgment therefor to be rendered by the court. Upon the filing of such
an action, you shall be fully released and discharged
F-8
<PAGE> 59
from all obligations to perform further any duties or obligations imposed
hereunder.
Very truly yours,
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC., a
Maryland corporation
By:
--------------------------------
Name:
Title:
"SELLER"
CROSSINGS INTERNATIONAL
CORPORATION,
a Washington corporation
By:
-------------------------------
Richard W. Boehlke,
President
"TENANT"
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By:
-------------------------------
Richard W. Boehlke,
President
F-9
<PAGE> 60
"UNION LIMITED PARTNERSHIP"
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
By:
-------------------------------
Richard W. Boehlke,
its general partner
ACCEPTED AND AGREED TO
as of the date first above written:
Chicago Title Insurance Company
By:
------------------------------
Its:
-----------------------------
F-10
<PAGE> 61
SCHEDULE 1
PRO FORMA TITLE POLICIES
F-11
<PAGE> 62
SCHEDULE 2
CORPORATION BY TITLE COMPANY
December 1995
Nationwide Health Properties, Inc.
c/o O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, California 92660
Attention: Tracy D. Johnson, Esq.
Crossings International Corporation
New Crossings International Corporation
2010 Union Limited Partnership
c/o Bogle & Gates
Two Union Square
601 Union Street
Seattle, Washington 98101-2346
Attention: Kyle B. Lukins, Esq.
Re: Purchase and Sale Agreement dated December 15, 1995 (the
"Purchase Agreement") by and among Crossings International
Corporation, a Washington corporation ("Seller") and Nationwide
Health Properties, Inc., a Maryland corporation ("Buyer"), New
Cross International Corporation, a Nevada corporation
("Tenant"), and 2010 Union Limited Partnership, a Washington
Limited partnership ("Union Limited Partnership")
Ladies and Gentlemen:
Please refer to that certain letter (the "Letter of Instructions")
captioned "CLOSING PROCEDURE LETTER", dated as of December 15, 1995, from
Seller, Buyer, Tenant and Union Limited Partnership to the undersigned.
F-12
<PAGE> 63
Pursuant to Paragraph D of the Letter of Instructions, we hereby
confirm that each of the conditions to disbursement and recordation set forth
in Paragraph C of the Letter of Instructions has been satisfied.
Very truly yours,
Chicago Title Insurance Company
By:
--------------------------------
Its:
---------------------------
F-13
<PAGE> 64
SCHEDULE 3
FORM OF MT. HOOD LEASE AMENDMENT
[See Attached]
S-3-1
<PAGE> 65
SCHEDULE 4
FORM OF MT. HOOD CONSENT AGREEMENT
[See Attached]
S-4-1
<PAGE> 66
SCHEDULE 5
ALBANY RESIDENTIAL ASSUMPTION AGREEMENT
[See Attached)
S-5-1
<PAGE> 67
SCHEDULE 6
ALBANY MEMORANDUM OF LEASE APPROVAL AGREEMENT
[See Attached]
S-6-1
<PAGE> 68
SCHEDULE 7
FOREST GROVE ASSUMPTION AGREEMENT
[See Attached]
S-7-1
<PAGE> 69
SCHEDULE 8
FOREST GROVE MEMORANDUM OF LEASE APPROVAL AGREEMENT
[See Attached]
S-8-1
<PAGE> 70
SCHEDULE 9
MC MINNVILLE ASSUMPTION AGREEMENT
[See Attached]
S-9-1
<PAGE> 71
SCHEDULE 10
MC MINNVILLE MEMORANDUM OF LEASE APPROVAL AGREEMENT
[See Attached]
S-10-1
<PAGE> 72
SCHEDULE 11
MT. HOOD ESTOPPEL CERTIFICATE
[See Attached]
S-11-1
<PAGE> 73
SCHEDULE 12
ALBANY LEASE APPROVAL AGREEMENT
[See Attached]
S-12-1
<PAGE> 74
SCHEDULE 13
ALBANY SIDE LETTER AGREEMENT
[See Attached]
S-13-1
<PAGE> 75
SCHEDULE 14
FOREST GROVE LEASE APPROVAL AGREEMENT
[See Attached]
S-14-1
<PAGE> 76
SCHEDULE 15
FOREST GROVE SIDE LETTER AGREEMENT
[See Attached]
S-15-1
<PAGE> 77
SCHEDULE 16
MC MINNVILLE LEASE APPROVAL AGREEMENT
[See Attached]
S-16-1
<PAGE> 78
SCHEDULE 17
MC MINNVILLE SIDE LETTER AGREEMENT
[See Attached]
S-17-1
<PAGE> 79
EXHIBIT G
FORM OF DEEDS
(See Attached)
G-1
<PAGE> 80
DEED
[Idaho Form]
THIS INDENTURE, made the ___________ day of December, 1995, between
[GRANTOR'S NAME], "Grantor," and NATIONWIDE HEALTH PROPERTIES, INC. a, Maryland
corporation, "Grantee," whose address is 4675 MacArthur Court, Suite 1170,
Newport Beach, California 92660.
WITNESSETH:
For Valuable Consideration, Grantor has granted, bargained, sold and
conveyed, and by these presents does grant, bargain, sell and convey unto
Grantee, and to its successors and assigns, forever, all of that certain piece
or parcel of land situate, lying and being located in the County of Ida, State
of Idaho, particularly described as follows, to-wit:
See Exhibit A attached hereto and incorporated by reference herein.
together with all and singular the tenements, hereditaments and appurtenances
thereunto belonging or in anyway appertaining, and the reversion and
reversions, remainder and remainders, rents, issues and profits thereof; and
also all the estate, right, title, interest in the property, possession, claim
and demand whatsoever, as well in law as in equity, of the Grantor, of, in or
to the said premises, and every part and parcel thereof, with the
appurtenances.
TO HAVE AND TO HOLD all and singular the said premises, together with
the appurtenances, unto the said Grantee and to its successors and assigns
forever.
IN WITNESS WHEREOF, the said Grantor has hereunto set its hand and
seal the day and year first above written.
-----------------------------------
By:
-------------------------------
Name:
---------------------------
Title: ---------------------------
G-2
<PAGE> 81
STATE OF WASHINGTON )
)ss.
COUNTY OF______________ )
On this __ day of December, 1995, before me personally appeared to me
known to be the ____________ of ___________________________ that executed
____________________________the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned and on oath stated that
he was authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
__________________________________
Notary Public in and for the
State of Washington
My Commission Expires:____________
G-3
<PAGE> 82
SCHEDULE 1
LEGAL DESCRIPTION OF THE REAL PROPERTY
G-4
<PAGE> 83
WARRANTY DEED
[Oregon Form]
___________________________, Grantor, conveys and warrants to
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation, Grantee, the
following described real property free of encumbrances except as specifically
set forth herein situated in [County], Oregon, to wit:
See Exhibit A attached hereto and incorporated
by this reference herein.
The said property is free from encumbrances except:
See Exhibit B attached hereto and incorporated
by this reference herein.
The true consideration for this conveyance is $___________ (However,
the actual consideration consists of other value given which is [the whole/part
of the] consideration).
Until a change is requested, all tax statements shall be sent to the
following address:
Nationwide Health Properties, Inc.
4675 MacArthur Court, Suite 1170
Newport Beach, CA 92660
THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS
INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE
SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TO THE PROPERTY
SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY
APPROVED USES AND TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST
PRACTICES AS DEFINED IN ORS 30.930.
DATED this _____ day of December, 1995.
----------------------
By:
----------------------
Its:
----------------------
G-5
<PAGE> 84
STATE OF WASHINGTON )
)ss.
COUNTY OF______________ )
On this ____ day of December, 1995, before me personally appeared
__________________________________ to me known to be the _________________of
_______________________ that executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned and on oath stated that
he was authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
-----------------------------
Notary Public in and for the
State of Washington
My Commission Expires:
------------
After Recording Return To:
O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, CA 92660
Attn: Tracy D. Johnson, Esq.
(614,055-78)
G-6
<PAGE> 85
SCHEDULE 1
LEGAL DESCRIPTION OF THE REAL PROPERTY
G-7
<PAGE> 86
SCHEDULE 2
PERMITTED ENCUMBRANCES
G-8
<PAGE> 87
WHEN RECORDED RETURN TO:
O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, CA 92660
Attn: Tracy D. Johnson, Esq.
(614,055-78)
MAIL TAX STATEMENTS TO;
Nationwide Health Properties, Inc.
4675 MacArthur Blvd., Suite 1170
Newport Beach, CA 92660
STATUTORY WARRANTY DEED
[Washington Form]
The undersigned grantor, _____________________, for and in
consideration of TEN DOLLARS ($10.00) in hand paid, conveys and warrants to
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation, effective as of the
date hereof, the real property in [County], Washington, described in Exhibit
"A" attached hereto and incorporated herein and subject to the encumbrances set
forth in Exhibit "B" attached hereto.
Dated: December __, 1995
[GRANTOR NAME]
--------------------------------------,
a
------------------------------------
By:
-----------------------------------
Name:
------------------------------
Its:
------------------------------
G-9
<PAGE> 88
STATE OF WASHINGTON )
)ss.
COUNTY OF_______________ )
On this __ day of December, 1995, before me personally appeared
______________________________________________ to me known to be the
______________________ of ______________________ that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned and on oath stated that he was authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
_____________________________________
Notary Public in and for the State of
Washington
My Commission Expires: _____________
G-10
<PAGE> 89
SCHEDULE 1
LEGAL DESCRIPTION
G-11
<PAGE> 90
SCHEDULE 2
PERMITTED ENCUMBRANCES
G-12
<PAGE> 91
WARRANTY DEED
[Colorado Form]
THIS DEED, made this ___ day of December, 1995, between [Seller] of
the City of ___________________, County of _______________, State of Colorado,
grantor and NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation whose
legal address is 4675 MacArthur Court, Suite 1170, Newport Beach, of the County
of Orange, State of California, grantee:
WITNESSETH, That the grantor, for and in consideration of the sum of
TEN DOLLARS, the receipt and sufficiency of which is hereby acknowledges, has
granted, bargained, sold and conveyed, and by these presents does grant,
bargain, sell, convey, and confirm, unto the grantee, its heirs and assigns
forever, all the real property together with improvements, if any, situate,
lying and being in the City of ______________________ County
of____________________, State of Colorado, described as follows:
[Insert Legal Description]
also known by street and number as:_____________________________________,
assessor's schedule or parcel number ___________________________________:
TOGETHER with all and singular the hereditaments and appurtenances
thereto belonging, or in anywise appertaining, and the reversion and
reversions, remainder and remainders, rents, issues and profits thereof, and
all the estate, right, title, interest, claim and demand whatsoever of the
grantor, either in law or equity, or, in and to the above bargained premises,
with the hereditaments and appurtenances.
TO HAVE AND TO HOLD the said premises above bargained and described
with the appurtenances, unto the grantee, its heirs and assigns forever. And
the grantor for itself, its heirs and personal representatives, does covenant,
grant, bargain, and agree to and with the grantee, its heirs and assigns, that
at the time of the ensealing and delivery of these presents, it is well seized
of the premises above conveyed, has good, sure, perfect, absolute and
indefeasible estate of inheritance, in law, in fee simple, and has good right,
full power and authority to grant, bargain, sell and convey the same in manner
and form as aforesaid, and that the same are free and clear from all former and
other grants, bargains, sales, liens, taxes, assessments, encumbrances, and
restrictions of whatever kind or nature soever, except
The grantor shall and will WARRANT AND FOREVER DEFEND the
above-bargained premises in the quiet and peaceable possession of the
grantee(s), its heirs
G-13
<PAGE> 92
and assigns, against all and every person or persons lawfully claiming the
whole or any part thereof.
IN WITNESS WHEREOF, the grantor has executed this deed on the date set
forth above.
-----------------------------
-----------------------------
-----------------------------
G-14
<PAGE> 93
STATE OF WASHINGTON )
) ss.
COUNTY OF_______________ )
On this day of December, 1995, before me personally appeared
_____________________________________ to me known to me known to be the
_____________________________ of _______________________________________ that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned and on oath stated that he was authorized to execute
said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
--------------------------------
Notary Public in and for the State of
Washington
My Commission Expires:
------------
G-15
<PAGE> 94
EXHIBIT H
FORM OF WRITTEN AUTHORIZATION TO CLOSE
December
1995
Chicago Title Insurance Company
National Business Unit
16969 Van Karman
Irvine, California 92714
Re: Purchase and Sale Agreement dated December ___, 1995, (the
"Purchase Agreement") by and among Crossings International
Corporation a Washington corporation ("Seller"), Nationwide
Health Properties, Inc., a Maryland corporation ("Buyer"), New
Crossings International Corporation, a Nevada corporation
("Tenant") and 2010 Union Limited Partnership, a Washington
limited partnership ("Union Limited Partnership"); Your Order
Nos.: NBU 148041 (Albany Residential - No. 19-26221); NBU
148042 (The Atrium - No. 1029353); NBU 148043 (Canterbury
Gardens - No. 1029348); NBU 148044 (Columbia Edgewater - No.
46957-SW); NBU 148045 (Courtyard Village - No. 19-26220); NBU
148046 (Forest Grove Residential - No. 145187); NBU 148047
(Heritage Mt. Hood - No. 145219); NBU 1480489 (McMinnville
Residential Estates - No. 3676574); NBU 148049 (Ridge Point -
No. 1029352); NBU 148050 (River Place - No. P142614); NBU
148051 (The Heritage at Rogue Valley - No. 03-30651); and NBU
148052 (Union Park at Allenmore No. 131438)
Ladies and Gentlemen:
You are hereby authorized to comply with the instructions delivered to
you in our Closing Procedure Letter dated December __, 1995.
Please confirm your receipt hereof and compliance with the
aforementioned instructions by contacting, via telephone, either Steven L.
Edwards, Esq., at (714) 669-7903 or Tracy D. Johnson, Esq., at (714) 669- 7924.
This Written Authorization to Close may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
H-1
<PAGE> 95
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC. a
Maryland corporation
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
"SELLER"
CROSSINGS INTERNATIONAL CORPORATION, a
Washington corporation
By:
--------------------------------------
Richard W. Boehlke,
President
"TENANT"
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By:
------------------------------
Richard W. Boehlke,
President
"UNION LIMITED PARTNERSHIP"
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
By:
------------------------------
Richard W. Boehlke,
its general partner
H-2
<PAGE> 96
EXHIBIT I
SCHEDULE OF ENVIRONMENTAL AUDIT REPORTS
1. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.02,
for Albany Residential, Albany, Oregon.
2. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.04,
for The Atrium, Boulder, Colorado.
3. Phase I Environmental Site Assessment prepared by Terracon
Consultants Western, Inc., dated November, 2, 1995, Project
Number 46955032, for Canterbury Gardens, Aurora, Colorado.
4. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.06,
for Columbia Edgewater, Richland, Washington.
5. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.01,
for Courtyard Village, Albany, Oregon.
6. Phase I Environmental Site Assessment prepared by Hahn and
Associates, Inc., Environmental Management, dated November 8,
1995, for Forest Grove Residential, Forest Grove, Oregon.
7. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.07,
for The Heritage at Rogue Valley, Medford, Oregon.
8. Phase One Environmental Property Assessment prepared by PBS
EnvironmentaL dated November, 1995, Project Number 8322.03,
for The Heritage, Mt. Hood, Gresham, Oregon.
9. Phase I Environmental Site Assessment prepared by Hahn and
Associates, Inc., Environmental Management, dated November 7,
1995, for McMinnville Residential Estates, McMinnville,
Oregon.
10. Phase I Environmental Site Assessment prepared by Terracon
Consultants Western, Inc., dated November 3, 1995, Project
Number 22957023, for Ridge Point, Boulder, Colorado.
I-1
<PAGE> 97
11. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.08,
for River Place, Boise, Idaho.
12. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.05,
for Union Park at Allenmore, Tacoma, Washington.
I-2
<PAGE> 1
EXHIBIT 10.34
The following Documents are substantially similar to Exhibit 10.33 herewith.
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Albany Residential)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(The Atrium)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Canterbury Gardens)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Columbia Edgewater)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Courtyard Village)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Forest Grove)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Heritage, Mt. Hood)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Heritage at Rogue Valley)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(McMinnville Residential Estates)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Ridge Point, Boulder)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(River Place, Boise)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(11 Facilities)
Purchase and Sale Agreement dated as of December 31, 1995 by and between
Nationwide Health Properties, Inc. and New Crossings International Corporation.
(Real Estate Purchase & Sale Agreement by and between C.J. Case and R.W. Case,
II and New Crossings International Corporation dated April 2, 1996.)
<PAGE> 1
EXHIBIT 10.37
OREGON HOUSING AGENCY
STATE OF OREGON
L 0 A N A G R E E M E N T
THIS AGREEMENT is made this 31 day of October, 1988, by and between Forest Grove
Residential Center Limited Partnership, an Oregon Limited Partnership, located
at 19428 SW 35Th Court, Lake Oswego OR 97035 (hereinafter referred to as
"Borrower"), and the State of Oregon, acting by and through the Oregon Housing
Agency, having its principal office at 1600 State Street, Suite 100, Salem,
Oregon 97310 (hereinafter referred to as the "Agency").
RECITALS:
Borrower has requested the Agency to make a loan to Borrower in the principal
amount of Three Million Five Hundred Twenty Seven Thousand Five Hundred Dollars
($3,527,500) for the long-term financing of a housing project for elderly and
disabled persons and families. The Agency is willing to make this loan on the
terms and conditions of this Agreement. Accordingly, the parties agree as
follows:
Section 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Act" shall mean ORS 456.515 to 456.720, as amended, which were in
effect when the loan closed.
(b) "Administrator" shall mean the chief administrative officer of the
Oregon Housing Agency appointed pursuant to ORS 456.554.
(c) "Allocable Portion" shall mean an amount equal to the ratio of the
total principal amount of obligations issued by the Agency to the principal
amount of the Loan, determined at closing.
(d) "Break-Even Occupancy" shall mean the point in time when the Project's
monthly rental income meets its monthly Operating Expenses and Loan payments.
(e) "Contingency Escrow Reserve Account" shall mean the account established
under Section 5(c) hereof, consisting of three percent (3%) of the principal of
the Loan or such other amount as the Agency in its sole discretion shall
require.
(f) "Financing Securities" shall mean the Allocable Portion of any
obligations issued by the Agency to finance the Loan.
(g) "Loan" shall mean long-term financing of Property for a housing project
for Occupants as set out in Section 2(a) hereof.
(h) "Occupant" shall mean people who meet the requirements of Section 8
hereof and occupy rental space in the Project.
1 - LOAN AGREEMENT
<PAGE> 2
(i) "Operating Expenses" shall mean all federal, state, county, and local
government taxes, assessments, or charges; water and sewer charges: operating
costs incurred in maintaining and operating the Project, including without
limitation costs of utilities, supplies, insurance, compensation of all persons
who perform duties connected with the operation, maintenance, and repair of the
Project, management of the Project, legal, accounting, and other professional
fees incurred in connection with the operation, maintenance, and management of
the Project; and any other costs or expenses incurred by Borrower or its agent
with respect to the Project and not otherwise reimbursed by Occupants of the
Project, which are properly allocable to the operation or maintenance of the
Project in accordance with generally accepted accounting principles.
(j) "Operating Receipts" shall mean rents paid by Occupants and all other
receipts of the Project.
(k) "Operating Receipts and Expense Account" shall mean the account
established under Section 5(a) hereof.
(l) "Project" shall mean the Property plus all assets of whatsoever nature
used in and owned by Borrower on the Property.
(m) "Property" shall mean property financed by the Loan.
(n) "Rental Reserve Account" shall mean the account established under
Section 5(e) hereof to assure sufficient funds to pay Operating Expenses and
Loan payments before Break-Even Occupancy.
(o) "Rent Up Schedule" shall mean the projection prepared by Borrower prior
to closing of the Loan and the number of months it will take the Project to
reach Break-Even Occupancy.
(p) "Replacement Cost Reserve Account" shall mean the account established
under Section 5(d) hereof to aid in extraordinary maintenance, repair, and
replacement of capital items of a Project.
(q) "Security Deposit Account" shall mean the account established under
Section 5(b) hereof.
Notice to Borrower: Do not sign this Agreement before you read it. This
Agreement authorizes the Agency to refuse to accept repayment of the Loan
before maturity of the Loan and provides for payment of a penalty if you repay
the Loan with the Agency's permission before that date.
Section 2. Payments of Principal and Interest, Prepayments
(a) Borrower promises to repay the principal of and accrued interest on the
Loan made hereunder in immediately available funds monthly. $32,776.32 shall be
due and payable monthly for 35 years, beginning on December 15, 1988.
(b) Borrower promises to pay interest on the unpaid principal amount of the
Loan for the period commencing at closing and until such Loan is paid in full,
at the rate of 10.9 percent per annum.
2 - LOAN AGREEMENT
<PAGE> 3
(c) The Loan may not be prepaid without the prior written consent of the
Agency. The Agency may consent to a prepayment of the principal provided that
the sum to be prepaid, computed as of the date of prepayment, shall equal the
unpaid principal balance of the Loan plus accrued interest, plus a premium for
the privilege of prepayment equal to:
(1) The difference between the unpaid principal balance of the Loan and the
amount of the Financing Securities, each as of the date of such prepayment;
plus
(2) Interest on the amount of the Financing Securities at the same rate as
interest is payable on the Loan from the date of prepayment to the earliest
date on which the Financing Securities may be redeemed, other than by
reference to Special or extraordinary redemption provision, at the option of
the Agency; plus
(3) The aggregate premium payable upon the redemption of the Financing
Securities on the earliest redemption date; plus
(4) The amount determined by the Agency as necessary to reimburse the
Agency for fees and expenses of the trustee, paying agents, and counsel as
may be necessary in connection with the redemption of such Financing
Securities (such amount in no event to exceed 2% of the amount of the
Financing Securities).
Upon disbursement of the Loan, the Agency will specify the principal amount of
obligations deemed necessary, in the sole judgment of the Agency, to provide
funds to pay the Agency's costs incurred in making the Loan. Such costs may
include, in addition to the principal amount of the Loan, an allocable share of
underwriter's discount, costs of issuance, capitalized interest, necessary
reserves and any other similar costs incurred by the Agency in connection with
the financing of the Loan. Such amount, reduced at any point in time in
proportion to the reduction of the principal amount of the Loan, shall be
conclusively deemed to be the amount of the Financing Securities to be redeemed
in the event of advance payment of the Loan.
(d) In the event of default which results in the Borrower paying the entire
amount of the Loan prior to the date set forth in section 2(a) hereof, the
Borrower shall pay a default penalty equal to the amount set forth in section
2(c) hereof. Notice to Borrower: Do not sign this Agreement before you read it.
This Agreement provides for the payment of a penalty if Borrower defaults and
repays the Loan prior to the date set out in section 2(a) hereof.
(e) All other payments and prepayments of principal and other amounts
payable to the Agency hereunder will be made to the Agency at its office located
at 1600 State Street, Suite 100, Salem, Oregon 97310, or at such other place
designated by the Agency to Borrower in writing.
Section 3. Low or Moderate Income Persons
To the end of satisfying the requirements of Section 142(d) of the
3 - LOAN AGREEMENT
<PAGE> 4
Code during the Qualified Project period, the Borrower hereby represents,
warrants, covenants, and agrees as follows:
(a) Throughout the Qualified Project Period, (i) at least twenty percent
(20%) of the completed residential units in the project shall be occupied by Low
or Moderate Income Persons, prior to the satisfaction of which no additional
units shall be rented or leased to any other tenants, and (ii) after initial
rental occupancy of residential units by Low or Moderate Income Persons, at
least twenty percent (20%) of the completed residential units in the Project
shall be occupied by Low or Moderate Income Persons, and at all times shall be
rented to and occupied (or held available for rent if previously rented to and
occupied by a Low or Moderate Income Person) by Low or Moderate Income Persons
as required by Section 142(d) of the Code. If a resident was a Low or Moderate
Income Person on commencement of his or her occupancy of a unit, the resident
shall be treated as continuing to be a Low or Moderate Income Person to the
applicable income limit. Once it is determined that the income of a resident who
was formerly a Low or Moderate Income Person exceeds 140 percent of the maximum
income which would qualify the resident as a Low or Moderate Income Person, then
no residential unit in the Project of comparable or smaller size shall be
occupied by a new resident who is not a Low or Moderate Income Person, unless,
as of the date of occupancy, at least 20 percent of the units are occupied by
Low or Moderate Income Persons.
(b) Throughout the Qualified Project period, the Borrower shall obtain and
maintain on file from each Low or Moderate Income Person residing in the Project
a certification of tenant eligibility and income verification in a form and
manner required by the Agency.
(c) Throughout the Qualified Project period, the Borrower shall permit any
duly authorized representative of the Agency to inspect the books and records of
the Borrower pertaining to the incomes of Low and Moderate Income Persons
residing in the Project.
(d) The Borrower shall prepare and submit to the Agency each quarter during
the Qualified Project Period a certification of continuing program compliance,
in the form required by the Agency, which certification shall be executed by the
Borrower, and shall set forth such information as the Agency may require,
including the percentage of the residential units of the Project which are
occupied by Low or Moderate Income Persons at all times during the period since
the filing of the last certification of continuing program compliance. The
Borrower shall have attached to the Agency's copy of the certification of
continuing program compliance the certifications of tenant eligibility and
income verification.
(e) Throughout the Qualified Project period, the Borrower shall prepare and
file with the Agency an annual certification that the Project continues to meet
the requirements of this Loan Agreement and Section 142(d) of the Code.
(f) Throughout the Qualified Project Period, the Borrower shall assure that
each lease or rental agreement used by the Borrower in renting any residential
units in the Project to Low or Moderate Income
4 - LOAN AGREEMENT
<PAGE> 5
Persons provides for termination of the lease and consent by such person to
immediate eviction for failure to qualify as a Low or Moderate Income Person,
as a result of any material misrepresentation made by such person with respect
to such person's income and income verification.
(g) The Borrower shall cause to be submitted to the Secretary of Treasury
of the United States (at such time and in such manner as the Secretary shall
prescribe) an annual certification as to whether the Project continues to meet
the requirements of Section 142(d) of the Code. Failure to comply with this
certification requirement shall subject the Borrower and any operator of the
Project to penalty, as provided in Section 6652(j) of the Code.
(h) The Borrower hereby expressly agrees to comply with all applicable
regulations which may have been promulgated under Section 142(d) of the Code.
The Borrower acknowledges that regulations have not been promulgated under
Section 142(d) of the Code, and that the Secretary of Treasury of the United
States may promulgate regulations under Section 142(d) of the Code which will be
retroactive in effect.
Section 4. Rental Rates and Operating Expenses
(a) Borrower shall submit to the Agency a proposed schedule of rental rates
for the Project on forms approved by the Agency not less than sixty (60) days
prior to the date of a proposed rent increase. A new rental rate schedule must
be submitted prior to any change in rental rates. Upon approval by the Agency,
the proposed schedule of rental rates shall be effective after all required
notifications.
(b) Borrower shall operate the Project in such a manner so as to maintain
the Project in good condition. All Operating Expenses shall be paid by Borrower
during the life of this Agreement even if an operating deficit occurs.
Section 5. Accounts and Funds.
(a) Operating Receipts and Expense Account: Borrower shall establish and
maintain a Project Operating Receipts and Expense Account with a depository
approved by the Agency. All Operating Receipts shall be immediately deposited in
the account, and Borrower shall promptly pay all Operating Expenses out of this
account.
(b) Security Deposit Account: Borrower shall segregate and hold all
Occupant security deposits in an interest-bearing account in a depository
approved by the Agency. The balance of this account must at all times be equal
to the total amount collected from the Occupants plus any accrued interest. All
pro rata interest on this account shall be payable to the Occupants if the
security deposit is returned to them.
(c) Contingency Escrow Reserve Account: At closing, the Borrower shall:
(1) Deposit with the Agency or a depository approved in writing by the
Agency, cash in the amount of One Hundred Five Thousand Eight
5 - LOAN AGREEMENT
<PAGE> 6
Hundred Twenty Five Dollars ($105,825). Said funds will be held by the
Agency or an approved depository in an interest-bearing Contingency
Escrow Reserve Account for three years or such longer period as the Agency
in its sole discretion shall determine. Accrued and unspent interest on the
account, if any, shall be payable to the Borrower when the account is
closed. This account shall not be funded with Loan proceeds. Said funds may
be applied by the Agency, in such amounts and at such times as the Agency,
in its sole discretion, determines: (A) to correct or repair any defects in
the mechanical or structural systems of the Project; (B) to correct any
violations of local, state, or federal ordinances, statutes or regulations;
(C) at the request of Borrower, to provide design modifications or tenant
services which will materially benefit the Occupants or reduce Operating
Expenses; (D) at the election of the Agency, to cure any breaches of the
obligations of Borrower in this Agreement, the Trust Deed, or Trust Deed
Note; (E) to perform necessary Project maintenance which the Borrower has
failed to perform; (F) to payment of delinquent principal and interest
payments required to be paid to the Agency by the Trust Deed Note and Trust
Deed, (G) to maintenance of the Replacement Cost Reserve Account; or (H),
to payment of the current and delinquent Operating Expenses of the Project
which the Borrower has failed to pay.
or
(2) Deliver to the Agency an unconditional and irrevocable letter of credit
in favor of the Agency, with a term of three (3) years, in a form and from a
financial institution acceptable to the Agency in the amount of One Hundred
Five Thousand Eight Hundred Twenty Five Dollars ($105,825). The Agency may,
in its sole discretion, draw against the letter of credit for the purposes
set forth in section 5(c)(1)(A) to (H) above.
If Borrower is unable to obtain a letter of credit of three (3) years'
duration, the Agency may consent to delivery by Borrower of successive
unconditional and irrevocable letters of credit in a form and from a
financial institution acceptable to the Agency. Each letter shall have a
term of not less than one (1) year, and the three letters of credit shall be
in force and effect continuously for three, years from closing. If Borrower
chooses to deliver successive letters of credit, Borrower unconditionally
consents to the Agency's right and privilege, in its sole option and
discretion, to draw and receive funds up to the full amount of each letter
of credit at any time during the last three (3) business days for which each
letter of credit is effective, unless, before the three (3) business day
period, Borrower shall deliver to the Agency a renewal of the letter of
credit for an additional period of not less than one (1) year.
(3) Borrower shall have two (2) working days to cure any problem set out in
section 5(c)(1)(A) to (H) hereof after receipt of written notice from the
Agency before the Agency disburses or applies for funds from the Contingency
Escrow Reserve Account.
6 - LOAN AGREEMENT
<PAGE> 7
(4) The amount of Borrower's Contingency Escrow Reserve Account may be
reduced from the amount set forth in Section 2(c)(1) or (2) above by
one-third (1/3) of the original amount of the deposit or letter of credit
per year upon approval of the Agency. Three (3) years from the date of Loan
closing, if the terms of this Agreement are fulfilled by Borrower, the funds
in such account shall be returned to Borrower. Notwithstanding the above,
the amount of Borrower's Contingency Escrow Reserve Account will not be
reduced if at any time, in the sole discretion of the Agency, it is
determined that a ready source of funds may be needed to meet any
contingencies as described in section 5(c)(1) above.
(d) Replacement Cost Reserve Account: Borrower shall establish, prior to or
concurrently with the first payment on the Loan, an account under the control
of the Agency with the Agency or in a depository designated by the Agency.
Borrower shall deposit the amount of ___________($___) per month into this
account. Disbursements from this account shall only be made for replacement of
capital items. Requests for disbursement shall be made in writing to the Agency
by Borrower. Agency may disapprove a request if the balance in the account is
less than an amount equal to 12 monthly payments to the account, plus any
insurance deductible required.
No deposits need to be made to this account after the account balance equals
144 times the monthly payment. When expenditures reduce the account balance
below this figure, Borrower shall resume monthly deposits until the account
balance again equals 144 times the monthly payment.
If an event of default under the terms of the Trust Deed, Loan Agreement, or
Trust Deed Note occurs and as a consequence of such default, the Agency elects
to declare immediately due and payable all amounts due on the Loan and secured
by the Trust Deed, the Agency may apply or authorize the application of the
balance in this account to the amounts due on the Loan as accelerated.
(e) Rental Reserve Account: Borrower shall, at Loan closing, establish a
federally insured checking or savings account in the amount of Fifty One
Thousand Dollars ($51,000) in the name of Borrower and the Agency. This account
shall not be funded with Loan proceeds.
This account shall be used to pay Operating Expenses, Loan payments, and
Replacement Cost Reserve Account payments as they are incurred during the
initial months of occupancy of the Project. After closing, Borrower shall
submit to the Agency each month a statement of income and expenses. The Agency
shall review the statement for accuracy and authorize payment of funds from
this account to pay Operating Expenses, Loan Payments, and Replacement Cost
Reserve Account payments as long as the statement of income and expenses is in
accordance with the Rent Up Schedule. If not in accordance with the Rent Up
Schedule, the Borrower shall pay any deficiency. The Agency authorization to
withdraw funds from this account shall be in a form agreed upon by Borrower,
the depository where the account is located and Agency. Borrower may then
withdraw funds to pay Operating Expenses, Loan Payments, and Replacement Cost
Reserve Account Payments.
7 - LOAN AGREEMENT
<PAGE> 8
After Break-Even Occupancy has been maintained for 90 days continuously, the
Agency shall have no further interest in the account. At this time, any funds
remaining in the account shall be returned to Borrower.
(f) Escrow for Taxes, Insurance, and Other Charges: The Agency or its agent
shall bill the Borrower and the Borrower shall pay the Agency or the Agency's
agent the following sums:
(1) Commencing on such date as the Agency, at its discretion, shall
designate, Borrower shall pay, in addition to the monthly payments required
by the Trust Deed Note, a sum equal to the land lease payments, if any, next
due, plus the premiums that will next become due and payable on the policy
or policies of fire and extended coverage and other property insurance
covering the Property, plus taxes and assessments next due on the Property,
all estimated by the Agency, minus all sums already paid for these items,
divided by the number of months to elapse before one month prior to the date
when such land lease payments, premiums, taxes, and assessments will become
delinquent or due. These sums shall be held by the Agency or the Agency's
agent in escrow to pay said land lease payments, premiums, taxes, and
special assessments at such time as such obligations become due.
(2) All payments required to be made by Borrower pursuant to this section
and all payments to be made under the Trust Deed Note shall be added
together and the aggregate amount thereof shall be paid each month in a
single payment by Borrower to the Agency. Agency shall apply the payments
to the following items in the following order of priority: (a) land lease
payments, taxes, special assessments, fire and other insurance premiums; (b)
interest on the Note; and (c) amortization of the principal of the Note.
Section 6. Distribution of Income and Assets.
Neither the Borrower nor those having a beneficial interest in Borrower shall
make, receive, or retain any distribution of any assets or any income of any
kind from the Project for the term of the Loan except from the Operating
Receipts and Expense Account and then only subject to the following conditions:
(a) Nonprofit Borrowers are not entitled to distributions from the
Operating Receipts and Expense Account.
(b) For-profit Borrowers are entitled to distributions from the Operating
Receipts and Expense Account only at the end of each month of Project operation
and only after all Operating Expenses, including Loan payments, have been paid,
or funds have been set aside for payment, and all reserve accounts have been
paid.
(c) No distribution shall be made from the Operating Receipts and Expense
Account when there is any default under this Agreement, the Trust Deed Note, or
Trust Deed, or when the Agency at its discretion determines that the Replacement
Cost Reserve Account is too low to provide adequate funds for needed foreseeable
repairs or replacements pursuant to section
8 - LOAN AGREEMENT
<PAGE> 9
5(d) of this Agreement, or when there is, in the Agency's estimation, any
reasonable probability that the Operating Receipts and Expense Account will not
be sufficient to pay for all of the Operating Expenses of the Project.
(d) Any distribution of funds from the Operating Receipts and Expense
Account which does not comply with the terms of this section shall be deemed to
be held in constructive trust for the benefit of the Agency by the possessor of
those funds. Borrower, if not the possessor of the trust funds, shall make
demand upon the possessor of those funds at the request of the Agency. Any
unauthorized distribution of funds shall be repaid to the Operating Receipts and
Expense Account from sources other than the reserve accounts set up in this
Agreement.
Section 7. Management.
Borrower shall provide for management of the project in a manner satisfactory to
the Agency and in accordance with a management agreement between Borrower and
the management agent, or Borrower and the Agency, if Borrower is acting as the
management agent. The Agency shall approve the management agent and plan before
Borrower enters into the management agreement. Borrower shall not amend, modify,
or terminate the management agreement or enter into any other management
agreement without the express written consent of the Agency. Any management
agreement entered into by Borrower shall contain a provision that it shall be
subject to termination at the sole discretion of the Agency for failure to carry
out the management plan without penalty to any party.
Section 8. Occupant Qualifications.
Borrower covenants and agrees that no occupant of the Project shall be approved
by Borrower unless the following conditions shall have been met at the time of
such approval, unless any requirement has been waived by the Administrator as
allowed by the Act:
(a) The Occupant is a low or below median-income person or family as
defined by the Act and the Agency's Rules and the head of the household is 58
years of age or older at the time the person or family occupies the dwelling
unit; or
(b) The Occupant meets the definition of a disabled person under the Act
and Agency Rules;
The Occupant shall execute and deliver to Borrower, on forms
prescribed by the Agency, a certification of the Occupant's status under
subsections (a) or (b) above.
Section 9. Borrower's Representations and Warranties.
Borrower represents and warrants to the Agency that:
(a) Borrower is a Limited Partnership duly organized, validly existing, and
in good standing under the laws of Oregon; and Borrower has full power and
authority to transact the business in which it is engaged,
9 - LOAN AGREEMENT
<PAGE> 10
and full power, authority, and legal right to make this Agreement, the Trust
Deed, and the Trust Deed Note and to incur and perform its obligations
hereunder and under the Trust Deed and Trust Deed Note.
(b) The making and performance by Borrower of this Agreement, the
Promissory Note and the Trust Deed and the borrowing by Borrower hereunder (i)
have been duly authorized by all necessary action of the Borrower, (ii) do not
and will not violate any provision of any applicable law, rule, regulation, or
order of any court, regulatory commission, board, or other administrative agency
or any provision of Borrower's articles of incorporation or bylaws (articles of
partnership) and (iii) do not and will not result in the breach of, or
constitute a default or require any consent under, or result in the creation of
any lien upon any properties or assets of Borrower pursuant to any other
indenture, bank, or other credit agreement, mortgage or other agreement or
instrument to which Borrower is a party or by which Borrower or any of its
properties may be bound or affected.
(c) This Agreement, the Trust Deed Note, and the Trust Deed have been duly
executed and delivered by Borrower and will constitute the legal, valid, and
binding obligation of Borrower, enforceable in accordance with their terms
subject to the laws of bankruptcy, insolvency, or other similar laws affecting
the enforcement of creditors' rights generally.
(d) No authorization, consent, license, or approval of, or filing or
registration with, or notification to, any governmental body or regulatory or
supervisory authority is required for the execution, delivery, or performance by
Borrower of this Agreement, the Trust Deed Note, or the Trust Deed or for the
borrowing hereunder.
(e) Since Borrower applied to Agency for the Loan, there has been no
material adverse change in the financial condition of Borrower.
(f) No representation or warranty by Borrower in this Agreement or on any
written statement, including information, data, exhibits, and other materials
submitted in connection with the Loan, furnished to the Agency pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement,
when taken together, contains or will contain any untrue statement of material
fact or omits or will omit to state a material fact necessary to make the
statements not misleading.
Section 10. Affirmative Covenants of Borrower.
Borrower covenants and agrees to all of the following:
(a) It shall abide by the terms of the Trust Deed and Trust Deed Note dated
the date hereof and by this reference incorporated herein.
(b) The Project shall be open to all persons without discrimination as to
race, color, creed, religion, national origin, sex, marital status, or status
with regard to public assistance or local residency, unless otherwise specified
by law or this Agreement.
(c) Any commercial facilities located in the Project will be rented
10 - LOAN AGREEMENT
<PAGE> 11
at the rental prescribed or approved by the Agency, and all such commercial
rental and lease agreements are subject to the prior written approval of the
Agency.
(d) Payment for services, supplies, or materials for the Project shall
not exceed the amount ordinarily paid for such services, supplies, or materials
in the area where the services are rendered or the supplies or materials are
furnished.
(e) Borrower shall at all times maintain books, contracts, records,
documents, and other papers relating to the Property and the Project in
reasonable condition for proper audit, and all such books, contracts, records,
documents, and other papers shall be subject to inspection by the Agency or its
authorized agents upon reasonable notice.
(f) For-profit Borrowers shall submit monthly/quarterly financial
statements as required by the Agency to the Agency. Nonprofit Borrowers shall
submit financial statements as requested by the Agency. Within sixty (60) days
following the end of each fiscal year, all Borrowers shall furnish to the Agency
a complete financial statement in a form acceptable to the Agency, based upon an
examination of the books, records, and accounts of the Project, setting forth
the financial condition of the Project as of the end of such fiscal year, the
results of operation of the Project for such fiscal year, and such other
financial information as the Agency may reasonably request.
(g) At the request of the Agency, Borrower shall furnish to the Agency
monthly occupancy reports and provide specific information relating to the
income and assets of the Occupants.
(h) Borrower shall at closing provide the Agency with certificates of
insurance from companies approved by the Agency with the following coverages and
provisions and shall maintain such insurance coverage so long as any amount of
the Loan is outstanding. Each policy shall provide that the Agency shall be
given thirty (30) days' advance written notice of the cancellation, expiration,
or termination of the policy or any material change in the coverage afforded
thereunder. In the event of loss, Borrower shall give prompt written notice to
the insurance carrier and the Agency, and the Agency may make proof of loss, if
not made promptly by Borrower. The Agency is hereby authorized in the event of
loss to compromise and settle all loss claims on said policies on such terms as
it deems appropriate. Borrower shall promptly furnish to the Agency a copy of
any proof of loss given to the insurance carrier.
(1) Liability insurance in an amount equal to $100,000 per individual
occurrence and $500,000 aggregate.
(2) Fire and extended coverage insurance equal to the replacement value of
the Project with no more than a $2,500 deductible. Such policies shall be
endorsed with a standard mortgagee clause with loss payable to Agency and
shall have a replacement clause endorsement.
(3) Business income insurance equal to one month's Operating Receipts. The
payment under the policy must continue until the
11 - LOAN AGREEMENT
<PAGE> 12
damaged portion of the Project is again ready for occupancy. This policy
shall be endorsed with a standard mortgagee clause.
(i) The Agency or its agents may enter upon the Property or the Project for
the purpose of inspection during Borrower's normal business hours.
(j) Borrower shall comply with the requirements of all applicable laws,
rules, regulations, and orders of any governmental authority, except where
contested in good faith and by proper proceedings.
Section 11. Negative Covenants of the Borrower.
Borrower covenants and agrees that it shall not, without the express prior
written approval of the Agency:
(a) Sell, lease (except individual units), convey or otherwise transfer or
encumber any of the Project or the Property, or permit such sale, lease,
conveyance, or other transfer or encumbrance of the Project or the Property or
any portion thereof, except as provided in the Trust Deed.
(b) Sell, assign, dispose of, or otherwise transfer or encumber any
personal property of the Project, including rents, or pay out any money except
for reasonable Operating Expenses and necessary repairs as provided herein.
(c) Remodel, add to, reconstruct, or demolish any part of the Property or
the Project.
(d) Require, as a condition of the occupancy or leasing of any unit in the
Project, any consideration or deposit other than the prepayment of the first
month's rent plus a refundable security deposit in an amount not in excess of
$250.
(e) Permit the use of the individual units of the Project for any purpose
except the use which was originally approved by the Agency
(f) Pay any compensation, including wages or salaries, from the Operating
Receipts and Expense Account or any other Project account.
(g) Incur any obligations on behalf of the Project to any of Borrower's
officers, directors, stockholders, members, trustees, partners, beneficiaries
under a trust, or any of their nominees.
(h) Enter into any contract or contracts for supervisory or managerial
services with respect to the Project's operation, other than the management
agreement set out in section 7 hereof.
(i) Transfer, assign, or pledge any right to, interest in, or title to any
funds deposited by Borrower with the Agency or reserved by the Agency for
Borrower.
(j) Make any capital expenditures not approved by the Agency
12 - LOAN AGREEMENT
<PAGE> 13
Section 12. Further Provisions Applicable to Borrower.
(a) No amendments will be made to a Borrower's certificate of limited
partnership or articles of incorporation or other documents establishing the
legal status of Borrower which would affect the Agency's rights under this
Agreement, the Trust Deed, or Trust Deed Note, without the Agency's prior
written approval.
(b) In the event of retirement, death, insanity, incapacity, withdrawal,
dissolution, liquidation, bankruptcy, or assignment for benefit of creditors of
a general partner of a limited partnership, the business may be continued by the
remaining general partners pursuant to a right set forth in the certificate of
limited partnership. In the event of dissolution of the limited partnership, no
title or right to possession and control of the Project, and no right to collect
the rents therefrom, shall pass to any person who is not bound by this
Agreement.
(c) If Borrower is a limited partnership, no general partner may
voluntarily withdraw from or be substituted by the partnership without the prior
written approval of the Agency.
(d) At the option of the Agency, the Loan may be reamortized within the
original term of the Loan if a partial prepayment results from an award in
condemnation, or from an insurance payment resulting from a loss on the
Property.
(e) The Agency warrants that it will not seek a deficiency judgment against
a limited partnership Borrower or any partner thereof personally following a
foreclosure and sale of the completed Project if the Agency has acknowledged, in
writing, satisfactory completion and acceptance of the Project.
(f) Borrower shall save and hold harmless the State of Oregon and the
Agency and their officers, agents, employees, and members from all claims,
suits, or actions of whatsoever nature resulting from or arising out of the
activities of Borrower or its subcontractors, agents, or employees in connection
with this Loan or the Project.
Section 13. Covenants Related to Tax-Exempt Status of Bonds Issued to
Finance the Loan.
The Loan is being funded, in part, with the proceeds of bonds of the Agency.
The bonds are "qualified private activity bonds" under Section 141 of the Code.
The Borrower agrees to comply with all reasonable requirements of the Agency
which it may subsequently impose in order to ensure that interest on the bonds
remains excludable from gross income under the federal income tax laws under
Section 103 of the Code. In addition, the Borrower specifically covenants:
(a) All property financed with the Loan will be owned by the Borrower.
(b) The Borrower will not permit the facilities to be used under a lease,
rental agreement, or any other agreement, by an entity other than an elderly or
disabled person.
13 - LOAN AGREEMENT
<PAGE> 14
(c) Neither the Borrower, nor any entity or person related to the Borrower
in any way, has or will enter into any arrangement, whether formal or informal,
to purchase the bonds used to finance the Loan in an amount which is related to
the amount of the Loan.
(d) The average maturity of the Note executed in connection with this Loan
Agreement does not exceed 120 percent of the average reasonably expected
economic life of the facilities being financed with the net proceeds of the
Loan.
(e) No portion of the facilities financed with the Loan will be used to
provide any airplane, skybox, or other private luxury box, health club facility,
facility primarily used for gambling, or store the principal business of which
is the sale of alcoholic beverages for consumption off-premises.
Section 14. Events of Default.
If any of the following events occurs and is continuing, namely:
(a) Borrower defaults in the performance or observation of any of its
covenants or agreements contained herein or in the Trust Deed Note and Trust
Deed, and the default continues for 30 days after the Agency gives written
notice thereof; or
(b) any representation or warranty with respect to current or historical
information made to Agency herein or in any certificate, notice, report,
financial statement, or other instrument or document furnished to Agency
hereunder or in connection herewith proves, to have been incorrect in any
material respect when made; or
(c) any authorization, consent, license, approval, filing, or registration
now or hereafter necessary to enable Borrower to comply with its obligations
hereunder or under the Trust Deed or Trust Deed Note or incurred pursuant hereto
or thereto fails to be timely issued or granted, or expires or lapses and is not
forthwith renewed or extended, or is revoked, withdrawn, withheld, or modified
so as to materially interfere with such compliance; or
(d) Borrower (i) applies for or consents to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of itself
or of all of its property, (ii) admits in writing its inability, or is generally
unable, to pay its debts as they become due, (iii) makes a general assignment
for the benefit of its creditors, (iv) commences a voluntary case under the
Federal Bankruptcy Code (as now or hereafter in effect), (v) is adjudicated as
bankrupt or insolvent, (vi) files a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, (vii) fails to controvert in a timely and
appropriate manner, or acquiesces in writing to, any petition filed against it
in an involuntary case under such Bankruptcy Code, or (viii) takes any corporate
action for the purpose of effecting any of the foregoing; or
14 - LOAN AGREEMENT
<PAGE> 15
Amendment to Loan Agreement
for Forest Grove Residential Center
Reference is made to that Loan Agreement dated October 31, 1988, recorded in
Washington County, Oregon by Memorandum on November 2, 1988 as document No.
W40852 between Forest Grove Residential Center Limited Partnership, (assumed by
Crossings International Corporation on August 30, 1990) and the State of
Oregon, acting by and through the Oregon Housing and Community Services
Department:
It is mutually agreed that Section 11(d) of said Loan Agreement is amended to
read:
"Require, as a condition of the occupancy or leasing of any unit in the Project,
any consideration or deposit other than the prepayment of the first month's rent
plus a refundable security deposit in an amount not in excess of $250, or an
amount as approved in writing by Oregon Housing and Community Services
Department."
Dated this 20th day of August 1995.
Crossings International Corporation (Borrower)
by: /s/ Richard W. Boehlke
-------------------------------------------
Richard W. Boehlke, President
State of Oregon, acting by and through
Oregon Housing and Community Services Dept.
By: /s/ Pauline Phillips
------------------------------------------
Pauline Phillips, Manager
Asset & Property Management
<PAGE> 1
EXHIBIT 10.38
PURCHASE AND SALE AGREEMENT
BY AND AMONG
CROSSINGS INTERNATIONAL CORPORATION,
a Washington corporation
("SELLER")
NEW CROSSINGS INTERNATIONAL CORPORATION,
a Nevada corporation
("TENANT")
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
("Union Limited Partnership")
AND
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
("BUYER")
December 15, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AGREEMENT OF PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . 7
2.1. Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III CLOSING AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1. Closing Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. Delivery to Title Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3. Delivery to Parties at Closing Conference . . . . . . . . . . . . . . . . . . . . . . . 8
3.4. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7. Outside Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV COSTS AND PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1. Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2. Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 15
5.1. Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3. Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1. Brokers and Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3. Further Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4. Limitation of Ability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5. Entire Agreement; Amendments; Captions . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7. Incorporation of Exhibits and Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8. Time of the Essence; Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.11. Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.13. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.16. Exclusive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.17. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6.18. No Third Parties Benefitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT A LEGAL DESCRIPTION OF FEE PARCELS
EXHIBIT B LEGAL DESCRIPTION OF LEASEHOLD PARCELS
EXHIBIT C DESCRIPTION OF ASSUMED INDEBTEDNESS
EXHIBIT D FORM OF BILL OF SALE AND ASSIGNMENT
EXHIBIT E FORM OF CERTIFICATE OF NON-FOREIGN STATUS
EXHIBIT F FORM OF CLOSING PROCEDURE LETTER
EXHIBIT G FORM OF DEEDS
EXHIBIT H FORM OF WRITTEN AUTHORIZATION TO CLOSE
EXHIBIT I SCHEDULE OF ENVIRONMENTAL AUDIT REPORTS
</TABLE>
ii
<PAGE> 4
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of
December 15, 1995, by and between CROSSINGS INTERNATIONAL CORPORATION, a
Washington corporation ("Seller"), NEW CROSSINGS INTERNATIONAL CORPORATION, a
Nevada corporation ("Tenant"), 2010 UNION LIMITED PARTNERSHIP, a Washington
limited partnership ("Union Limited Partnership"), and NATIONWIDE HEALTH
PROPERTIES, INC., a Maryland corporation ("Buyer").
RECITALS
A. Seller is the fee owner (or is under contract with one or
more of its Affiliates to become the fee owner) of those certain parcels of
real property more particularly described in Exhibit A attached hereto and by
this reference incorporated herein (each individually, a "Fee Parcel").
B. Seller and Union Limited Partnership are (or, in the case of
Seller, is under contract with its Affiliate to become) the owners of leasehold
estates as to those certain parcels of real property more particularly
described in Exhibit B attached hereto and by this reference incorporated
herein (each individually, a "Leasehold Parcel") pursuant to ground leases as
described in said Exhibit B (each individually, a "Ground Lease"). The
Leasehold Parcels are referred to as the "Mt. Hood Parcel" and the "Allenmore
Parcel" in keeping with the facility name shown for such Leasehold Parcels on
said Exhibit B. Seller is (or will become) the lessee of the Mt. Hood Parcel
and Union Limited Partnership, an Affiliate of Seller, is the lessee of the
Allenmore Parcel.
C. Each Fee Parcel and each Leasehold Parcel shall sometimes be
referred to individually herein as a "Parcel" and collectively as the "Land."
D. The Land is improved with certain buildings and other
Improvements (as hereinafter defined) and each Parcel together with the
Improvements thereon is operated as an assisted living facility.
E. Seller desires to sell, and Buyer desires to buy, all of the
Property (as hereinafter defined) other than the Allenmore Parcel. Effective
immediately following the sale of the Property, the shareholders of Seller
intend to contribute their shares of stock of Seller to Tenant in exchange for
all of the shares of capital stock of Tenant, with Seller becoming a
wholly-owned subsidiary of Tenant. In addition, Buyer desires to make a loan
to Union Limited Partnership and Union Limited Partnership desires to accept
such loan with respect to the Allenmore Parcel, all upon the terms and
conditions set forth herein.
1
<PAGE> 5
AGREEMENT
NOW, THEREFORE, taking the foregoing Recitals into account, and
in consideration of the mutual covenants, agreements and conditions set forth
herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used herein (including any Exhibits attached hereto), the
following terms shall have the following meanings:
"Affiliate" shall mean, with respect to any person or entity, any
other person or entity which controls, is controlled by or is under common
control with the first person or entity.
"Allenmore Parcel" shall have the meaning given such term in
Recital B hereof.
"Assumed Indebtedness" shall mean the loans to be assumed by
Buyer as part of the Purchase Price as provided herein, as such loans are
described on Exhibit C attached hereto and by this reference incorporated
herein.
"Bill of Sale" shall mean a bill or bills of sale in the form
attached as Exhibit D hereto and sufficient to transfer to Buyer all Personal
Property.
"Business Agreement" shall mean any lease, rental agreement,
management agreement, loan agreement, mortgage, easement, covenant, restriction
or other agreement or instrument affecting all or a portion of the Property and
which is presently in effect or binding upon Seller or all or any portion of
the Property.
"Certificate of Non-Foreign Status" shall mean a certificate or
certificates dated as of the Closing Date, addressed to Buyer and duly executed
by Seller or its applicable Affiliates, in the form of Exhibit E attached
hereto.
"Claim" shall mean any obligation, liability, lien, encumbrance,
loss, damage, cost, expense or claim, including, without limitation, any claim
for damage to property or injury to or death of any person or persons.
"Closing" shall mean the consummation of the sale and purchase
provided for herein.
2
<PAGE> 6
"Closing Conference" shall mean a conference held in Seattle,
Washington, on the Closing Date in order to bring about the Closing at the
offices of Seller's counsel, or such other place as the parties hereto may
hereafter mutually agree.
"Closing Date" shall mean December 20, 1995, or such earlier or
later date as shall be hereafter agreed upon by the parties hereto.
"Closing Procedure Letter" shall mean a letter to the Title
Company executed by Seller and Buyer setting forth directions for the Title
Company in connection with the Closing and in the form of Exhibit F attached
hereto.
"Debt Service Reserve" shall mean cash in the amount of One
Hundred Sixty-Seven Thousand One Hundred Forty-Nine and 25/100 Dollars
($167,149.25) to be held by Buyer as additional security for Union Limited
Partnership's obligations under the NHP Loan Documents, as further described in
such NHP Loan Documents.
"Deed" shall mean a deed or deeds substantially in the form of
Exhibit G attached hereto, executed by Seller or its applicable Affiliates, as
grantor, in favor of Buyer, as grantee, conveying the Land and Improvements to
Buyer with respect to the Fee Parcels in their entirety and with respect to the
Improvements located on the Mt. Hood Parcel, subject only to the Permitted
Exceptions.
"Existing Encumbrances" shall have the meaning given such term in
Section 4.1(g).
"Facility Lease" shall mean the following in form and substance
satisfactory to Buyer: (i) a lease of each Fee Parcel from Buyer as lessor to
Tenant as lessee; (ii) a sublease of the Mt. Hood Parcel from Buyer as
sublessor to Tenant as sublessee; and (iii) a sublease of the Allenmore Parcel
from Union Limited Partnership as sublessor to Tenant as sublessee.
"Fee Parcel" shall have the meaning given to such term in
Recital A hereof.
"Financing Statement" shall mean a financing statement or
statements (applicable UCC form) executed by Tenant, as debtor, in favor of
Buyer, as secured party, to be filed in connection with the Facility Leases
(other than for the Allenmore Parcel).
"Fixture" shall mean all property now or upon the Closing Date
located on or about the Property which is attached or appurtenant thereto.
"Fixture Filing" shall mean a financing statement or statements
(applicable UCC form) executed by Tenant, as debtor, in favor of Buyer, as
secured party, to be filed in connection with the Facility Leases (other than
for the Allenmore Parcel).
3
<PAGE> 7
"Hazardous Materials" shall mean (i) any petroleum products
and/or by-products (including any fraction thereof), flammable substances,
explosives, radioactive materials, hazardous or toxic wastes, substances or
materials, known carcinogens or any other materials, contaminants or pollutants
which pose a hazard to the Property or to persons on or about the Property or
cause the Property to be in violation of any Hazardous Materials Laws: (ii)
asbestos in any form which is friable; (iii) urea formaldehyde in foam
insulation or any other form; (iv) transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty (50) parts per million or any other more restrictive standard
then prevailing; (v) medical wastes and biohazards; (vi) radon gas; and (vii)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or may or could pose a
hazard to the health and safety of the occupants of the Property or the owners
and/or occupants of property adjacent to or surrounding the Property.
"Improvements" shall mean all buildings, improvements, structures
and Fixtures now or on the Closing Date located on the Land, including, without
limitation, parking lots and structures, roads, drainage and other utility
structures and other so-called "infrastructure" improvements.
"Intangible Property" means all Permits and other intangible
property or any interest therein now or on the Closing Date owned or held by
Seller or Tenant or any of their Affiliates in connection with the Land, the
Improvements or the Fixtures, or any business or businesses now or hereafter
conducted by Seller, Tenant or any of their Affiliates thereon or with the use
thereof, including all rights of Seller or Tenant in and to all leases,
contract rights, agreements, trade or other names associated with the operation
of the Property by Seller or Tenant (including, without limitation, the names
"Albany Residential", "The Atrium", "Canterbury Gardens", "The Inn at
Canterbury", "Columbia Edgewater", "Courtyard Village", "Forest Grove
Residential", "Heritage, Mt. Hood", "The Heritage at Rogue Valley",
"McMinnville Residential", "Ridge Point" and "River Place"), water rights and
reservations, zoning rights, business licenses and warranties (including those
relating to construction or fabrication) related to the Land, the Improvements
or the Fixtures, or any part thereof; provided, however, "Intangible Property"
shall not include the general corporate trademarks, service marks, logos or
insignia or books and records of Seller, Tenant or any of their Affiliates, nor
any cash, accounts receivable or bank accounts of Seller or Tenant.
"Land" shall have the meaning given such term in Recital C hereof.
"Laws" means all federal, state and local laws, moratoria,
initiatives, referenda, ordinances, rules, regulations, standards, orders and
other governmental requirements, including, without limitation, those relating
to the environment, health and safety, or handicapped persons, where the
failure to abide by the same would have a material adverse effect on Buyer,
Seller or the Property or the operation or use thereof.
4
<PAGE> 8
"Leasehold Parcel" shall have the meaning given such term in
Recital A hereof.
"Lease Assignment Agreement" shall mean an instrument assigning
the leasehold estate in the Mt. Hood Parcel under the applicable Ground Lease
to Buyer in form and substance satisfactory to Buyer, including without
limitation the approval of the ground lessor for such assignment and for the
sublease of the Mt. Hood Parcel pursuant to a Facility Lease.
"Lease Guaranty" shall mean a guaranty or guaranties of Tenant's
obligations as lessee (or sublessee, as applicable) under the Facility Leases
executed by Seller in favor of Buyer in form and substance acceptable to Buyer;
provided, however, in the case of the Allenmore Facility, the Lease Guarantee
shall guarantee Tenant's obligations as lessee in favor of Union Limited
Partnership as landlord and the benefit of the same shall run also in favor of
Buyer.
"Memorandum of Lease" shall mean a memorandum or memoranda of the
Facility Leases in form and substance acceptable to Buyer to be recorded in the
official records of each county in which a Parcel is located.
"Mt. Hood Parcel" shall have the meaning given such term in
Recital B hereof.
"NHP Loan" shall mean a loan from Buyer, as lender, to Union
Limited Partnership, as borrower, in the original principal amount of Six
Million Five Hundred Fifty Thousand Dollars ($6,550,000.00) secured by, among
other things, the leasehold estate of Union Limited Partnership under the Ground
Lease covering the Allenmore Parcel.
"NHP Loan Documents" shall mean the instruments which evidence
and secure the NHP Loan, all in form and substance satisfactory to Buyer.
"Parcel" shall have the meaning given such term in Recital C
hereof.
"Permits" means all permits, licenses, approvals, entitlements and
other governmental and quasi-governmental authorizations including, without
limitation, certificates of occupancy, required in connection with the
ownership, planning, development, construction, use, operation or maintenance
of the Property for the purpose as described in the Facility Leases. As
used herein, "quasi-governmental" shall include the providers of all
utilities services to the Property.
"Permitted Exceptions" shall mean those title exceptions or
defects which have been approved in writing by Buyer to appear as exceptions on
the Title Policies.
5
<PAGE> 9
"Personal Property" shall mean all Intangible Property and all
furnishings, equipment, tools, machinery, fixtures, appliances and all other
tangible personal property, other than the Fixtures, now or on the Closing Date
located on or about the Land or Improvements or used in connection with the
operation thereof which is owned by Seller or its applicable Affiliates,
specifically excluding computer equipment, food, linens, clothing, medical
records, vehicles and other personal property owned by Seller or Tenant and
personal property owned by residents and employees of Seller or Tenant.
"Property" means, collectively, the Land and all rights, titles,
and appurtenant interests, the Improvements, the Fixtures, the Personal
Property and the Intangible Property. As used in the foregoing, "appurtenant
interests" shall mean those interests which pass by operation of law with the
conveyance of the fee simple estate in the Land and Improvements.
"Purchase Price" shall mean an amount equal to Fifty-Four Million
Six Hundred Twenty-Three Thousand Dollars ($54,623,000.00).
"Real Property" shall mean the Land, the Improvements and the
Fixtures.
"Security Deposit" shall mean cash in the total amount of One
Million Three Hundred Eighty-One Thousand Three Hundred Seventy-One and 71/100
Dollars ($1,381,371.71) to be held by Buyer as additional security for
performance by Seller under the Facility Leases, and to be divided between the
Facility Leases as set forth in the Facility Leases.
"Subdivision Map Act" shall mean the applicable statutes of the
States of Colorado, Idaho, Oregon and Washington which govern the subdivision
of real property.
"Title Company" shall mean the underwriter of the Title Policies
and shall be Chicago Title Insurance Company, whose address is National
Business Unit, 16969 Von Karman, Irvine, California 92714.
"Title Policies" shall mean ALTA Extended Coverage Owner's and
Lender's Policies of Title Insurance (1970 Form B) without modification,
together with such endorsements thereto as are reasonably requested by Buyer.
The owner's policies shall insure Buyer's fee ownership of the Fee Parcels and
the leasehold estate of Buyer in the Mt. Hood Parcel, with liability in the
amount of the Purchase Price. The lender's policy shall insure Buyer as the
holder of a first lien mortgage under the NHP Loan Documents. Both the owner's
and the lender's policies shall be dated as of the Closing Date, shall be
issued by the Title Company subject only to the Permitted Exceptions and to the
standard printed exceptions included in the ALTA standard form owner's and
lender's extended coverage policies of title insurance, as applicable.
"Warranties" shall mean all warranties, representations and
guaranties with respect to the Property (other than the Allenmore Parcel),
whether express or implied,
6
<PAGE> 10
which Seller or any of its Affiliates now holds or under which Seller or any of
its Affiliates is the beneficiary.
"Written Authorization to Close" shall mean a letter to the
Title Company, in the form of Exhibit H, executed by Buyer, Tenant, Union
Limited Partnership and Seller, directing the Title Company to comply with the
instructions in the Closing Procedure Letter.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE
2.1. Agreement to Purchase and Sell. Seller hereby agrees
to sell, convey and assign the Property (other than the Allenmore Parcel) to
Buyer, Buyer agrees to buy and accept the Property (other than the Allenmore
Parcel) from Seller, and Buyer and Union Limited Partnership agree to enter
into the NHP Loan Documents as to the Allerunore Parcel, all on the terms and
conditions as hereinafter set forth.
ARTICLE III
CLOSING AND CONDITIONS
3.1. Closing Conference. The Closing shall take place at
the Closing Conference on or before the Closing Date.
3.2. Delivery to Title Company.
(a) Deliveries by Seller and Affiliates. On or
before the Closing Date, Seller, Tenant or Union Limited
Partnership, as indicated below, shall deliver or cause to be
delivered to Title Company:
(i) from Seller or its applicable Affiliates, a
duly executed and acknowledged Deed for each Fee Parcel;
(ii) from Seller or its applicable Affiliate, a
duly executed and acknowledged Lease Assignment Agreement
with respect to the leasehold estate under the Ground Lease
applicable to the Mt. Hood Parcel;
(iii) from Seller or its applicable
Affiliate, a duly executed and acknowledged Deed with
respect to the Improvements located on the Mt. Hood Parcel;
(iv) from Seller, payoff letters from the
holders or claimants of, or with respect to, any encumbrance
or monetary lien affecting the Fee Parcels, the leasehold
estate under the Ground Lease as to the Mt. Hood
7
<PAGE> 11
Parcel and the Improvements located on the Mt. Hood Parcel,
other than the Assumed Indebtedness;
(v) from Union Limited Partnership, each of the
NHP Loan Documents which is to be recorded or filed, in each
case duly executed and acknowledged; and
(vi) any and all transfer declarations or
disclosure documents, duly executed by the appropriate
parties, required in connection with the Deeds, the Lease
Assignment Agreement and/or the NHP Loan Documents by any
state, city or county agency having jurisdiction over the
same or the transactions contemplated hereby.
(b) Deliveries by Buyer. On or before the Closing
Date Buyer shall deliver or cause to be delivered to Title
Company the Purchase Price and the amount of the NHP Loan in same
day available funds less all amounts outstanding under the
Assumed Indebtedness and (at Buyer's option) net of all prorated
or other amounts credited to Buyer hereunder.
(c) Closing Procedure Letter. The deliveries to be
made to Title Company under this Section 3.2 shall be made in
accordance with and subject to the Closing Procedure Letter.
3.3. Delivery to Parties at Closing Conference. Upon
satisfaction of all the conditions in the Closing Procedure Letter for
recordation of the instruments described above and upon receipt by Buyer and
Seller of written advice from Title Company that such conditions have been
satisfied and that Title Company is prepared to record and/or file the
instruments delivered to Title Company pursuant to Section 3.2(a) above,
disburse funds and issue its unconditional, irrevocable commitment to issue
the Title Policies, the following items are to be delivered at the Closing
Conference:
(a) Items To Be Delivered by Seller and Affiliates.
Seller, Tenant or Union Limited Partnership, as indicated below,
shall deliver to Buyer the following items, all of which shall be
in form and substance acceptable to Buyer, and each of which
shall be executed by the Applicable of Seller, Tenant or Union
Limited Partnership (or other appropriate party) and acknowledged
by a notary public where applicable:
(i) The Bills of Sale executed by Seller or
its applicable Affiliates;
(ii) The following duly executed (and
acknowledged if required by the Title Company or Buyer) by
the lessor under the Ground Lease of the Allenmore Parcel
all in form and substance satisfactory to Buyer: (a) an
approval with respect to the assignment of the leasehold
estate under such
8
<PAGE> 12
Ground Lease to Buyer as security for the NHP Loan pursuant
to the NHP Loan Documents, (B) a lessor's estoppel
certificate from such lessor in favor of Buyer, and (C) an
approval of the assignment to Buyer of the landlord's
interest under the Facility Lease for the Allenmore
Facility to Seller as additional security for the NHP Loan
pursuant to the NHP Loan Documents;
(iii) The Lease Guaranty;
(iv) A lessor's estoppel certificate in favor of
Buyer from the lessor under the Ground Lease of the Mt. Hood
Parcel in form and substance acceptable to Buyer;
(v) The Security Deposit and the Debt Service
Reserve in same day funds;
(vi) Any prorated rent under the Facility Leases
(other than for the Allenmore Parcel) or prorated interest
under the NHP Loan Documents for partial payments for the
period after the Closing Date until the next applicable
payment dates together with the first full month's payment
under the Facility Leases (other than for the Allenmore
Parcel) and under the NHP Loan Documents;
(vii) The Facility Lease between Union
Limited Partnership and Tenant with respect to the Allenmore
Parcel;
(viii) Financing Statements and Fixture
Filings with respect to the Personal Property and Fixtures;
(ix) The Certificates of Non-Foreign Status;
(x) Agreements, consents and estoppel in form
and substance satisfactory to Buyer whereby the holders of
the Assumed Indebtedness acknowledge and consent to the
assumption of the Assumed Indebtedness by Buyer and setting
forth the amount outstanding under the Assumed Indebtedness;
(xi) Certificates of casualty and fire insurance
for each of the Parcels as are required pursuant to the
Facility Leases and/or the NHP Loan Documents showing Buyer
as an additional insured and loss payee thereunder, with
appropriate provisions for prior notice to Buyer in the
event of cancellation or termination of such policies;
(xii) Such evidence of the due execution,
delivery and authorization of documents executed by Seller
and its applicable Affiliates,
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Tenant and Union Limited Partnership in connection with this
Agreement and the transactions contemplated hereunder as
Buyer may reasonably request;
(xiii) copies of any management agreements
required by the Facility Leases with respect to the
licensing of the various Parcels.
(b) Items To Be Delivered by Buyer. Buyer shall
deliver to Seller, Tenant or Union Limited Partnership such
evidence of the due execution, delivery and authorization of
documents executed by Buyer in connection with this Agreement and
the transactions contemplated hereunder as Seller, Tenant or
Union Limited Partnership may reasonably request.
(c) Items To Be Delivered by All Parties. Buyer and
Seller, Tenant or Union United Partnership shall jointly deliver
the following items, all of which shall be in form and substance
acceptable to Seller, and each of which shall be executed by
Buyer and Seller, Tenant or Union Limited Partnership (or other
appropriate party) and acknowledged by a notary public where
applicable:
(i) All notices of change of ownership or other
similar notices required by any governmental or
quasi-governmental authority or agency having jurisdiction
over the Property or any portion thereof or any activities
occurring on the Property or deemed reasonably advisable by
Buyer; and
(ii) Facility Leases executed by Buyer and
Tenant for all of the Property other than the Allenmore
Parcel.
(d) Written Authorization to Close. Upon receipt of
the items described in this Section 3.3, and upon compliance with
the other terms and conditions of this Agreement, Seller, Tenant,
Union limited Partnership and Buyer shall execute and deliver to
Title Company the Written Authorization to Close.
3.4. Title Insurance. As a condition to Buyer's obligation
to consummate the transactions herein contemplated, Buyer shall receive on the
Closing Date a pro forma of the Title Policies and an unconditional,
irrevocable commitment from the Title Company to issue the Title Policies in
conformity with the aforementioned pro forma. Seller, Tenant and Union Limited
Partnership shall deliver to Title Company such instruments, documents,
payments, indemnities, releases and agreements and shall perform such other
acts as Title Company shall reasonably require in order to issue the Title
Policies.
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3.5. Additional Conditions.
(a) Mutual Conditions. In addition to the conditions
provided in other provisions of this Agreement, each party's
obligation to perform its undertakings provided in this Agreement
is conditioned upon the following:
(i) Performance by Other Parties. The due
performance by the other parties of each and every material
undertaking and agreement to be performed by them hereunder
(including the delivery by such other parties of the items
specified in Sections 3.2 and 3.3 above).
(ii) Representations and Warranties. Each
representation and warranty made by the other parties in
this Agreement shall be true and correct in all material
respects on the date hereof and at all times up to and
including the Closing Date.
(iii) No Bankruptcy or Dissolution. As of
the Closing Date, none of the following shall have been done
by, against or with respect to Buyer, Seller (or any
Affiliate of either of them), any constituent general
partner in Seller, Old Crossings, any lessor under the
Ground Leases or any person or entity as to which any of the
foregoing or their principals have effective management
control: (A) the commencement of a case under Title 11 of
the U.S. Code, as now constituted or hereafter amended, or
under any other applicable federal or state bankruptcy law
or other similar law; (B) the appointment of a trustee or
receiver of any property interest other than the existing
receivership with respect to Seller's facility known as "The
Palms" (which is not a portion of the Property); (C) an
assignment for the benefit of creditors; (D) an attachment,
execution or other judicial seizure of a substantial
property interest; (E) the taking of, failure to take, or
submission to any action indicating an inability to meet its
financial obligations as they accrue; or (F) a dissolution
or liquidation.
(b) Conditions to Buyer's Performance. In addition
to the conditions provided elsewhere in this Agreement, Buyer's
obligation to perform its undertakings provided in this Agreement
is conditioned upon the following:
(i) No Damage. Between September 25, 1995 and
the Closing Date, inclusive, no destruction of or damage or
loss from any cause whatsoever, shall have occurred with
respect to the Property which, according to Buyer's
reasonable estimate, would cost, in the aggregate, more than
One Million Dollars ($1,000,000) to repair, restore and
replace or would cost more than Two Hundred Fifty Thousand
Dollars ($250,000) to repair, restore and replace with
respect to any single Parcel, or would take longer than
sixty (60) days to repair, restore and replace.
Notwithstanding the foregoing, in the event that, despite
destruction of or loss or damage to
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the Property or any Parcel, the transaction herein provided
shall be consummated, Seller and Tenant shall, at their sole
cost and expense, repair such destruction, loss or damage as
soon as possible using the proceeds of any insurance
covering the same to reimburse them up to the amount of
their cost in effecting such repairs.
(ii) No Taking. No taking, threatened taking
(or consideration by a governmental authority of a taking)
of any Parcel or any material part thereof by eminent domain
shall have occurred which would allow any lessee to
terminate any lease or to abate any rent due under any lease
or would otherwise materially and adversely affect the value
or use of the Property or portion thereof.
(iii) Approval of Due Diligence Results. On
or before the Closing Date, Buyer shall have completed and
approved its review of the conditions precedent set forth in
the letter agreement dated September 25, 1995 between Buyer
and Seller.
(iv) CCI Investment. On or before the Closing
Date, evidence satisfactory to Buyer that Capital
Consultants, Inc., an Oregon corporation, has completed its
acquisition of preferred stock in Tenant.
3.6. Waiver of Conditions. Any party may at any time or
times, in its sole discretion, waive any of the conditions to its obligations
hereunder, but any such waiver shall be effective only if contained in a
writing signed by such party. No waiver by a party of any breach of this
Agreement or of any warranty or representation hereunder by the other party
shall be deemed to be a waiver of any other breach by such other party (whether
preceding or succeeding and whether or not of the same or similar nature), and
no acceptance of payment or performance by a party after any breach by the
other party shall be deemed to be a waiver of any breach of this Agreement or
of any representation or warranty hereunder by such other party, whether or not
the first party knows of such breach at the time it accepts such payment or
performance. No failure or delay by a party to exercise any right it may have
by reason of the default of the other party shall operate as a waiver of such
default or as a modification of this Agreement nor shall any such failure or
delay prevent the exercise of any right by the nonbreaching party while the
default continues. Without limiting the generality of the foregoing, in the
event that for any reason any item required to be delivered to Buyer or Seller,
Tenant or Union Limited Partnership hereunder shall not be delivered when
required, then the party obligated to make such delivery shall nevertheless
remain obligated to deliver the same to the party entitled to receive such
delivery provided the other party delivers a written request for such delivery
within six (6) months following the Closing Date and nothing (including the
closing of the transaction hereunder) shall be deemed a waiver by the party
entitled to receive such delivery of any such requirement, except an express
written waiver or a failure to make such request within the foregoing time
period.
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3.7. Outside Date. In the event that for any reason the
transactions contemplated hereby shall not be consummated on or before the
Closing Date, either party hereto may extend the Closing Date to December 27,
1995, by delivering written notice of such election to the other party. In the
event that for any reason the transactions contemplated hereby shall not be
consummated on or before December , 1995, then (unless Buyer commences an
action to specifically enforce this Agreement within 30 days thereafter) either
party may at any time after the Closing Date, by written notice to the other
party, terminate this Agreement and the obligations of the parties hereunder;
provided, however, that such termination shall not release any party from
liability for any breach of this Agreement occurring prior to such termination.
ARTICLE IV
COSTS AND PRORATIONS
4.1. Closing Costs.
(a) Seller's Costs. Seller shall pay:
(i) any and all state, municipal or other
documentary, transfer, sales or use taxes payable in
connection with the delivery of any instrument or document
provided in or contemplated by this Agreement, any agreement
or commitment described or referred to herein or the
transactions contemplated herein;
(ii) all expenses of or related to the issuance
of the Title Policies (including, but not limited to,
insurance premiums, but not including the costs of any
surveys required by Buyer and the Title Company) and all
escrow fees and charges;
(iii) the charges for or in connection with the
recording and/or filing of any instrument or document
provided herein or contemplated by this Agreement or any
agreement or document described or referred to herein;
(iv) any and all broker's fees or similar fees
claimed by any party employed by Seller in connection with
the transactions contemplated herein;
(v) Seller's legal, accounting and other
professional fees and expenses and the cost of all opinions,
certificates, instruments, documents and papers required to
be delivered, or to cause to be delivered, by Seller
hereunder, including without limitation, the cost of all
performances by Seller of its obligations hereunder; and
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(vi) any and all assumption fees, charges or
other sums payable in connection with Buyer's assumption of
the Assumed Indebtedness.
(b) Buyer's Costs. Buyer shall pay:
(i) any and all broker's fees or similar fees
claimed by any party employed by Buyer in connection with
the transactions hereunder, provided, however, Buyer shall
not be deemed to have employed any party by merely receiving
information concerning Seller, Tenant, the Property or
related to the transactions contemplated hereunder or by
executing any agreement to hold such information
confidential;
(ii) all costs of any site inspections, title
surveys or environmental audits performed by or on behalf of
Buyer, including travel and out-of-pocket expenses for such
inspections or audits; and
(iii) Buyer's legal, accounting, and other
professional fees and expenses and the cost of all opinions,
certificates, instruments, documents and papers required to
be delivered, or to cause to be delivered, by Buyer
hereunder, including without limitation the cost of all
performances by Buyer of its obligations hereunder.
(c) Existing Financing. The Property is presently
encumbered by certain deeds of trust and certain other security
instruments other than the Assumed Indebtedness (individually and
collectively, the Existing Encumbrances"). Seller shall cause the
Existing Encumbrances and all indebtedness secured thereby to be
fully satisfied, released and discharged of record on or prior to
the Closing Date (recognizing that Seller may use the proceeds of
the sale contemplated hereby to satisfy the same) so that Buyer
shall take title to the Property free of the Existing
Encumbrances. Seller acknowledges that such satisfaction,
release and discharge may involve prepayment penalties or
premiums and other costs or expenses, all of which shall be paid
by Seller at its sole cost and expense on or before the Closing
Date; provided, however, Buyer agrees to pay one-half of the
prepayment penalty for paying off the Existing Encumbrance on the
Mt. Hood Parcel so long as Buyer's share of such prepayment
penalty does not exceed approximately $60,000.
4.2. Prorations.
(a) No Items To Be Prorated. Except as provided in
Section 4.2(c) below, the income and expenses of the Property
shall not be prorated between Seller and Buyer on the Closing
Date as the Property is currently owned by Seller or Affiliates
of Seller and as Tenant will be responsible for such matters
under the Facility Leases after the Closing Date.
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(b) Procedure. The prorations and payments to be
made at the Closing Conference pursuant to this Section 4.2 shall
be made on the basis of a written statement or statements
provided to Buyer by Seller prior to the Closing Conference and
approved by Buyer. In the event any prorations, apportionments
or computations made under this Section 4.2 shall prove to be
incorrect for any reason, then either party shall be entitled to
an adjustment to correct the same, provided that it makes written
demand on the one from whom it is entitled to such adjustment
within one (1) year after the Closing Date.
(c) Ground Leases and Indebtedness. Seller shall pay
all amounts which are due or accrue under the Assumed
Indebtedness, the Existing Encumbrances and the Ground Leases
prior to and including the Closing Date, including, without
limitation, all interest or rent accrued on all of the same prior
to and including the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of Seller. Seller and
Tenant jointly and severally represent and warrant to Buyer the following:
(a) Title. Buyer will acquire hereunder good,
marketable and insurable title to, and the entire right, title,
and interest in, the Property, other than the Allenmore Parcel,
free and clear of any and all leases, liens, encumbrances, or
other liabilities, subject only to the Assumed Indebtedness, the
Facility Leases and the Permitted Exceptions. Such title shall
be (i) fee title as to the Fee Parcels, (ii) leasehold title to
the Land under the applicable Ground Lease as to the Mt. Hood
Parcel and (iii) fee title to the Improvements to the Mt. Hood
Parcel. In addition, Buyer will acquire hereunder a valid first
mortgage lien under the NHP Loan Documents as to good, marketable
and insurable title and the entire right, title and interest (x)
in the leasehold estate under the applicable Ground Lease as to
the Land of the Allenmore Parcel, and (y) fee title to the
Improvements on the Allenmore Parcel, in both cases free and
clear of any and all leases, liens, encumbrances, or other
liabilities, subject only to the Permitted Exceptions.
(b) Utilities. To the best of Seller's and Tenant's
knowledge after due inquiry, the Property has available to its
boundaries adequate utilities, including without limitation,
adequate water supply, storm and sanitary sewage facilities,
telephone, gas, electricity and fire protection, as is required
for the operation of the Property as contemplated under the
Facility Leases and the NHP Loan Documents.
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(c) Physical Condition; Completeness.
(i) To the best of Seller's and Tenant's
knowledge after due inquiry, the Property has been
constructed in a good, workmanlike and substantial manner,
free from material defects and in accordance with all
applicable Laws.
(ii) To the best of Seller's and Tenant's
knowledge after due inquiry, neither the zoning nor any
other right to construct upon or to use the Property is to
any extent dependent upon or related to any real estate
other than the Property, the improvement of such other real
estate or the payment of any fees for the improvement of
such other real estate.
(iii) To the best of Seller's and Tenant's
knowledge after due inquiry, the Property, and each portion
thereof, is in good condition and repair and is free from
material defects. Seller and Tenant will each use its best
efforts to maintain the Property in good condition
and-repair, except for ordinary wear and tear, between the
date hereof and the Closing Date.
(iv) To the best of Seller's and Tenant's
knowledge after due inquiry, there are no soil conditions
adversely affecting the Property, except with respect to the
sink hole located on the Mt. Hood Parcel.
(v) To the best of Seller's and Tenant's
knowledge after due inquiry, except as disclosed in the
environmental audit reports identified on Exhibit I attached
hereto procured by Buyer (the "Environmental Audit
Reports"), copies of which have been provided to Seller,
there are and have been no Hazardous Materials installed or
stored in or otherwise existing at, on, in or under the
Property which are or have been at any time in violation of
any applicable Laws or which are or have been at any time in
amounts or concentrations sufficient to require the
reporting of such materials to any governmental authority.
(d) Compliance.
(i) Seller, Tenant or Union Limited Partnership
have obtained all consents, approvals, licenses, permits and
other permissions related to the transactions contemplated
herein as are required under any Business Agreement or Laws.
Notwithstanding the foregoing, if any additional consents,
approvals, licenses, permits or other permissions are
required in connection with such transactions, Seller,
Tenant and Union Limited Partnership hereby jointly and
severally agree that Seller, Tenant or Union Limited
Partnership, as applicable shall, as promptly as practical,
use their best efforts to obtain all such additional
consents, approvals, licenses, permits
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and other permissions related to the transactions
contemplated herein and required under any Business
Agreement or Law.
(ii) To the best of Seller's and Tenant's
knowledge after due inquiry, Seller, Tenant, Union Limited
Partnership and/or their Affiliates have all Permits which
are necessary for the use and operation of the Property for
its current and intended use, which Permits shall authorize
such use by Seller, Tenant and/or Union Limited Partnership,
as applicable, after the Closing Date.
(e) Zoning. To the best of Seller's knowledge after
due inquiry, the Property is properly and full zoned for its
current use and the Property and the operation and use thereof,
including, without limitation, all boundary line adjustments to
the Property, comply with all applicable Laws including, without
limitation, the Subdivision Map Act.
(f) No Notices of Non-Compliance. Seller has
received no notice that and, after due inquiry Seller has no
knowledge that (i) any government agency or any employee or
official thereof considers that the operation or use of the
Property for the current use has failed or will fail to comply
with any Law, (ii) any investigation has been commenced or is
contemplated respecting any such possible or actual failure of
the operation or use of the Property for the current use to
comply with any Law, and (iii) there are any unsatisfied requests
for repairs, restorations or alterations with regard to the
Property from any person, entity or authority, including, but not
limited to, any tenant, lender, insurance carrier or government
authority.
(g) Due Authorization, Execution, Organization, etc.
(i) This Agreement and all agreements,
instruments and documents herein provided to be executed or
to be caused to be executed by Seller, Tenant and/or Union
Limited Partnership and/or any Affiliate of any of the
foregoing which signs any Deed or Bill of Sale are, and on
the Closing Date will be, duly authorized, executed and
delivered by and are binding in accordance with their terms
upon Seller, Tenant and/or Union Limited Partnership and/or
any such Affiliate, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws
of general application and of legal or equitable principles
generally and covenants of good faith and fair dealing.
(ii) Seller is a corporation, duly organized,
validly existing and in good standing under the laws of the
State of Washington and is duly qualified to do business in
each State where the Parcels are located. Tenant is a
corporation, duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly
qualified to do business in each
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State where the Parcels are located. Any Affiliate of
Seller which executes a Deed is a partnership duly
organized, validly existing and in good standing under the
laws of the state of its formation as shown on the
applicable Deed and is duly qualified to do business in the
state in which the Parcel conveyed by the applicable Deed is
located. Seller and each such Affiliate each have the power
and authority to enter into this Agreement (or the pertinent
Deed and Bill of Sale, as applicable) and all agreements,
instruments and documents herein provided and to consummate
the transactions contemplated hereby and thereby.
(iii) Union Limited Partnership is a limited
partnership duly organized, validly existing and in good
standing under the laws of the State of Washington and is
duly qualified to do business in the State of Washington.
Union Limited Partnership has the power and authority to
enter into the Loan Documents and all agreements,
instruments and documents therein provided and to consummate
the transactions contemplated thereby.
(iv) Neither this Agreement, the Loan Documents
nor any agreement, document or instrument executed or to be
executed in connection with this Agreement or the NHP Loan
Documents, nor anything provided in or contemplated by this
Agreement or the NHP Loan Documents or any such other
agreement, document or instrument, does now or shall
hereafter breach, invalidate, cancel, make inoperative or
interfere with, or result in the acceleration or maturity
of, any agreement, document, instrument, right or interest,
affecting or relating to Seller, Tenant, Union Limited
Partnership, any Affiliate of Seller executing a Deed or the
Property.
(h) True, Correct and Complete Information.
(i) To the best of Seller's and Tenant's
knowledge after due inquiry, all documents, plans, surveys
and other data or information prepared by parties other than
Seller or Tenant or the agents or employees of either of
them and provided to Buyer in connection herewith, are true,
correct and complete in all material respects and disclose
all material facts with no material omissions with respect
thereto.
(ii) All documents and other data or information
provided to Buyer by Seller, Tenant, Union Limited
Partnership or any of their respective Affiliates are true,
correct and complete in all material respects with no
material omissions with respect thereto.
(i) Existing Agreements. There are no material
agreements or understandings (whether written or oral) to which
Seller, Tenant or Union Limited Partnership is a party or is
bound, including, without limitation, any Business
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Agreements, relating to the Property or the operation or use
thereof other than the Permitted Exceptions and those documents
and instruments which have been delivered to Buyer by Seller,
Tenant or Union Limited Partnership prior to the Closing Date.
(j) Default. As of the Closing Date, neither Seller,
Tenant nor Union Limited Partnership is in default with respect
to any of its respective material obligations or liabilities
pertaining to the Property. Without limiting the foregoing, the
Permitted Exceptions (or will be at the Closing Date) are free
from material default by Seller, Tenant or Union Limited
Partnership and, to the best of Seller's and Tenant's actual
knowledge, by any other party thereto. Seller and Tenant
represent and warrant that all of the defaults which have been
disclosed to Buyer pursuant to the foregoing will be cured and
satisfied by Seller or Tenant prior to or at the Closing.
(k) Litigation; Condemnation. To the best of
Seller's and Tenant's knowledge after due inquiry, there are no
material actions, suits or proceedings pending or threatened
before or by any judicial, administrative or union body, any
arbiter or any governmental authority, against or affecting
Seller, Tenant or Union Limited Partnership or the Property or
any portion thereof. To the best of Seller's and Tenant's
knowledge after due inquiry, there are no existing, proposed or
threatened eminent domain or similar proceedings which would
affect the Land or Improvements in any manner whatsoever.
(l) No Intangible Property. Other than any right
that Seller, Tenant or Union Limited Partnership may have to use
the names of the assisted living facilities located on the
Property, and other than the Permits required for such use, there
is no Intangible Property owned or held by any third party
necessary in any material way to the use or operation of the
Property.
(m) Assumed Indebtedness. Seller, Tenant, or Union
Limited Partnership have delivered to Buyer true, correct and
complete copies of all material documents evidencing or relating
to the Assumed Indebtedness. No default exists under any of the
Assumed Indebtedness nor has any event occurred which, with the
passage of time or giving of notice, or both, would constitute a
default under the Assumed Indebtedness.
(n) Warranties. Seller has delivered to Buyer true,
correct and complete copies of all material Warranties. To the
best of Seller's and Tenant's knowledge after due inquiry, the
Warranties are in full force and effect with no defaults
thereunder. The Warranties have not been assigned to or by any
other party and Seller has the right and authority to assign the
Warranties to Buyer.
(o) Wholly-Owned Subsidiary; Conveyance. Effective
as of the Closing Date, Seller shall be a wholly-owned subsidiary
of Tenant. Prior to the
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Closing Date, Seller at its expense shall cause the fee or
leasehold title, as the case may be, to the Property (other than
the Allenmore Parcel) to vest in Seller. Alternatively, for the
purpose of administrative convenience, Seller may cause its
Affiliates to convey such title directly to Buyer in the
condition required under this Agreement.
(p) Ground Leases; Assumed Indebtedness. Seller and
Tenant have reviewed the instruments to be delivered to Buyer
pursuant to Section 3.2 and Section 3.3 above and represent to
Buyer that no further consent or approval by any ground lessor,
lender or other party is required to effectuate the transfers and
assignments contemplated by this Agreement.
5.2. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller, Tenant and Union Limited Partnership as
follows:
(a) This Agreement and all agreements, instruments
and documents herein provided to be executed or to be caused to
be executed by Buyer are and on the Closing Date will be duly
authorized, executed and delivered by and are binding upon Buyer,
subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application and by
legal or equitable principles relating to, limiting or affecting
the enforceability of creditors' rights generally.
(b) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland and duly authorized and qualified to do all things
required of it under this Agreement.
(c) Buyer has the authority to enter into this
Agreement and consummate the transactions herein provided and
nothing prohibits or restricts the right or ability of Buyer to
close the transactions contemplated hereunder and carry out the
terms hereof.
5.3. Indemnifications.
(a) Indemnification by Seller. Seller and Tenant
shall jointly and severally hold harmless, indemnify and defend
Buyer and the Property from and against any Claim that (i) is
inconsistent with (or results from any actual or alleged fact
that is inconsistent with) any representation or warranty of
Seller, Tenant or Union Limited Partnership contained in this
Agreement or in any document executed in connection with this
Agreement, (ii) results from any breach or default by Seller,
Tenant or Union Limited Partnership under this Agreement, or
(iii) arises out of the negligent or intentional act or omission
of Seller, Tenant or Union Limited Partnership to the extent such
Claim arises out of such negligent or intentional act or
omission. Nothing in this Agreement shall be construed to
relieve Seller, Tenant or Union Limited Partnership of any
liability which Seller,
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Tenant or Union Limited Partnership may have to Buyer under any
Laws relating to Hazardous Materials.
(b) Indemnification by Buyer. Buyer shall hold
harmless, indemnify and defend Seller, Tenant and Union Limited
Partnership from and against any Claim that (i) is inconsistent
with (or results from any actual or alleged fact that is
inconsistent with) any representation or warranty of Buyer
contained in this Agreement or in any document executed in
connection with this Agreement, (ii) results from any breach or
default by Buyer under this Agreement, (iii) arises out of the
negligent or intentional act or omission of Buyer, to the extent
such Claim arises out of such negligent or intentional act or
omission of Buyer occurring after the Closing Date or occurring
during the course of Buyer's inspection of the Property prior to
the Closing Date, or (iv) arises solely out of any act, event or
omission of Buyer occurring or arising after the Closing Date and
imposing any liability under any Laws relating to Hazardous
Materials.
(c) General Indemnity Provisions. Each indemnity
provided for under this Agreement shall be subject to the
following provisions:
(i) The indemnity shall cover the costs and
expenses of the indemnitee, including reasonable attorneys'
fees and costs (including expert fees), related to any
actions, suits or judgments incident to any of the matters
covered by such indemnity.
(ii) The indemnitee shall notify the indemnitor
of any Claim against the indemnitee covered by the indemnity
within one hundred eighty (180) days after it has notice of
such Claim, but failure to notify the indemnitor shall in no
case prejudice the rights of the indemnitee under this
Agreement unless the indemnitor shall be prejudiced by such
failure and then only to the extent the indemnitor shall be
prejudiced by such failure. Should the indemnitor fail to
discharge or undertake to defend the indemnitee against such
liability upon learning of the same, then the indemnitee may
settle such liability, and the liability of the indemnitor
hereunder shall be conclusively established by such
settlement, the amount of such liability to include both the
settlement consideration and the reasonable costs and
expenses, including attorneys' fees and costs (including
expert fees), incurred by the indemnitee in effecting such
settlement.
(iii) The indemnity shall also run in favor
of any officer, director, employee, advisor, accountant,
attorney, partner or shareholder of the indemnitee or any
person or entity having a direct or indirect ownership
interest in the indemnitee.
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ARTICLE VI
MISCELLANEOUS
6.1. Brokers and Consultants. Seller represents and
warrants to Buyer that Seller shall be solely responsible for the payment of
any brokerage commissions or finder's fee due or claimed to be due in
connection with the transactions contemplated hereby, and Seller shall
indemnify, defend and save Buyer harmless from and against any such liability.
Notwithstanding the foregoing, Buyer represents and warrants to Seller that no
broker or finder has been engaged by Buyer in connection with any of the
transactions contemplated by this Agreement. In the event of a claim for
broker's or finder's fee or commissions in connection herewith based upon any
agreement inconsistent with the foregoing representation and warranty by Buyer,
Buyer shall indemnify and defend Seller from such claim. For purposes of this
Section 6.1, Buyer shall not be deemed to have engaged any broker or finder by
merely receiving information concerning Seller, the Property or related to the
transactions contemplated hereunder or by executing any agreement to hold such
information confidential.
6.2. Survival. All warranties, representations, covenants,
obligations and agreements contained in this Agreement shall survive the
Closing hereunder and the transfer and conveyance of the Property hereunder and
any and all performances hereunder. All warranties and representations shall be
effective regardless of any investigation made or which could have been made.
6.3. Further Instruments. Each party will, whenever and as
often as it shall be reasonably requested so to do by the other, cause to be
executed, acknowledged or delivered, any and all such further instruments and
documents as may be necessary or proper, in the reasonable opinion of the
requesting party, in order to carry out the intent and purpose of this
Agreement.
6.4. Limitation of Liability. No advisor, trustee,
director, officer, employee, accountant, attorney, beneficiary, shareholder,
partner, participant or agent of or in Buyer, Seller, Tenant or Union Limited
Partnership (other than the general partner in Union Limited Partnership) shall
have any personal liability, directly or indirectly, under or in connection
with this Agreement or any agreement made or entered into under or pursuant to
the provisions of this Agreement, or any amendment or amendments to any of the
foregoing made at any time or times, heretofore or hereafter. Buyer, Seller,
Tenant and Union Limited Partnership and their respective successors and
assigns and, without limitation, all other persons and entities, shall look
solely to Seller's Tenant's or Union Limited Partnership's (or the general
partner in Union Limited Partnership) or Buyer's, as applicable, assets for the
payment of any claim or for any performance, and Buyer, Seller, Tenant and
Union Limited Partnership hereby waive any and all such personal liability
except as set forth herein. The limitations of liability provided in this
Section are in addition to, and not in limitation of, any limitation on
liability applicable to the parties as provided by law or by any other
contract, agreement or instrument.
22
<PAGE> 26
6.5. Entire Agreement; Amendments; Captions. This
Agreement contains the entire agreement between the parties respecting the
matters herein set forth and supersedes all prior or contemporaneous agreements
or understandings, verbal or written, between the parties hereto respecting
such matters. This Agreement may be amended by written agreement of amendment
executed by both parties hereto, but not otherwise. Section headings shall not
be used in construing this Agreement.
6.6. Consents and Approvals. Except as otherwise expressly
provided herein, any approval or consent provided to be given by a party
hereunder may be given or withheld in the absolute discretion of such party.
6.7. Incorporating of Exhibits and Recitals. All exhibits
attached and referred to in this Agreement and all Recitals set forth at the
beginning of this Agreement are hereby incorporated herein as fully set forth
in this Agreement.
6.8. Time of the Essence: Non-Business Days. Subject to
the next full sentence, time is of the essence of this Agreement. Whenever
action must be taken (including the giving of notice or the delivery of
documents) under this Agreement during a certain period of time or by a
particular date that ends or occurs on a non-business day, then such period or
date shall be extended until the immediately following business day. As used
herein, "business day" means any day other than Saturday, Sunday or a federal
holiday.
6.9. Terminology. Whenever the words "including",
"include" or "includes" are used in this agreement, they should be interpreted
in a non-exclusive manner as though the words, "without limitation,"
immediately followed the same. Except as otherwise indicated, all Section and
Exhibit references in this Agreement shall be deemed to refer to the Sections
and Exhibits in or to this Agreement.
6.10. Attorneys' Fees. In the event any legal action
or proceeding is commenced to interpret or enforce the terms of, or obligations
arising out of, this Agreement, or to recover damages for the breach thereof,
the party prevailing in any such action or proceeding shall be entitled to
recover from the non-prevailing party all reasonable attorneys' fees and
reasonable costs and expenses incurred by the prevailing party, including such
fees and costs incurred with respect to appeals, arbitrations and bankruptcy
proceedings. As used herein, "attorneys' fees" shall mean the reasonable fees
and expenses of counsel to the parties hereto, which may include printing,
photostating, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegal, librarians and others not admitted to the bar
but performing services under the supervision of an attorney.
23
<PAGE> 27
6.11. Cumulative Remedies. No remedy conferred upon a
party in this Agreement is intended to be exclusive of any other remedy herein
or by law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute (except as otherwise expressly herein provided).
6.12. Governing Law. This Agreement shall be construed
and enforced in accordance with the internal laws of the State of Washington,
without regard to the rules governing choice of law.
6.13. Successors and Assigns. Neither Buyer nor any of
Seller, Tenant or Union Limited Partnership may assign or transfer its rights
or obligations under this Agreement without the prior written consent of the
other party (in which event such transferee shall assume in writing all of the
transferor's obligations hereunder, but such transferor shall not be released
from its obligations hereunder). No consent given by any party hereto to any
transfer or assignment of the other party's or parties' rights or obligations
hereunder shall be construed as a consent to any other transfer or assignment
of such other party's rights or obligations hereunder. No transfer or
assignment in violation of the provisions hereof shall be valid or enforceable.
Subject to the foregoing, this Agreement and the terms and provisions hereof
shall inure to the benefit of and be binding upon the successors and assigns of
the parties.
6.14. Notices. Any notice which a party is required or
may desire to give the other shall be in writing and shall be sent by personal
delivery or by any of the following means: (a) United States registered or
certified mail, return receipt requested, postage prepaid; (b) Federal Express
or similar generally recognized overnight carrier regularly providing proof
of delivery; or (c) electronic telecopying (if confirmed in writing sent by
personal delivery or by either of the means specified in (a) or (b) above),
addressed as follows:
24
<PAGE> 28
To Seller, Tenant or Union: To Buyer:
Limited Partnership
Nationwide Health Properties, Inc.
c/o Crossings International 4675 MacArthur Court
Corporation Suite 1170
1201 Pacific Avenue, Suite 1800 Newport Beach, CA 92660
Tacoma, Washington 98402 Attn: Mr. R. Bruce Andrews,
Attn: President President
Facsimile: (206) 383-9979 Facsimile: (714) 251-9644
With Copy To: With Copy To:
Bogle & Gates, P.L.L.C. O'Melveny & Myers
4700 Two Union Square 610 Newport Center Drive
Seattle, Washington 98101 Suite 1700
Attn: Bryce L. Holland, Esq. Newport Beach, CA 92660
Facsimile: (206) 621-2660 Attn: Chairman, Real Estate Dept.
Facsimile: (714) 669-6994
Any notice so given by mail shall be deemed to have been given as of the date
of delivery (whether accepted or refused) established by U.S. Post Office
return receipt or the overnight carrier's proof of delivery, as the case may
be, whether accepted or refused. Any notice so given by electronic telecopying
shall be deemed to have been given as of the date of dispatch by electronic
means. Any such notice not so given as set forth in the two preceding
sentences shall be deemed given upon receipt of the same by the party to whom
the same is to be given. Any party hereto may designate a different address
for itself by notice to the other party in accordance with this Section 6.14.
In the event a party is not a natural person, delivery to an officer, director
or partner of such party shall be deemed delivery to such party.
6.15. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
6.16. Exclusive Rights.
(a) Agreement of Seller. Seller hereby agrees that
Seller, its agents, employees, directors, partners, and directors
and officers of such partners shall not negotiate with or discuss
the sale, financing or other disposition of the Property with any
person or entity other than Buyer, nor take any steps to
initiate, consummate, encourage or document the sale, financing
or other disposition of the Property, or any portion thereof, to
any person or entity other than Buyer until the earlier to occur
of: (i) Seller's receipt of written notification from Buyer that
Buyer
25
<PAGE> 29
is withdrawing from the transactions contemplated hereby; or (ii)
after continuous good faith negotiations, the Closing Date does
not occur on or before December 29, 1995. The period commencing
September 25, 1995, and extending until the first to occur of the
events specified in subsections 6.16(a)(i) and (ii) shall be
hereinafter referred to as the "Exclusivity Period".
(b) Notice of Other Offers. Seller agrees to notify
Buyer in writing within one (1) business day of any offer
received by, delivered to or communicated to Seller or any of its
general partners, agents or employees for the purchase, sale,
financing, acquisition or other disposition of the Property or
any interest in Seller.
6.17. Interpretation. Both Buyer and Seller have been
represented by counsel and this Agreement has been freely and fairly
negotiated. Consequently, all provisions of this Agreement shall be
interpreted according to their fair meaning and shall not be strictly construed
against any party.
6.18. No Third Parties Benefitted. This Agreement is
made and entered into for the sole protection and benefit of Buyer and Seller
and their permitted successors and assigns. No other persons or entities shall
have any right of action under this Agreement.
26
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: /s/ T. Andrew Stokes
-----------------------------------
Name: T. Andrew Stokes
------------------------------
Title: Vice President
-----------------------------
"SELLER"
CROSSINGS INTERNATIONAL
CORPORATION,
a Washington corporation
By: /s/ Richard W. Boehlke
-----------------------------------
Richard W. Boehlke,
President
"TENANT"
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By: /s/ Richard W. Boehlke
-----------------------------------
Richard W. Boehlke,
President
"UNION LIMITED PARTNERSHIP"
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
By: /s/ Richard W. Boehlke
-----------------------------------
Richard W. Boehlke,
its general partner
27
<PAGE> 31
EXHIBIT A
LEGAL DESCRIPTION OF FEE PARCELS
THE ATRIUM
3350 30th Street
Boulder, Colorado 80301
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF COLORADO, COUNTY OF
BOULDER, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 1, REMINGTON POST, COUNTY OF BOULDER, STATE OF COLORADO.
CANTERBURY GARDENS
11265 E. Mississippi Ave.
Aurora, Colorado 80012
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF COLORADO, COUNTY OF
ARAPAHOE, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
LOT 3, BLOCK 1, CANTERBURY GARDENS SUBDIVISION FILING NO. 1, COUNTY OF
ARAPAHOE, STATE OF COLORADO.
PARCEL B:
AN EASEMENT FOR PRIVATE DRIVE, UTILITIES AND FIRE LANE CREATED BY INSTRUMENT
RECORDED MAY 17, 1979 IN BOOK 2993 AT PAGE 368 OVER THE WEST 30 FEET OF LOT 1,
BLOCK 1 AND THE EAST 16.60 FEET OF LOT 2, BLOCK 1, CANTERBURY GARDENS
SUBDIVISION FILING NO. 1, COUNTY OF ARAPAHOE, STATE OF COLORADO.
PARCEL C:
LOT 2, BLOCK 1, CANTERBURY GARDENS SUBDIVISION FILING NO. 2, COUNTY OF
ARAPAHOE, STATE OF COLORADO.
A-1
<PAGE> 32
RIDGE POINT
3375 34th Street
Boulder, Colorado 80301
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF COLORADO, COUNTY OF
BOULDER, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 7, REMINGTON POST REPLAT A, COUNTY OF BOULDER, STATE OF
COLORADO.
RIVER PLACE
739 E. Parkcenter Blvd.
Boise, Idaho 83706
PARCEL A:
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF IDAHO, COUNTY OF ADA,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A PARCEL OF LAND LYING IN PORTIONS OF LOTS 1 AND 2 OF H.G. MYERS COUNTRY ACRES
SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY
RECORDER, BOISE, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184, AND LYING IN
A PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 3 NORTH, RANGE 2
EAST, BOISE MERIDIAN, BOISE, ADA COUNTY, IDAHO BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
COMMENCING AT THE SECTION CORNER COMMON TO SECTIONS 13, 14, 24 AND SAID
SECTION 23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23 BEARS
SOUTH 0(DEGREE) 19' 34" WEST; THENCE NORTH 87(DEGREES) 19' 10" WEST FOR A
DISTANCE OF 431.35 FEET TO A POINT ON CURVE MARKED BY AN ALUMINUM PIPE BEING
ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD; THENCE
SOUTHEASTERLY ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE TO
THE RIGHT 210.02 FEET, SAID CURVE HAVING A RADIUS OF 1,372.40 FEET, A CENTRAL
ANGLE OF 8(DEGREES) 46' 04", TANGENTS OF 105.21 FEET AND A CHORD LENGTH OF
209.81 FEET BEARING SOUTH 38(DEGREES) 23' 37" EAST TO A POINT ON CURVE
MARKED BY AN IRON PIN, SAID POINT BEING THE POINT OF BEGINNING; THENCE
LEAVING SAID SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD
SOUTH 45(DEGREES) 27' 07" WEST FOR A DISTANCE OF 460.87 FEET TO AN IRON PIN;
THENCE SOUTH 44(DEGREES) 32' 53" EAST FOR A DISTANCE OF 382.38 FEET TO AN
IRON PIN; THENCE NORTH 45(DEGREES) 27' 07" EAST FOR A DISTANCE OF 332.78 FEET
TO AN IRON PIN ON THE
A-2
<PAGE> 33
SOUTHWESTERLY RIGHT-OF-WAY OF SAID EAST PARKCENTER (BOULEVARD); THENCE NORTH
21(DEGREES) 04' 52" WEST ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE FOR A
DISTANCE OF 101.11 FEET TO AN IRON PIN MARKING A POINT OF CURVATURE; THENCE
ALONG A CURVE TO THE LEFT ON SAID SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST
PARKCENTER BOULEVARD FOR A DISTANCE OF 303.28 FEET, SAID CURVE HAVING A RADIUS
OF 1,372.40 FEET, A CENTRAL ANGLE OF 12(DEGREES) 39' 41", TANGENTS OF 152.26
FEET, AND A CHORD LENGTH OF 302.66 FEET BEARING NORTH 27(DEGREES) 40' 44" WEST
TO THE POINT OF BEGINNING.
PARCEL A-1:
EASEMENT RIGHTS FOR INGRESS AND EGRESS AS CREATED UNDER THAT CERTAIN
CROSS-EASEMENT AGREEMENT RECORDED MAY 3, 1990 AS INSTRUMENT NO. 9023531,
RECORDS OF ADA COUNTY, IDAHO.
PARCEL B:
A PARCEL OF LAND LYING IN A PORTION OF LOT 1 OF H.G. MYERS COUNTRY ACRES
SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY
RECORDER, BOISE, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184, AND LYING IN
A PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 3 NORTH, RANGE 2
EAST, BOISE MERIDIAN, BOISE, ADA COUNTY, IDAHO AND MORE PARTICULARLY DESCRIBED
AS FOLLOWS: COMMENCING AT THE SECTION CORNER COMMON TO SECTIONS 13, 14, 24 AND
SAID SECTION 23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23 BEARS SOUTH
0(DEGREES) 19' 34" WEST, THENCE; NORTH 87(DEGREES) 19' 10" WEST A DISTANCE OF
431.35 FEET TO A POINT ON CURVE ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST
PARKCENTER BOULEVARD, THENCE SOUTHWESTERLY ALONG SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.02 FEET, SAID CURVE HAVING A
CENTRAL ANGLE OF 8(DEGREES) 46' 04", A RADIUS OF 1,372.40 FEET, TANGENTS OF
105.21 FEET AND A LONG CHORD OF 209.81 FEET BEARING SOUTH 38(DEGREES) 23' 37"
EAST TO A POINT ON CURVE, THENCE; SOUTH 45(DEGREES) 27' 07" WEST A DISTANCE OF
366.83 FEET TO THE TRUE POINT OF BEGINNING, THENCE; NORTH 44(DEGREES) 32' 53"
WEST A DISTANCE OF 252.56 FEET TO A POINT ON THE NORTHEASTERLY BOUNDARY OF SAID
LOT 1 OF H.G. MYERS COUNTRY ACRES SUBDIVISION NO. 2., THENCE; NORTH 65(DEGREES)
09' 16" WEST A DISTANCE OF 126.68 FEET ALONG SAID NORTHEASTERLY BOUNDARY TO A
POINT, THENCE; SOUTH 6(DEGREES) 30' 29" EAST A DISTANCE OF 322.54 FEET TO A
POINT ON THE NORTHEASTERLY BOUNDARY OF LOGGER'S CREEK COVE SUBDIVISION, AS
FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY RECORDER, BOISE IDAHO IN BOOK
56 OF PLATS AT PAGES 5204, 5205, AND 5206, THENCE SOUTHEASTERLY ALONG SAID
NORTHEASTERLY BOUNDARY OF
A-3
<PAGE> 34
LOGGER'S CREEK COVE SUBDIVISION FOR THE NEXT 3 COURSES, SOUTH 41 DEGREES 16'
01" EAST (FORMERLY DESCRIBED AS SOUTH 41 DEGREES 15' 21" EAST) A DISTANCE OF
158.93 FEET, SOUTH 48(DEGREES) 10' 31" EAST (FORMERLY DESCRIBED AS SOUTH
48(DEGREES) 09' 51" EAST) A DISTANCE OF 147.55 FEET, SOUTH 59(DEGREES) 22' 31"
EAST (FORMERLY DESCRIBED AS SOUTH 59(DEGREES) 21' 51" EAST) A DISTANCE OF
107.43 FEET, THENCE; NORTH 45(DEGREES) 27' 07" EAST A DISTANCE OF 121.57 FEET
TO A POINT, THENCE; NORTH 44(DEGREES) 32' 53" WEST A DISTANCE OF 292.65 FEET TO
A POINT, THENCE; NORTH 45(DEGREES) 27' 07" EAST A DISTANCE OF 94.04 FEET TO THE
TRUE POINT OF BEGINNING.
PARCEL C:
A PARCEL OF LAND LYING IN A PORTION OF LOT 2 OF H.G. MYERS COUNTRY
ACRES SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY
RECORDER, BOISE, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184, AND LYING IN
A PORTION OF THE NORTHEAST QUARTER OF SECTION 23, TOWNSHIP 3 NORTH RANGE 2
EAST, BOISE, MERIDIAN, BOISE, ADA COUNTY, IDAHO, AND MORE PARTICULARLY
DESCRIBED AS FOLLOWS: COMMENCING AT THE SECTION CORNER COMMON TO SECTION
13,14,24 AND SAID SECTION 23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23
BEARS SOUTH 0(DEGREES) 19' 34" WEST, THENCE; NORTH 87(DEGREES) 19' 10" WEST A
DISTANCE OF 431.35 FEET TO A POINT ON CURVE ON THE SOUTHWESTERLY RIGHT-OF-WAY
LINE OF EAST PARKCENTER BOULEVARD, THENCE SOUTHEASTERLY ALONG SAID
SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.02 FEET, SAID
CURVE HAVING A CENTRAL ANGLE OF 8(DEGREES) 46' 04", A RADIUS OF 1,372.40 FEET,
TANGENTS OF 105.21 FEET AND A LONG CHORD OF 209.81 FEET BEARING SOUTH
38(DEGREES) 23' 37" EAST TO A POINT ON CURVE, THENCE; SOUTH 45(DEGREES) 27' 07"
WEST A DISTANCE OF 271.87 FEET TO A POINT ON THE SOUTHWESTERLY BOUNDARY OF SAID
LOT 2 OF H.G. MYERS COUNTRY ACRES SUBDIVISION NO. 2, THENCE; NORTH 65(DEGREES)
09' 16" WEST A DISTANCE OF 269.82 FEET ALONG SAID SOUTHWESTERLY BOUNDARY OF LOT
2 TO THE TRUE POINT OF BEGINNING, THENCE; NORTH 44(DEGREES) 32' 53" WEST A
DISTANCE OF 135.34 FEET TO A POINT, THENCE SOUTH 24(DEGREES) 50' 45" WEST 47.63
FEET TO A POINT, THENCE SOUTH 65(DEGREES) 09' 16" EAST A DISTANCE OF 126.68
FEET ALONG SAID SOUTHWESTERLY BOUNDARY OF LOT 2 TO THE TRUE POINT OF BEGINNING.
PARCEL D:
A PARCEL OF LAND LYING IN A PORTION OF LOT 1 OF H.G. MYERS COUNTRY ACRES
SUBDIVISION NO. 2, AS FILED FOR RECORD IN THE OFFICE OF THE ADA COUNTY
RECORDER, BOISE, ADA COUNTY, IDAHO IN BOOK 18 OF PLATS AT PAGES 1183 AND 1184,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A-4
<PAGE> 35
COMMENCING AT THE SECTION CORNER COMMON TO SECTION 13, 14, 24 AND SAID SECTION
23 FROM WHICH THE EAST BOUNDARY OF SAID SECTION 23 BEARS SOUTH 0(DEGREES)
19' 34" WEST; THENCE NORTH 87 DEGREES 19' 10" WEST 431.35 FEET TO A POINT ON
CURVE ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD;
THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE
TO THE RIGHT 513.29 FEET, SAID CURVE HAVING A CENTRAL ANGLE OF 21 DEGREES 25'
45", A RADIUS OF 1,372.40 FEET, TANGENTS OF 259.68 FEET AND A LONG CHORD OF
510.31 FEET BEARING SOUTH 32(DEGREES) 03' 47" EAST TO A NON-TANGENT POINT ON
CURVE; THENCE CONTINUING ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE SOUTH
21(DEGREES) 04' 52" EAST 101.11 FEET TO A POINT ON THE NORTHEASTERLY BOUNDARY
OF SAID LOT 1 OF H.G. MYERS COUNTRY ACRES SUBDIVISION NO. 2, ALSO SAID POINT
BEING THE TRUE POINT OF BEGINNING; THENCE SOUTH 45(DEGREES) 27' 07" WEST 332.78
FEET TO A POINT; THENCE NORTH 44(DEGREES) 32' 53" WEST 89.73 FEET TO A POINT;
THENCE SOUTH 45(DEGREES) 27' 07" WEST 121.57 FEET TO A POINT ON THE
NORTHEASTERLY BOUNDARY OF LOGGER'S CREEK COVE SUBDIVISION, AS FILED FOR RECORD
IN THE OFFICE OF THE ADA COUNTY RECORDER, BOISE, IDAHO IN BOOK 56 OF PLATS AT
PAGES 5204, 5205 AND 5206; THENCE SOUTHEASTERLY ALONG SAID NORTHEASTERLY
BOUNDARY OF LOGGER'S CREEK COVE SUBDIVISION FOR THE NEXT 4 COURSES SOUTH
59(DEGREES) 22' 31" EAST (FORMERLY DESCRIBED AS SOUTH 59(DEGREES) 21' 51"
EAST) 190.12 FEET SOUTH 75(DEGREES) 38' 31" EAST (FORMERLY DESCRIBED AS SOUTH
75(DEGREES) 37' 51" EAST) 208.63 FEET NORTH 58(DEGREES) 37' 29" EAST
(FORMERLY DESCRIBED AS NORTH 58(DEGREES) 39' 09" EAST) 38.79 FEET NORTH
61(DEGREES) 59' 29" EAST (FORMERLY DESCRIBED AS NORTH 62(DEGREES) 00' 09"
EAST) 59.78 FEET TO A POINT ON THE SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST
PARKCENTER BOULEVARD; THENCE NORTH 2(DEGREES) 46' 26" EAST 24.04 FEET ALONG
SAID SOUTHWESTERLY RIGHT-OF-WAY LINE TO A POINT; THENCE NORTHWESTERLY ALONG
SAID SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A NON-TANGENT CURVE TO THE LEFT
267.21 FEET, SAID CURVE HAVING A CENTRAL ANGLE OF 11 DEGREES 04' 29",
A RADIUS OF 1,382.40 FEET, TANGENTS OF 134.02 FEET, AND A LONG CHORD OF
266.79 FEET BEARING NORTH 8(DEGREES) 38' 29" WEST TO A POINT; THENCE
CONTINUING ALONG SAID SOUTHWESTERLY RIGHT-OF-WAY LINE NORTH 21(DEGREES)
04' 51" WEST 72.16 FEET TO THE TRUE POINT OF BEGINNING.
ALBANY RESIDENTIAL
1560 Davidson St. SE
Albany, Oregon 97321
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF LINN,
CITY OF ALBANY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A-5
<PAGE> 36
BEGINNING AT A POINT WHICH IS ON THE NORTH RIGHT-OF-WAY OF 16TH AVENUE IN THE
CITY OF ALBANY, LINN COUNTY, OREGON, SAID POINT BEING 1899.48 FEET NORTH
88(DEGREES) 51' EAST, 390.16 FEET NORTH 1(DEGREES) 25' 10" WEST AND 70 FEET
NORTH 89(DEGREES) 48' 05" WEST OF THE SOUTHEAST CORNER OF THE ABRAM HACKLEMAN
DONATION LAND CLAIM NO. 62 IN SECTION 8, TOWNSHIP 11 SOUTH, RANGE 3 WEST,
WILLAMETTE MERIDIAN, LINN COUNTY, OREGON; THENCE ALONG SAID NORTHERLY LINE OF
16TH AVENUE, NORTH 89(DEGREES) 48' 05" WEST 1.97 FEET; THENCE ALONG SAID
NORTHERLY LINE ON A 250 FOOT RADIUS CURVE TO THE RIGHT, THE LONG CHORD OF WHICH
BEARS NORTH 65(DEGREES) 49' 13" WEST 203.22 FEET; THENCE ALONG SAID NORTHERLY
LINE, ON A 250 FOOT RADIUS CURVE TO THE LEFT, THE LONG CHORD OF WHICH BEARS
NORTH 56(DEGREES) 06' 27" WEST 123.23 FEET; THENCE NORTH 1(DEGREES) 25' 10"
WEST 189.79 FEET; THENCE NORTH 88(DEGREES) 34' 50" EAST 324.73 FEET TO THE
WESTERLY RIGHT-OF-WAY LINE OF DAVIDSON STREET; THENCE ALONG SAID WESTERLY LINE
ON A 375 FOOT RADIUS CURVE TO THE RIGHT, THE LONG CHORD OF WHICH BEARS SOUTH
9(DEGREES) 40' 05" WEST 51.20 FEET; THENCE ALONG SAID WESTERLY LINE ON A 430
FOOT RADIUS CURVE TO THE LEFT, THE LONG CHORD OF WHICH BEARS SOUTH 7(DEGREES)
31' 44" WEST 90.70 FEET; THENCE ALONG SAID WESTERLY LINE, SOUTH 1(DEGREE) 28'
29" WEST 198.05 FEET AND SOUTH 22(DEGREES) 29' 06" TO THE POINT OF BEGINNING.
COURTYARD VILLAGE
1929 Grand Prairie Rd SE
Albany, Oregon 97321
ALL THAT CERTAIN REAL PROPERTY SITUATED IN STATE OF OREGON, COUNTY OF LINN,
CITY OF ALBANY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A: (TL 502)
BEGINNING ON THE NORTH LINE OF AND SOUTH 89(DEGREES) 49' EAST 30.0 FEET FROM THE
NORTHWEST CORNER OF THE JOHN BURKHART DONATION LAND CLAIM 51, IN TOWNSHIP 11
SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON, SAID
BEGINNING POINT BEING ON THE EAST LINE OF A COUNTY ROAD AND RUNNING THENCE
SOUTH 89(DEGREES) 49' EAST ALONG THE NORTH LINE OF SAID CLAIM, A DISTANCE OF
450.0 FEET; THENCE SOUTH 1(DEGREE) 36' EAST PARALLEL TO THE WEST LINE OF SAID
CLAIM A DISTANCE OF 807.31 FEET TO THE NORTHERLY RIGHT OF WAY LINE OF A COUNTY
ROAD; THENCE NORTH 65(DEGREES) 58' WEST ALONG SAID RIGHT OF WAY 379.06 FEET TO
A POINT OF CURVE ON SAID RIGHT OF WAY; THENCE ALONG SAID RIGHT OF WAY ON A
190.4 FOOT RADIUS CURVE TO THE RIGHT (THE LONG CHORD OF
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WHICH BEARS NORTH 44(DEGREES) 21.4' WEST 140.24 FEET) A DISTANCE OF 143.63
FEET; THENCE SOUTH 89(DEGREES) 49' EAST PARALLEL WITH THE NORTH LINE OF
DONATION LAND CLAIM 51, A DISTANCE OF 112.15 FEET; THENCE NORTH 1(DEGREE) 36'
WEST PARALLEL WITH THE WEST LINE OF SAID CLAIM 51, A DISTANCE OF 130.0 FEET;
THENCE NORTH 89(DEGREES) 49' WEST PARALLEL WITH THE NORTH LINE OF SAID CLAIM
51 A DISTANCE OF 125.0 FEET TO THE EAST LINE OF A COUNTY ROAD; THENCE NORTH
1(DEGREE) 36' WEST 424.0 FEET TO THE PLACE OF BEGINNING.
EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR PERIWINKLE CREEK RIGHT
OF WAY IN DEED RECORDED JUNE 28, 1973 IN MF VOLUME 66, PAGE 61, MICROFILM
RECORDS, LINN COUNTY, OREGON.
ALSO EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR GEARY STREET RIGHT
OF WAY BY DEEDS RECORDED MAY 27, 1975 IN MF VOLUME 109, PAGE 22 AND MF VOLUME
109, PAGE 23, MICROFILM RECORDS, LINN COUNTY, OREGON.
ALSO EXCEPT (TL 501) BEGINNING SOUTH 1(DEGREE) 36' EAST 424.0 FEET FROM A POINT
ON THE NORTH LINE OF AND SOUTH 89(DEGREES) 49' EAST 30.0 FEET FROM THE
NORTHWEST CORNER OF THE JOHN BURKHART DONATION LAND CLAIM NO. 51, IN TOWNSHIP
11 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; SAID
BEGINNING POINT BEING ON THE EAST LINE OF A COUNTY ROAD; AND RUNNING THENCE
SOUTH 89(DEGREES) 49' EAST PARALLEL WITH THE NORTH LINE OF SAID CLAIM, A
DISTANCE OF 125.0 FEET; THENCE SOUTH 1(DEGREE) 36' EAST PARALLEL WITH THE WEST
LINE OF SAID CLAIM, A DISTANCE OF 130.0 FEET; THENCE NORTH 89(DEGREES) 49' WEST
PARALLEL WITH THE NORTH LINE OF SAID CLAIM, A DISTANCE OF 112.15 FEET TO THE
EASTERLY RIGHT OF WAY OF SAID COUNTY ROAD; THENCE ALONG SAID RIGHT OF WAY ON
A 190.4 FOOT RADIUS CURVE TO THE RIGHT (THE LONG CHORD OF WHICH BEARS NORTH
12(DEGREES) 10.4' WEST 69.88 FEET) A DISTANCE OF 70.27 FEET; THENCE NORTH
1(DEGREE) 36' WEST 61.68 FEET TO THE PLACE OF BEGINNING.
SAVE AND EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR GEARY STREET
RIGHT OF WAY RECORDED SEPTEMBER 18, 1973 IN VOLUME 71, PAGE 524, LINN COUNTY
MICROFILM RECORDS.
ALSO EXCEPT THE FOLLOWING: (TL 506) BEGINNING AT A POINT ON THE NORTHERLY
RIGHT OF WAY OF GRAND PRAIRIE ROAD, SAID POINT ALSO BEING NORTH 11(DEGREES) 55'
59" EAST 5.11 FEET AND NORTH 65(DEGREES) 58' 43" WEST A DISTANCE OF 208.03
FEET FROM THE SOUTHEAST CORNER OF TRACT 12 OF JASON WHEELER'S HOME FARM IN
TOWNSHIP 11 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN IN LINN COUNTY,
OREGON; AND RUNNING THENCE NORTH 11(DEGREES) 55' 59" EAST A DISTANCE OF
208.03 FEET;
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THENCE SOUTH 65(DEGREES) 58' 43" EAST 82.06 FEET THENCE NORTH 12(DEGREES) 59'
24" EAST 259.86 FEET; THENCE NORTH 77(DEGREES) 00' 36" WEST 400.00 FEET; THENCE
SOUTH 83(DEGREES) 32' 42" WEST 120.37 FEET; THENCE NORTH 77(DEGREES) 00' 36"
WEST 84.00 FEET; THENCE SOUTH 12(DEGREES) 59' 24" WEST 38.00 FEET; THENCE NORTH
77(DEGREES) 00' 36" WEST 110.0 FEET; THENCE NORTH 54(DEGREES) 13' 39" WEST
108.46 FEET; THENCE NORTH 77(DEGREES) 00' 36" WEST 120.00 FEET; THENCE SOUTH
44(DEGREES) 19' 26" WEST 38.80 FEET TO THE NORTHEAST CORNER OF THAT CERTAIN
DESCRIBED TRACT IN MICROFILM VOLUME MF 338-89 OF THE LINN COUNTY MICROFILM
RECORDS; THENCE SOUTH 01(DEGREES) 36' 00" EAST ALONG SAID EAST LINE 130.00
FEET TO THE SOUTHEAST CORNER THEREOF; THENCE NORTH 89(DEGREES) 51' 14" WEST
ALONG THE SOUTH LINE OF SAID TRACT 112.13 FEET TO THE EASTERLY RIGHT OF WAY OF
GEARY STREET; THENCE SOUTHEASTERLY ON A 190.37 FOOT RADIUS CURVE LEFT A
DISTANCE OF 117.68 FEET (THE LONG CHORD OF WHICH BEARS SOUTH 40(DEGREES) 28'
54" EAST 115.82 FEET); THENCE NORTH 24(DEGREES) 01' 17" EAST 3.24 FEET TO A
5/8" IRON ROD ON THE NORTH LINE OF GRAND PRAIRIE ROAD; THENCE SOUTH 65(DEGREES)
58' 43" EAST ALONG SAID NORTH LINE 869.94 FEET TO THE TRUE PLACE OF BEGINNING.
PARCEL C: (TL 506 & 507)
BEGINNING AT A POINT ON THE NORTHERLY RIGHT OF WAY OF GRAND PRARIE
ROAD, SAID POINT ALSO BEING NORTH 11(DEGREES) 55' 59" EAST 5.11 FEET AND NORTH
65(DEGREES) 58' 43" WEST A DISTANCE OF 208.03 FEET FROM THE SOUTHEAST CORNER OF
TRACT 12 OF JASON WHEELER'S HOME FARM IN TOWNSHIP 11 SOUTH, RANGE 3 WEST OF THE
WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; AND RUNNING THENCE NORTH
11(DEGREES) 55' 59" EAST A DISTANCE OF 208.03 FEET; THENCE SOUTH 65(DEGREES)
58' 43" EAST 82.06 FEET; THENCE NORTH 12(DEGREES) 59' 24" EAST 259.86 FEET;
THENCE NORTH 77(DEGREES) 00' 36" WEST 400.00 FEET; THENCE SOUTH 83(DEGREES) 32'
42" WEST 120.37 FEET; THENCE NORTH 77(DEGREES) 00' 36" WEST 84.00 FEET; THENCE
SOUTH 12(DEGREES) 59' 24" WEST 38.00 FEET; THENCE NORTH 77(DEGREES) 00' 36"
WEST 110.0 FEET; THENCE NORTH 54(DEGREES) 13' 39" WEST 108.46 FEET; THENCE
NORTH 77(DEGREES) 00' 36" WEST 120.00 FEET; THENCE SOUTH 44(DEGREES) 19' 26"
WEST 38.80 FEET TO THE NORTHEAST CORNER OF THAT CERTAIN DESCRIBED TRACT IN
MICROFILM VOLUME MF 338-89 OF THE LINN COUNTY MICROFILM RECORDS: THENCE SOUTH
01(DEGREES) 36' 00" EAST ALONG SAID EAST LINE 130.00 FEET TO THE SOUTHEAST
CORNER THEREOF; THENCE NORTH 89(DEGREES) 51' 14" WEST ALONG THE SOUTH LINE OF
SAID TRACT 112.13 FEET TO THE EASTERLY RIGHT OF WAY OF GEARY STREET; THENCE
SOUTHEASTERLY ON A 190.37 FOOT RADIUS CURVE LEFT A DISTANCE OF 117.68 FEET (THE
LONG CHORD OF WHICH BEARS SOUTH 40(DEGREES) 28' 54" EAST 115.82 FEET); THENCE
NORTH 24(DEGREES) 01' 17" EAST 3.24 FEET TO A 5/8" IRON ROD ON THE NORTH LINE
OF GRAND PRAIRIE ROAD; THENCE SOUTH 65(DEGREES) 58' 43" EAST ALONG SAID NORTH
LINE 869.94 FEET TO THE TRUE PLACE OF BEGINNING.
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<PAGE> 39
PARCEL D: (TL 501)
BEGINNING SOUTH 1(DEGREES) 36" EAST 424.0 FEET FROM A POINT ON THE NORTH LINE
OF AND SOUTH 89(DEGREES) 49' EAST 30.0 FEET FROM THE NORTHWEST CORNER OF THE
JOHN BURKHART DONATION LAND CLAIM NO. 51, IN TOWNSHIP 11 SOUTH, RANGE 3 WEST OF
THE WILLAMETTE MERIDIAN IN LINN COUNTY, OREGON; SAID BEGINNING POINT BEING ON
THE EAST LINE OF A COUNTY ROAD; AND RUNNING THENCE SOUTH 89(DEGREES) 49' EAST
PARALLEL WITH THE NORTH LINE OF SAID CLAIM, A DISTANCE OF 125.0 FEET; THENCE
SOUTH 1(DEGREE) 36' EAST PARALLEL WITH THE WEST LINE OF SAID CLAIM, A DISTANCE
OF 130.0 FEET; THENCE NORTH 89(DEGREES) 49' WEST PARALLEL WITH THE NORTH LINE
OF SAID CLAIM, A DISTANCE OF 112.15 FEET TO THE EASTERLY RIGHT OF WAY OF SAID
COUNTY ROAD; THENCE ALONG SAID RIGHT OF WAY ON A 190.4 FOOT RADIUS CURVE TO THE
RIGHT (THE LONG CHORD OF WHICH BEARS NORTH 12(DEGREES) 10.4' WEST 69.88 FEET) A
DISTANCE OF 70.27 FEET; THENCE NORTH 1(DEGREES) 36' WEST 61.68 FEET TO THE
PLACE OF BEGINNING.
SAVE AND EXCEPT THAT PROPERTY CONVEYED TO THE CITY OF ALBANY FOR GEARY STREET
RIGHT OF WAY RECORDED SEPTEMBER 18, 1973 IN VOLUME 71, PAGE 524, LINN COUNTY
MICROFILM RECORDS.
FOREST GROVE RESIDENTIAL
3110 19th Ave.
Forest Grove, Oregon 97116
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
WASHINGTON, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
A PARCEL OF LAND SITUATED IN THE NORTHWEST QUARTER OF THE NORTHWEST QUARTER OF
SECTION 5, TOWNSHIP 1 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN, IN THE
CITY OF FOREST GROVE, COUNTY OF WASHINGTON AND STATE OF OREGON, DESCRIBED
AS FOLLOWS:
BEGINNING AT A 5/8 INCH IRON ROD LOCATED AT THE INTERSECTION OF THE CENTER
LINES OF 19TH AVENUE (FORMERLY FIRST AVENUE) AND MAPLE STREET; THENCE NORTH
89(DEGREES) 43' 13" WEST ALONG THE CENTER LINE OF 19TH AVENUE A DISTANCE OF
404.75 FEET; THENCE SOUTH 00(DEGREES) 29' 47" WEST 33.00 FEET TO A POINT ON THE
SOUTH RIGHT OF WAY LINE OF 19TH AVENUE AND THE TRUE POINT OF BEGINNING OF THE
TRACT TO BE DESCRIBED; THENCE ALONG SAID SOUTH RIGHT OF WAY LINE
A-9
<PAGE> 40
SOUTH 89(DEGREES) 43' 13" EAST 374.57 FEET TO THE WEST RIGHT OF WAY LINE OF
MAPLE STREET (30.00 FEET WESTERLY OF THE CENTER LINE THEREOF); THENCE ALONG
SAID WEST RIGHT OF WAY LINE SOUTH 00(DEGREES) 48' 00" WEST 293.51 FEET TO THE
SOUTH LINE OF THAT CERTAIN TRACT DESCRIBED IN DEED RECORDED IN BOOK 809, PAGE
372, WASHINGTON COUNTY RECORDS; THENCE PARALLEL WITH THE CENTER LINE OF 19TH
AVENUE, NORTH 89(DEGREES) 43' 13" WEST 317.08 FEET TO THE EAST LINE OF THAT
CERTAIN TRACT CONVEYED TO T.E. MILLER BY DEED RECORDED IN BOOK 227, PAGE 669,
WASHINGTON COUNTY RECORDS; THENCE ALONG THE EAST LINE OF SAID MILLER TRACT
NORTH 00(DEGREES) 29' 47" EAST 90.00 FEET TO THE NORTHEAST CORNER OF THAT
CERTAIN TRACT CONVEYED TO WILLIAM DAVID AND MARGIE LOUISE HOWARTH BY DEED
RECORDED IN BOOK 422, PAGE 468, WASHINGTON COUNTY RECORDS; THENCE ALONG THE
NORTH LINE OF THE SAID HOWARTH TRACT NORTH 89(DEGREES) 43' 13" WEST 55.94 FEET;
THENCE NORTH 00(DEGREES) 29' 47" EAST 203.50 FEET TO THE TRUE POINT OF
BEGINNING.
PARCEL B:
A PARCEL OF LAND SITUATED IN THE NORTHWEST QUARTER OF THE NORTHWEST QUARTER OF
SECTION 5, TOWNSHIP 1 SOUTH, RANGE 3 WEST OF THE WILLAMETTE MERIDIAN, IN THE
CITY OF FOREST GROVE, COUNTY OF WASHINGTON AND STATE OF OREGON, DESCRIBED AS
FOLLOWS:
BEGINNING AT A 5/8 INCH IRON ROD LOCATED AT THE INTERSECTION OF THE
CENTER LINES OF 19TH AVENUE (FORMERLY FIRST AVENUE) AND MAPLE STREET; THENCE
ALONG THE CENTER LINE OF 19TH AVENUE NORTH 89(DEGREES) 43' 13" WEST 404.75
FEET; THENCE SOUTH 00(DEGREES) 29' 47" WEST 33.00 FEET TO A POINT ON THE SOUTH
RIGHT OF WAY LINE OF 19TH AVENUE AND THE TRUE POINT OF BEGINNING OF THE TRACT
TO BE DESCRIBED; THENCE SOUTH 00(DEGREES) 29' 47" WEST 203.50 FEET TO THE NORTH
LINE OF THAT CERTAIN TRACT CONVEYED TO WILLIAM DAVID AND MARGIE LOUISE HOWARTH
BY DEED RECORDED IN BOOK 422, PAGE 468, WASHINGTON COUNTY RECORDS; THENCE NORTH
89(DEGREES) 43' 13" WEST ALONG THE NORTH LINE OF THE SAID HOWARTH TRACT 44.06
FEET TO THE NORTHWEST CORNER THEREOF, SAID POINT ALSO BEING ON THE EAST LINE OF
A TRACT DESCRIBED IN DEED BOOK 404, PAGE 164, WASHINGTON COUNTY RECORDS; THENCE
ALONG SAID LAST DESCRIBED EAST LINE NORTH 00(DEGREES) 29' 47" EAST 1.75 FEET TO
THE SOUTHEAST CORNER OF THAT CERTAIN TRACT OF LAND DESCRIBED IN CONTRACT OF
SALE TO 74 VENTURES, A PARTNERSHIP, RECORDED DOCUMENT 85043483, DEED RECORDS OF
WASHINGTON COUNTY; THENCE ALONG THE SOUTH LINE OF SAID 74 VENTURES TRACT NORTH
89(DEGREES) 43' 13" WEST 100.00 FEET TO THE SOUTHWEST CORNER THEREOF; THENCE
NORTH 00(DEGREES) 29' 47" EAST ALONG
A-10
<PAGE> 41
THE WEST LINE OF SAID 74 VENTURES TRACT 201.75 FEET TO THE SOUTH RIGHT OF WAY
LINE OF 19TH AVENUE; THENCE SOUTH 89(DEGREES) 43' 13" EAST ALONG SAID SOUTH
RIGHT OF WAY LINE 144.06 FEET TO THE TRUE POINT OF BEGINNING.
THE HERITAGE AT ROGUE VALLEY
3033 Barnett Rd.
Medford, Oregon 97504
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
JACKSON, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
PARCEL 1 OF MINOR LAND PARTITION FILED AUGUST 8, 1990 AS PARTITION PLAT NO.
P-70-1990 IN VOLUME 1 OF MINOR LAND PARTITIONS, PAGE 70, JACKSON COUNTY,
OREGON, COUNTY SURVEY NO. 12136.
PARCEL B:
PARCEL 2 OF MINOR LAND PARTITION FILED AUGUST 8, 1990 AS PARTITION PLAT NO.
P-70-1990 IN VOLUME 1 OF MINOR LAND PARTITIONS, PAGE 70, JACKSON COUNTY,
OREGON, COUNTY SURVEY NO. 12136.
McMINNVILLE RESIDENTIAL
775 E 27th Street
McMinnville, Oregon 97128
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
YAMHILL, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 21, BLOCK 2, O.M.I. ACRES; ACCORDING TO THE RECORDED PLAT THEREOF, FILED
JULY 10, 1990 IN VOLUME 3, PAGES 16-18 INCLUSIVE, PLAT RECORDS OF YAMHILL
COUNTY, SITUATED IN THE CITY OF McMINNVILLE, YAMHILL COUNTY, OREGON.
COLUMBIA EDGEWATER
1629 George Washington Way
Richland, Washington 99352
A-11
<PAGE> 42
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF WASHINGTON, COUNTY OF
BENTON, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
ALL OF THAT PORTION OF LOT 1, BLOCK 733, PLAT OF RICHLAND, ACCORDING TO THE
PLAT THEREOF RECORDED IN VOLUMES 6 AND 7 OF PLATS, RECORDS OF BENTON COUNTY,
WASHINGTON, WHICH LIES NORTH AND EAST OF THE FOLLOWING DESCRIBED LINE:
BEGINNING AT A POINT ON THE EAST LINE OF SAID LOT 1, A DISTANCE OF 299.83 FEET
SOUTH OF THE NORTHEAST CORNER OF SAID LOT 1; THENCE SOUTH 88(DEGREES) 54' 12"
WEST A DISTANCE OF 508.0 FEET; THENCE NORTHWESTERLY TO THE NORTH LINE OF SAID
LOT 1, TO A POINT WHICH IS 640.00 FEET WEST OF SAID NORTHEAST CORNER AND
TERMINUS OF SAID LINE.
PARCEL B:
AN EASEMENT FOR VEHICULAR AND PEDESTRIAN TRAFFIC OVER AND ACROSS A STRIP OF
LAND 30.00 FEET WIDE, WHICH LIES SOUTH OF AND IS CONTIGUOUS TO THE SOUTH
BOUNDARY OF THE PROPERTY HEREINABOVE DESCRIBED.
A-12
<PAGE> 43
EXHIBIT B
LEGAL DESCRIPTION OF LEASEHOLD PARCELS
UNION PARK AT ALLENMORE
2010 South Union Ave.
Tacoma, Washington 98405
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF WASHINGTON, COUNTY OF
PIERCE, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LEASEHOLD INTEREST CREATED PURSUANT TO LEASE AGREEMENT OF VETERANS OF FOREIGN
WARS POST 91, DATED DECEMBER 2, 1985, BY AND BETWEEN WILD WEST POST NO. 91
VETERANS OF FOREIGN WARS OF THE UNITED STATES, A CORPORATION, AS LESSOR, AND
2010 UNION LIMITED PARTNERSHIP, A WASHINGTON LIMITED PARTNERSHIP, AS LESSEE,
RECORDED ON OCTOBER 29, 1987 AS INSTRUMENT NO. 8710290147 OF THE OFFICIAL
RECORDS OF PIERCE COUNTY, WASHINGTON, AS AMENDED BY THAT CERTAIN AMENDMENT OF
LEASE AGREEMENT DATED APRIL 15, 1993, THAT CERTAIN AMENDMENT TO LEASE AGREEMENT
DATED SEPTEMBER 3, 1986, AND THAT CERTAIN LEASE AMENDMENT DATED AS OF THE DATE
HEREOF.
PARCEL A:
BEGINNING 362 FEET SOUTH OF THE NORTHWEST CORNER OF GOVERNMENT LOT 1, IN
SECTION 7, TOWNSHIP 20 NORTH, RANGE 3 EAST OF THE WILLAMETTE MERIDIAN; THENCE
EAST PARALLEL WITH THE NORTH LINE OF SAID LOT 1, 38.00 FEET; THENCE SOUTH
PARALLEL WITH THE WEST LINE OF SAID LOT 1, 180.00 FEET; THENCE EAST PARALLEL
WITH THE NORTH LINE OF SAID LOT 1, 18.00 FEET; THENCE SOUTH PARALLEL WITH
THE WEST LINE OF SAID LOT 1, 18.00 FEET; THENCE EAST PARALLEL WITH THE NORTH
LINE OF SAID LOT 1, 142.00 FEET; THENCE NORTH PARALLEL WITH THE WEST LINE OF
SAID LOT 1, 158.00 FEET; THENCE EAST PARALLEL WITH THE NORTH LINE OF SAID
LOT 1, 9.00 FEET; THENCE NORTH PARALLEL WITH THE WEST LINE OF SAID LOT 1,
40.00 FEET; THENCE EAST PARALLEL WITH THE NORTH LINE OF SAID LOT 1, 47.91
FEET TO THE WESTERLY RIGHT OF WAY LINE OF UNION AVE. AS CONVEYED TO THE
CITY OF TACOMA BY DEED RECORDED DECEMBER 6, 1966, UNDER RECORDING NUMBER
2171084; THENCE SOUTHERLY ALONG SAID WESTERLY RIGHT OF WAY LINE 321.34 FEET
TO THE SOUTH LINE OF THE NORTH 679.00 FEET, AS MEASURED ALONG THE WEST LINE
OF SAID GOVERNMENT LOT 1; THENCE WEST PARALLEL WITH THE
B-1
<PAGE> 44
NORTH LINE OF SAID LOT 1, 310.25 FEET TO THE WEST LINE OF SAID LOT 1; THENCE
NORTH ALONG SAID WEST LINE OF LOT 1, 317.00 FEET TO THE BEGINNING.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
PARCEL B:
BEGINNING AT A POINT 412.50 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12,
TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE WILLAMETTE MERIDIAN IN PIERCE COUNTY,
WASHINGTON; SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE SOUTH 165
FEET; THENCE WEST 264 FEET; THENCE NORTH 165 FEET; THENCE EAST 264 FEET TO THE
POINT OF BEGINNING.
EXCEPT THE WEST 15 FEET OF THE NORTH 82.5 FEET THEREOF, CONVEYED TO THE CITY OF
TACOMA, BY DEED RECORDED MAY 07, 1947 UNDER RECORDING NUMBER 1448676, RECORDS
OF PIERCE COUNTY, WASHINGTON.
EXCEPT THE WEST 15 FEET OF THE SOUTH 82.5 FEET THEREOF, CONVEYED TO THE CITY OF
TACOMA, BY DEED RECORDED JANUARY 28, 1947 UNDER RECORDING NUMBER 1439030,
RECORDS OF PIERCE COUNTY, WASHINGTON.
ALSO EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED UNDER RECORDING NUMBER 8610060308, RECORDS OF PIERCE COUNTY,
WASHINGTON.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
PARCEL C:
BEGINNING 577.50 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12, TOWNSHIP 20
NORTH, RANGE 2 EAST OF THE WILLAMETTE MERIDIAN IN PIERCE COUNTY, WASHINGTON;
SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE SOUTH 82.5 FEET; THENCE
WEST 264 FEET; THENCE NORTH 82.5 FEET; THENCE EAST 264 FEET TO THE TRUE POINT OF
BEGINNING.
EXCEPT THE WEST 15 FEET THEREOF, CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED APRIL 12, 1954, UNDER RECORDING NUMBER 1678966, RECORDS OF PIERCE
COUNTY, WASHINGTON; AND
B-2
<PAGE> 45
ALSO EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED UNDER RECORDING NUMBER 8610060308, RECORDS OF PIERCE COUNTY,
WASHINGTON.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
PARCEL D:
BEGINNING 660 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12, TOWNSHIP 20
NORTH, RANGE 2 EAST OF THE W.M. IN PIERCE COUNTY, WASHINGTON; SAID POINT BEING
THE TRUE POINT OF BEGINNING; THENCE SOUTH 165 FEET; THENCE WEST 264 FEET;
THENCE NORTH 165 FEET; THENCE EAST 264 FEET TO THE TRUE POINT OF BEGINNING.
EXCEPT THE WEST 30 FEET THEREOF, CONVEYED TO THE CITY OF TACOMA, BY DEED
RECORDED UNDER RECORDING NUMBER 8610060308, RECORDS OF PIERCE COUNTY,
WASHINGTON.
SITUATE IN THE CITY OF TACOMA, PIERCE COUNTY, WASHINGTON.
HERITAGE, MT. HOOD
25200 S.E. Stark Street
Gresham, Oregon 97030
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF OREGON, COUNTY OF
MULTNOMAH, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LEASEHOLD INTEREST CREATED PURSUANT TO GROUND LEASE DATED MARCH 6, 1989 BY AND
BETWEEN HEALTHLINK, AN OREGON NON-PROFIT CORPORATION, CURRENTLY KNOWN AS LEGACY
HEALTH SYSTEM, AS LESSOR, AND CROSSINGS INTERNATIONAL CORPORATION, A WASHINGTON
CORPORATION ("CROSSINGS"), AS LESSEE, AS EVIDENCED BY THAT CERTAIN MEMORANDUM
OF LEASE DATED MARCH 6, 1989 BY AND BETWEEN HEALTHLINK, AS LESSOR, AND
CROSSINGS, AS LESSEE, AND RECORDED ON MARCH 9, 1989 IN BOOK 2184, PAGE 1304 OF
THE OFFICIAL RECORDS OF MULTNOMAH COUNTY, OREGON.
PARCEL I:
A TRACT OF LAND LYING IN THE NORTHEAST QUARTER OF SECTION 2, TOWNSHIP 1 SOUTH,
RANGE 3 EAST OF THE WILLAMETTE MERIDIAN, IN
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<PAGE> 46
THE CITY OF GRESHAM, COUNTY OF MULTNOMAH AND STATE OF OREGON, SAID TRACT BEING
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTHERLY RIGHT OF WAY LINE OF SE STARK STREET,
SAID POINT ALSO LYING SOUTH 0(DEGREES) 19' 42" EAST 45.00 FEET AND NORTH
89(DEGREES) 40' 13" EAST, A DISTANCE OF 150.02 FEET FROM THE NORTHWEST CORNER
OF SAID NORTHEAST QUARTER OF SECTION 2; AND RUNNING THENCE NORTH 89(DEGREES)
40' 13" EAST ALONG THE SOUTHERLY RIGHT OF WAY LINE OF SAID SE STARK STREET, A
DISTANCE OF 355.00 FEET TO A 5/8 INCH IRON ROD AT THE NORTHWEST CORNER OF LOT
9, BLOCK 6 OF SANDPIPER EAST, DULY RECORDED SUBDIVISION IN MULTNOMAH COUNTY
PLAT BOOK 1209, PAGES 55 AND 56; THENCE SOUTH 1(DEGREE) 04' 42" EAST ALONG THE
WEST BOUNDARY OF SAID BLOCK 6 A DISTANCE OF 445.04 FEET TO A POINT; THENCE
LEAVING SAID WEST BOUNDARY SOUTH 89(DEGREES) 40' 13" WEST 425.07 FEET TO A
POINT; THENCE NORTH 63(DEGREES) 16' 25" WEST 24.15 FEET TO A POINT OF NON
TANGENT CURVATURE, THE RADIAL CENTER OF WHICH BEARS NORTH 43(DEGREES) 35' 38"
WEST; THENCE NORTHEASTERLY ALONG THE ARC OF A 282.00 FOOT RADIUS CURVE TO THE
LEFT, THROUGH A CENTRAL ANGLE OF 47(DEGREES) 29' 04", AN ARC DISTANCE OF 233.71
FEET (THE LONG CHORD OF WHICH BEARS NORTH 22(DEGREES) 39' 50" EAST 227.08 FEET)
TO A POINT OF TANGENCY; THENCE NORTH 1(DEGREE) 04' 42" WEST 225.00 FEET TO THE
POINT OF BEGINNING.
PARCEL II:
UTILITY EASEMENTS RECORDED MARCH 9, 1989 IN BOOK 2184, PAGE 1316, DEED RECORDS,
OVER THE FOLLOWING DESCRIBED TRACT:
A TRACT OF LAND LYING IN THE NORTHEAST QUARTER OF SECTION 2, TOWNSHIP 1 SOUTH,
RANGE 3 EAST OF THE WILLAMETTE MERIDIAN, IN THE CITY OF GRESHAM, COUNTY OF
MULTNOMAH AND STATE OF OREGON, SAID TRACT BEING DESCRIBED AS FOLLOWS:
COMMENCING AT A 5/8 INCH IRON ROD AT THE NORTHWEST CORNER OF LOT 9 IN BLOCK 6
OF SANDPIPER EAST, A DULY RECORDED SUBDIVISION IN MULTNOMAH COUNTY PLAT BOOK
1209, PAGES 55 AND 56; THENCE SOUTH 01(DEGREE) 04' 42" EAST ALONG THE WEST
BOUNDARY OF SAID BLOCK 6, A DISTANCE OF 445.04 FEET; THENCE LEAVING SAID WEST
BOUNDARY, SOUTH 89(DEGREES) 40' 13" WEST, 81.23 FEET TO THE TRUE POINT OF
BEGINNING OF THE TRACT OF LAND TO BE DESCRIBED; THENCE SOUTH 18(DEGREES) 22' 37"
EAST, 193.32 FEET TO THE WEST LINE OF LOT 1, BLOCK 6 OF SAID SANDPIPER EAST;
THENCE SOUTH 18(DEGREES) 40' 22" WEST ALONG THE WEST LINE OF SAID LOT 1, BLOCK
6, A DISTANCE OF 27.22 FEET TO THE MOST WESTERLY CORNER OF SAID LOT 1, BLOCK 6;
THENCE SOUTH 26(DEGREES) 43' 35" WEST ALONG THE WEST BOUNDARY OF SAID SANDPIPER
EAST, A DISTANCE OF 47.00 FEET;
B-4
<PAGE> 47
THENCE LEAVING THE BOUNDARY OF SAID SANDPIPER EAST, NORTH 63(DEGREES) 16' 25"
WEST, 26.75 FEET; THENCE NORTH 26(DEGREES) 43' 35" EAST, 17.00 FEET; THENCE
NORTH 63(DEGREES) 16' 25" WEST, 69.35 FEET; THENCE NORTH 00(DEGREES) 29' 50"
WEST, 192.55 FEET; THENCE NORTH 89(DEGREES) 40' 13" EAST, 20.00 FEET; THENCE
SOUTH 00(DEGREES) 29' 50" EAST, 180.29 FEET; THENCE SOUTH 63(DEGREES) 16' 25"
EAST, 57.15 FEET; THENCE NORTH 26(DEGREES) 43' 35" EAST, 28.75 FEET; THENCE
NORTH 18(DEGREES) 22' 37" WEST, 190.03 FEET; THENCE NORTH 89(DEGREES) 40' 13"
EAST, 23.14 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL III:
ACCESS EASEMENT RECORDED MARCH 9, 1989 IN BOOK 2184, PAGE 1311, DEED RECORDS,
OVER THE FOLLOWING DESCRIBED TRACT:
A TRACT OF LAND LYING IN THE NORTHEAST QUARTER OF SECTION 2, TOWNSHIP 1 SOUTH,
RANGE 3 EAST OF THE WILLAMETTE MERIDIAN, IN THE CITY OF GRESHAM, COUNTY OF
MULTNOMAH AND STATE OF OREGON, SAID TRACT BEING DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTHERLY RIGHT OF WAY LINE OF SE STARK STREET,
SAID POINT ALSO LYING SOUTH 0(DEGREE) 19' 42" EAST, 45.00 FEET AND NORTH
89(DEGREES) 40' 13" EAST, A DISTANCE OF 150.02 FEET FROM THE NORTHWEST CORNER
OF SAID NORTHEAST QUARTER OF SECTION 2; AND RUNNING THENCE SOUTH 01(DEGREE) 04'
42" EAST, 151.88 FEET; THENCE SOUTH 88(DEGREES) 55' 18" WEST, 54.00 FEET;
THENCE NORTH 01(DEGREE) 04' 42" WEST, 152.58 FEET TO THE SOUTHERLY RIGHT OF WAY
LINE OF SE STARK STREET; THENCE NORTH 89(DEGREES) 40' 13" EAST, ALONG THE
SOUTHERLY RIGHT OF WAY LINE OF SE STARK STREET, A DISTANCE OF 54.00 FEET TO THE
POINT OF BEGINNING.
B-5
<PAGE> 48
EXHIBIT C
DESCRIPTION OF ASSUMED INDEBTEDNESS
1. That certain loan from the Oregon Housing & Community Services
Department, State of Oregon (formerly known as the Oregon Housing
Agency) made on May 30, 1984, in the original principal amount of Two
Million Two Hundred Thousand Dollars ($2,200,000.00), for the purposes
of developing that certain real property located in the County of Linn,
State of Oregon, and legally described in Exhibit A of this Agreement
under the commonly known name of "Albany Residential".
2. That certain loan from the Oregon Housing & Community Services
Department, State of Oregon (formerly known as the Oregon Housing
Agency) made on October 31, 1988, in the original principal amount of
Three Million Five Hundred Twenty-Seven Thousand Five Hundred Dollars
($3,527,500.00), for the purposes of developing that certain real
property located in the County of Washington, State of Oregon, and
legally described in Exhibit A of this Agreement under the commonly
known name of "Forest Grove Residential".
3. That certain loan from the Oregon Housing & Community Services
Department, State of Oregon (formerly known as the Oregon Housing
Agency) made on March 22, 1991, in the original principal amount of
Three Million Nine Hundred Thousand Dollars ($3,900,000.00), for the
purposes of developing that certain real property located in the County
of Yamhill, State of Oregon, and legally described in Exhibit A of this
Agreement under the commonly known name of "McMinnville Residential".
C-1
<PAGE> 49
EXHIBIT D
FORM OF BILL OF SALE AND ASSIGNMENT
THIS BILL OF SALE AND ASSIGNMENT is made as of December __, 1995, by
___________________, a _____________________ ("Seller"), in favor of
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation ("Buyer"), pursuant
to that certain Purchase and Sale Agreement of even date herewith, by and among
Buyer, Crossings International Corporation, a Washington corporation, New
Crossings International Corporation, a Nevada corporation, and 2010 Union
Limited Partnership, a Washington limited partnership (the "Purchase
Agreement"). All initially capitalized terms used herein and not otherwise
defined herein shall have the same meaning given such terms in the Purchase
Agreement.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Seller does
hereby grant, bargain, sell, convey, assign, transfer, set over, deliver to and
vest in Buyer, its successors and assigns forever, all of Seller's right, title
and interest in and to all of the following property, whether now existing or
hereafter arising:
(a) All Personal Property which relate in any way to the construction,
use, occupancy, operation, development or marketing of the Land,
which real property is more particularly described on Schedule 1
attached hereto, or the improvements or the Fixtures
(collectively, the "Real Property") wherever the same may be
located, on the Land or otherwise;
(b) All Warranties;
(c) All deposits and bonds of Seller relating to the Property or any
portion thereof, including, without limitation, deposits and bonds
provided to any governmental agency for construction, use or
operation of the Property;
(d) All original reports, drawings, plans, blueprints, studies,
specifications, certificates of occupancy, building permits and
grading permits relating to all or any part of the Real Property
and all amendments, modifications, supplements, general conditions
and addenda thereto. In the event Buyer reasonably requires
copies thereof, Seller hereby covenants and agrees that it shall
cooperate and comply in a timely manner with Buyer's reasonable
requests for delivery of copies of all financial documents,
instruments, bills, checks, invoices and all other books and
records relating to all or any part of the Property; and
D-1
<PAGE> 50
(e) All of Seller's legal and equitable claims, causes of action, and
rights against the architects, engineers, designers, contractors,
subcontractors, suppliers and materialmen and any other party who
has supplied labor, services, materials or equipment, directly or
indirectly, in connection with the design, planning, marketing,
construction, manufacturing or operation of all or any part of the
Property.
Seller hereby represents and warrants to Buyer that Seller is the owner
of all right, title and interest in and to the above property, that, except
with respect to the Assumed Indebtedness, said property is free and clear of
all liens, charges and encumbrances created by or imposed against Seller and
that Seller has full right, power and authority to sell said property and to
make this Bill of Sale and Assignment. Seller shall warrant and forever defend
title to said property unto Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale and Assignment
as of the day and year first above written.
"SELLER"
[signature block]
D-2
<PAGE> 51
SCHEDULE I
LEGAL DESCRIPTION OF REAL PROPERTY
D-3
<PAGE> 52
EXHIBIT E
FORM OF CERTIFICATE OF NON-FOREIGN STATUS
_____________________, a _____________________ ("Seller"), is the owner
of that certain real property more particularly described in, Schedule 1
attached hereto and incorporated herein by this reference (the "Property").
This Certificate of Non-Foreign Status is made pursuant to that certain
Purchase and Sale Agreement of even date herewith ("Purchase and Sale
Agreement"), with respect to the Property, by and among CROSSINGS NATIONAL
CORPORATION, a Washington corporation, NATIONWIDE HEALTH PROPERTIES, INC., a
Maryland corporation ("Buyer"), NEW CROSSINGS NATIONAL CORPORATION, a Nevada
corporation and 2010 UNION LIMITED PARTNERSHIP, a Washington limited
partnership.
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform Buyer that
withholding of tax will not be required when the Property is transferred
pursuant to the Purchase and Sale Agreement, the undersigned hereby certifies
the following on behalf of Seller:
1. Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate, as those terms are defined in the Code and the Income
Tax Regulations promulgated thereunder;
2. Seller's U.S. employer identification number is ________; and
3. Seller's office address is 1201 Pacific Avenue, Suite 1800,
Tacoma, Washington 98402.
Seller understands that this Certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement contained herein
could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct
and complete, and I further declare that I have authority to sign this document
on behalf of Seller.
Dated as of: December __, 1995
"SELLER"
[signature block)
E-1
<PAGE> 53
SCHEDULE 1
LEGAL DESCRIPTION OF PROPERTY
E-2
<PAGE> 54
EXHIBIT F
FORM OF CLOSING PROCEDURE LETTER
December
15th
1 9 9 5
Chicago Title Insurance Company
National Business Unit
16969 Von Karman
Irvine, California 92714
Attn: Joy Eaton
Re: Purchase and Sale Agreement dated December 15, 1995, (the
"Purchase Agreement) by and between Crossings International
Corporation, a Washington corporation ("Seller"), Nationwide
Health Properties, Inc., a Maryland corporation ("Buyer"),
New Crossings International Corporation a Nevada corporation
("Tenant"), and 2010 Union Limited Partnership, a Washington
limited partnership ("Union Limited Partnership"); Your
Order Nos.: NBU 148041 (Albany Residential - No. 19-26221);
NBU 148042 (the Atrium - No. 1029353); NBU 140843
(Canterbury Gardens - No. 1029348); NBU 148044 (Columbia
Edgewater - No. 46957-SW); NBU 148045 (Courtyard Village -
No. 19-26220); NBU 148046 (Forest Grove Residential - No.
145187); NBU 148047 (Heritage Mt. Hood - No. 145219); NBU
1480489 McMinnville Residential Estates - No. 3676574); NBU
148051 (Ridge Point - No. 1029352); NBU 148050 (River Place
- No. P142614); NBU 148051 (The Heritage at Rogue Valley -
No. 03-30651); and NBU 148052 (Union Park at Allenmore -
No. 131438)
Ladies and Gentlemen:
Please refer to the Purchase Agreement, a copy of which is being
delivered to you with this letter. Except as otherwise defined herein, all
initially capitalized terms used herein shall have the same meaning given such
terms in the Purchase Agreement.
This letter shall constitute your instructions with respect to the
"Funds" and "Documents" described herein.
A. Delivery of Funds.
1. On or before December 20, 1995, (the "Closing Date"), Buyer shall
wire-transfer to you funds required pursuant to Section 3.2(b) of
the Purchase Agreement (the "Funds").
F-1
<PAGE> 55
2. On or before the Closing Date, Tenant shall wire transfer to you
in same day funds and/or direct same day available funds to be
delivered to you, in the amount of $1,381,197.00 representing the
Security Deposit under Section 3.3(a)(v) of the Purchase Agreement
(the "Lease Security Deposit").
3. On or before the Closing Date, Tenant shall wire transfer to you
in same day funds and/or direct same day available funds to be
delivered to you, in the amount of $163,105.00 representing the
Debt Service Reserve under Section 3.3(a)(v) of the Purchase
Agreement (the "Debt Service Reserve").
4. The Lease Security Deposit and the Debt Service Reserve shall be
collectively referred to as the "Security Deposit").
5. On or before the Closing Date, Tenant and Union Limited
Partnership shall wire transfer to you in same day funds an amount
sufficient to make all rent and interest payments due under the
Ground Leases and the Assumed Indebtedness before the Closing Date
and/or within ten (10) calendar days thereafter (the "Third Party
Monthly Payments").
6. On or before the Closing Date, Tenant shall wire transfer to you
in same day funds an amount sufficient to pay the "Deferred Rent"
due and payable to the ground lessor of the Mt. Hood Parcel (the
"Mt. Hood Deferred Rent").
B. Delivery of Documents.
1. Delivery of Recordation Documents. On or before the Closing Date,
Seller, Buyer, Tenant or Union Limited Partnership shall deliver
to you, or to your respective local agent for the Parcels, one
fully executed and acknowledged original of each of the following
documents (the "Recordation Documents"):
(a) A Deed conveying each of the Fee Parcels and the
Improvements on the Mt. Hood Parcel to Buyer, in each case
executed and acknowledged by Seller or an Affiliate of Seller (the
"Deeds");
(b) The Lease Assignment Agreement for the Mt. Hood Parcel;
(c) An Amendment to Lease by and between Legacy Health
Systems ("Legacy") and Buyer for the Mt. Hood Parcel, in the form
attached as Schedule 3 hereto (the "Mt. Hood Lease Amendment");
F-2
<PAGE> 56
(d) A Consent Agreement by and among Legacy, Seller and
Buyer for the Mt. Hood Parcel, in the form attached as Schedule 4
hereto (the "Mt. Hood Consent Agreement");
(e) An Assumption Agreement by and among Seller, Tenant,
the Oregon Housing & Community Services Department, State of
Oregon (the "Agency") and Buyer for the assumption by Buyer of the
Albany Residential Center Assumed Indebtedness, in the form
attached as Schedule 5 hereto (the "Albany Residential Assumption
Agreement");
(f) A Memorandum of Lease Approval Agreement by and among
Buyer, Tenant and the Agency, in the form attached as Schedule 6
hereto (the "Albany Memorandum of Lease Approval Agreement");
(g) An Assumption Agreement by and among Seller, Tenant,
the Agency and Buyer for the assumption by Buyer of the Forest
Grove Residential Center Assumed Indebtedness, in the form
attached as Schedule 7 hereto (the "Forest Grove Assumption
Agreement");
(h) A Memorandum of Lease Approval Agreement by and among
Buyer, Tenant and the Agency, in the form attached as Schedule 8
hereto (the "Forest Grove Memorandum of Lease Approval
Agreement");
(i) An Assumption Agreement by and among McMinnville
Residential Center Limited Partnership, an Oregon limited
partnership ("McMinnville"), Seller, Tenant, the Agency and Buyer
for the assumption by Buyer of the McMinnville Residential Center
Assumed Indebtedness, in the form attached as Schedule 9 hereto
(the "McMinnville Assumption Agreement");
(j) A Memorandum of Lease Approval Agreement by and among
Buyer, Tenant and the Agency, in the form attached as Schedule 10
hereto (the "McMinnville Memorandum of Lease Approval Agreement");
(k) A Memorandum of Lease for each Facility Lease; and
(l) The Fixture Filings.
2. Delivery of Non-Recordation Documents. On or before the Closing
Date, Seller, Buyer, Tenant or Union Limited Partnership shall
deliver to you, or to your respective local agent for the Parcels,
one fully executed original of each of the following documents
(the "Non-Recordation Documents"):
F-3
<PAGE> 57
(a) Pay-off letters or demands (the "Pay-Off Letters") from
the then record holders or claimants of any encumbrance or
monetary lien affecting the Property, other than the Assumed
Indebtedness, stating the cash amount required to be paid and
where and to whom such amount is to be paid in order to satisfy
and discharge of record such encumbrances; and
(b) Lessor Estoppel Certificate by Legacy, to Buyer, with
respect to the Mt. Hood Parcel, in the form attached as Schedule
11 hereto (the "Mt. Hood Estoppel Certificate");
(c) A Lease Approval Agreement by and among Tenant, the
Agency and Buyer for the Albany Residential Center, in the form
attached as Schedule 12 hereto (the "Albany Lease Approval
Agreement");
(d) A Side Letter Agreement by the Agency, and Accepted and
Agreed to by Buyer, Seller and Tenant, in the form attached as
Schedule 13 hereto (the "Albany Side Letter Agreement");
(e) A Lease Approval Agreement by and among Tenant, the
Agency and Buyer for the Forest Grove Residential Center, in the
form attached as Schedule 11 hereto (the "Forest Grove Lease
Approval Agreement");
(f) A Side Letter Agreement by the Agency, and Accepted and
Agreed to by Buyer, Seller and Tenant, in the form attached as
Schedule 15 hereto (the "Forest Grove Side Letter Agreement");
(g) A Lease Approval Agreement by and among Tenant, the
Agency and Buyer for the McMinnville Residential Center, in the
form attached as Schedule 16 hereto (the "McMinnville Lease
Approval Agreement"); and
(h) A Side Letter Agreement by the Agency, and Accepted and
Agreed to by Buyer, Seller and Tenant, in the form attached as
Schedule 17 hereto (the "McMinnville Side Letter Agreement");
3. Delivery and Approval of Closing Statement. On or before the
Closing Date, you shall prepare and Seller, Buyer, Tenant and
Union Limited Partnership shall approve and execute a closing
statement showing the source and application of funds received by
you and the costs and expenses incurred in connection herewith
(the "Closing Statement").
F-4
<PAGE> 58
4. Definition of Documents. As used herein, "Documents" shall mean,
collectively, the Recordation Documents, the Non-Recordation
Documents and the Closing Statement.
C. Conditions to Closing. The Funds shall not be disbursed and the
Documents shall not be recorded or delivered to any person or entity
until each of the following conditions are satisfied:
1. You have received the Funds, the Security Deposit, the Third Party
Monthly Payments and the Mt. Hood Deferred Rent and are
unconditionally and irrevocably prepared to wire the same in
accordance with Paragraph D hereof.
2. You have received the Documents and are unconditionally and
irrevocably prepared to record the Recordation Documents in
accordance with Paragraph D hereof.
3. You are unconditionally and irrevocably committed to issue the
Title Policies subject only to those exceptions (the "Permitted
Exceptions") which appear on the pro forma title policies attached
hereto as Schedule 1.
4. You have received from Tenant and/or Union Limited Partnership, by
check payable to Buyer or wire transfer for the account of Buyer,
the amount of $__________________, representing the first full
month's rent (and any proration for the first partial month) as
required by the Facility Leases (other than for the Allenmore
Parcel) and the interest as required by the NHP Loan Documents
(the "Facilities Payment").
5. You have received the Written Authorization to Close.
6. You have received all the necessary information for filing the
form then required to be filed pursuant to Section 6045 of the
Internal Revenue Code (the "Information Return") with respect to
the transactions contemplated by the Purchase Agreement and you
are unconditionally and irrevocably prepared to file the same.
Buyer, Seller, Tenant and Union Limited Partnership hereby agree,
as between themselves, to cooperate in providing any information
within their possession or control that is necessary for filing.
The purchase and sale of the Property is the sale of "reportable
real estate" within the meaning of U.S. Treasury Regulations
Section 1.605-4 (the "Regulations").
YOU ARE THE "REAL ESTATE REPORTING PERSON" WITHIN THE MEANING OF THE
REGULATIONS AND SHALL MAKE ALL REPORTS TO THE FEDERAL GOVERNMENT AS
REQUIRED BY THE REGULATIONS.
F-5
<PAGE> 59
D. Closing. If the conditions specified in Paragraph C above are satisfied
on or before the Closing Date, then you shall immediately deliver to
Buyer, Seller, Tenant and Union Limited Partnership a written
confirmation of such satisfaction in the form of Schedule 2 hereto
(which confirmation shall evidence your agreement to immediately take or
cause to be taken the actions hereinafter specified), and thereafter you
shall immediately:
1. Record the Recordation Documents in the order listed in Paragraph
B(1) above.
2. Wire the respective amounts due to third parties (e.g., lien
holders) under the Closing Statement in accordance with the
respective instructions (the "Third Party Instructions") from such
third parties.
3. Wire the amount due Seller under the Closing Statement in
accordance with the wiring instructions to be provided by Seller
(the "Seller Wiring Instructions").
4. Wire the Facilities Payment, the Lease Security Deposit and any
amounts due Buyer under the Closing Statement in accordance with
the following wiring instructions (the "Buyer Wiring
Instructions") (or if the same is made by check, deliver the same
to Buyer via overnight courier at Tenant's expense to Nationwide
Health Properties, Inc., 4675 MacArthur Court, Suite 510, Newport
Beach, California 92660, Attention: Mr. Mark Desmond):
Wells Fargo Bank
420 Montgomery Street
San Francisco, California
AJBA No. 121000248
for the benefit of
Nationwide Health Properties, Inc.
Account No. 4692089329
Upon receipt, notify Mark Desmond
by telephone at (714) 251-1211
5. Wire the Debt Service Reserve in accordance with the wiring
instructions to be provided by Buyer (the "Debt Service Reserve
Wiring Instructions").
6. Transmit the Third Party Monthly Payments to the parties entitled
thereto and at the addresses specified to you in written
instructions delivered to you by Buyer, Tenant and Union Limited
Partnership.
F-6
<PAGE> 60
7. Transmit the Mt. Hood Deferred Rent to the party entitled thereto
and at the address specified to you in written instructions
delivered to you by Legacy
8. Issue the Title Policies subject only to those exceptions which
appear on the pro forma title policy attached hereto as Schedule 1
and deliver the same to O'Melveny & Myers, at the address
specified in Paragraph E, hereof, within 20 business days.
9. File the Informational Return and all other filings and reports
required pursuant to the Regulations and deliver copies of the
same to counsel for Buyer and Seller (at the respective addresses
set forth below) within 3 business days.
E. Delivery of Documents. As soon as they are available, please deliver
the Documents as follows:
1. To O'Melveny & Myers, 610 Newport Center Drive, Suite 1700,
Newport Beach, California 92660, Attention: Tracy D. Johnson,
Esq., the following:
(a) The recorded original of each of the Recordation
Documents; and
(b) The originals of the Documents other than the
Recordation Documents.
2. To Bogle & Gates, Two Union Square, 601 Union Street, Seattle,
Washington 98101-2346, Attention: Felicia L. Gittleman, Esq.
(a) A copy of each of the Recordation Documents, as
recorded.
(b) A copy of the Documents other than the Recordation
Documents.
F. Closing Costs, All closing costs incurred in carrying out your duties
under this letter are to be billed in accordance with Section 4.1 of the
Purchase Agreement.
G. Investment of Funds.
1. Buyer's Funds. As soon as you receive any portion of the Funds,
you shall notify Buyer of such fact. If Buyer gives you written
instructions to do so, you shall invest the Funds in treasury
bills (or such other shortterm investment as may be authorized by
Buyer) for the benefit of Buyer.
F-7
<PAGE> 61
2. If No Closing. If the Closing fails to occur and you receive
cancellation instructions pursuant to Paragraph H below, the
interest accrued on the Funds shall be delivered to Buyer, in
accordance with the Buyer Wiring Instructions.
3. If Closing Occurs. The Closing Statement shall provide that Buyer
is entitled to rent under the Facility Lease (other than for the
Allenmore Parcel) from the date that Buyer disburses the Funds to
you. If the transactions described herein close, Tenant shall be
entitled to a credit against such rent equal to interest accrued
on the funds up to the Closing Date and you shall deliver such
accrued interest to Tenant according to the Seller Wiring
Instructions.
H. Cancellation of Instructions. Notwithstanding anything to the contrary
herein, if the conditions specified in Paragraph C hereof are not
satisfied on or before the Closing Date, then, if you receive written
instructions to cancel this transaction from either of the undersigned,
the instructions set forth in Paragraphs A through E above shall be
deemed cancelled, you shall immediately return the Funds (and any
interest thereon) to Buyer, in accordance with the Buyer Wiring
Instructions and you shall destroy the Documents on the next business
day thereafter.
I. Limitation of Liability. You are acting solely as closing agent, and
you shall be liable solely for your failure to comply with the terms of
this letter. The foregoing will not limit your liability as title
insurer under the terms of the Title Policies (such liability being in
accordance with the terms of such policy).
J. Execution by Counterparts; Facsimile Signatures. This letter of
instructions may be executed in two or more counterparts, each of which
shall be an original, but all of which shall constitute one and the same
letter of instructions. You are hereby authorized to accept facsimile
signatures on this letter of instructions as original signatures, and
such facsimile signatures are hereby deemed originals.
K. Interpleader. Buyer, Seller, Tenant and Union Limited Partnership
expressly agree that if they give you contradictory instructions, you
shall have the right, at your election, to file an action in
interpleader requiring the Buyer, Seller, Tenant and Union Limited
Partnership to answer and litigate their several claims and rights
between themselves and you are authorized to deposit with the clerk of
the court all documents and funds held by you. In the event such action
is filed, Buyer, Seller, Tenant and Union Limited Partnership agree to
pay your cancellation charges and costs, expenses and reasonable
attorneys' fees which you are required to expend or incur in the
interpleader action, the amount thereof to be fixed and judgment
therefor to be rendered by the court. Upon the filing of such an
action, you shall be fully released and discharged
F-8
<PAGE> 62
from all obligations to perform further any duties or obligations
imposed hereunder.
Very truly yours,
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
"SELLER"
CROSSINGS NATIONAL
CORPORATION,
a Washington corporation
By:
-------------------------------------
Richard W. Boehlke,
President
"TENANT"
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By:
-------------------------------------
Richard W. Boehlke,
President
F-9
<PAGE> 63
"UNION LIMITED PARTNERS"
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
By:
-------------------------------------
Richard W. Boehlke,
its general partner
ACCEPTED AND AGREED TO
as of the date first
above written:
Chicago Title Insurance Company
By:
----------------------------
Its:
---------------------
F-10
<PAGE> 64
SCHEDULE 1
PRO FORMA TITLE POLICIES
F-11
<PAGE> 65
SCHEDULE 2
CONFIRMATION BY TITLE COMPANY
December __, 1995
Nationwide Health Properties, Inc.
c/o O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, California 92660
Attention: Tracy D. Johnson, Esq.
Crossings International Corporation
New Crossings International Corporation
2010 Union Limited Partnership
c/o Bogle & Gates
Two Union Square
601 Union Street
Seattle, Washington 98101-2346
Attention: Kyle B. Lukins, Esq.
Re: Purchase and Sale Agreement dated December 15, 1995 (the
"Purchase Agreement") by and among Crossings International
Corporation, a Washington corporation ("Seller") and
Nationwide Health Properties, Inc., a Maryland corporation
("Buyer"), New Crossings International Corporation a Nevada
corporation ("Tenant"), and 2010 Union Limited Partnership,
a Washington limited partnership ("Union Limited
Partnership")
Ladies and Gentlemen:
Please refer to that certain letter (the "Letter of
Instructions") captioned "CLOSING PROCEDURE LETTER", dated as of December 15,
1995, from Seller, Buyer, Tenant and Union United Partnership to the
undersigned.
F-12
<PAGE> 66
Pursuant to Paragraph D of the Letter of Instructions, we hereby
confirm that each of the conditions to disbursement and recordation set forth
in Paragraph C of the Letter of Instructions has been satisfied.
Very truly yours,
Chicago Title Insurance Company
By:
-----------------------------
Its:
------------------------
F-13
<PAGE> 67
SCHEDULE 3
FORM OF MT. HOOD LEASE AMENDMENT
[See Attached]
S-3-1
<PAGE> 68
SCHEDULE 4
FORM OF MT. HOOD CONSENT AGREEMENT
[See Attached]
S-4-1
<PAGE> 69
SCHEDULE 5
ALBANY RESIDENTIAL ASSUMPTION AGREEMENT
[See Attached]
S-5-1
<PAGE> 70
SCHEDULE 6
ALBANY MEMORANDUM OF LEASE APPROVAL AGREEMENT
[See Attached]
S-6-1
<PAGE> 71
SCHEDULE 7
FOREST GROVE ASSUMPTION AGREEMENT
[See Attached]
S-7-1
<PAGE> 72
SCHEDULE 8
FOREST GROVE MEMORANDUM OF LEASE APPROVAL AGREEMENT
[See Attached]
S-8-1
<PAGE> 73
SCHEDULE 9
Mc MINNVILLE ASSUMPTION AGREEMENT
[See Attached]
S-9-1
<PAGE> 74
SCHEDULE 10
MC MINNVILLE MEMORANDUM OF LEASE APPROVAL AGREEMENT
[See Attached]
S-10-1
<PAGE> 75
SCHEDULE 11
MT. HOOD ESTOPPEL CERTIFICATE
[See Attached]
S-11-1
<PAGE> 76
SCHEDULE 12
ALBANY LEASE APPROVAL AGREEMENT
[See Attached]
S-12-1
<PAGE> 77
SCHEDULE 13
ALBANY SIDE LETTER AGREEMENT
[See Attached]
S-13-1
<PAGE> 78
SCHEDULE 14
FOREST GROVE LEASE APPROVAL AGREEMENT
[See Attached]
S-14-1
<PAGE> 79
SCHEDULE 15
FOREST GROVE SIDE LETTER AGREEMENT
[See Attached]
S-15-1
<PAGE> 80
SCHEDULE 16
McMINNVILE LEASE APPROVAL AGREEMENT
[See Attached]
S-16-1
<PAGE> 81
SCHEDULE 17
MC MINNVILLE SIDE LETTER AGREEMENT
[See Attached]
S-17-1
<PAGE> 82
EXHIBIT G
FORM OF DEEDS
(See Attached)
G-1
<PAGE> 83
DEED
[Idaho Form]
THIS INDENTURE, made the _______ day of December, 1995, between
[GRANTOR'S NAME], "Grantor," and NATIONWIDE HEALTH PROPERTIES, INC. a, Maryland
corporation, "Grantee," whose address is 4675 MacArthur Court, Suite 1170,
Newport Beach, California 92660.
WITNESSETH:
For Valuable Consideration, Grantor has granted, bargained, sold
and conveyed, and by these presents does grant, bargain, sell and convey unto
Grantee, and to its successors and assigns, forever, all of that certain piece
or parcel of land situate, lying and being located in the County of Ida, State
of Idaho, particularly described as follows, to-wit:
See Exhibit A attached hereto and incorporated by reference herein.
together with all and singular the tenements, hereditament and appurtenances
thereunto belonging or in anyway appertaining, and the reversion and
reversions, remainder and remainders, rents, issues and profits thereof; and
also all the estate, right, title, interest in the property, possession, claim
and demand whatsoever, as well in law as in equity, of the Grantor, of, in or
to the said premises, and every part and parcel thereof, with the
appurtenances.
TO HAVE AND TO HOLD all and singular the said premises, together
with the appurtenances, unto the said Grantee and to its successors and assigns
forever.
IN WITNESS WHEREOF, the said Grantor has hereunto set its hand
and seal the day and year first above written.
--------------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
G-2
<PAGE> 84
STATE OF WASHINGTON )
) ss.
COUNTY OF )
On this ____ day of December, 1995, before me personally appeared
__________________ to me known to be the _______________ of ________________
_________________ that executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned and on oath stated that
he was authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
---------------------------------
Notary Public in and for the
State of Washington
My Commission Expires:_______
G-3
<PAGE> 85
SCHEDULE 1
LEGAL DESCRIPTION OF THE REAL PROPERTY
G-4
<PAGE> 86
WARRANTY DEED
[Oregon Form]
________________________, Grantor, conveys and warrants to
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation, Grantee, the
following described real property free of encumbrances except as specifically
set forth herein situated in [County], Oregon, to wit:
See Exhibit A attached hereto and incorporated by this
reference herein.
The said property is free from encumbrances except:
See Exhibit B attached hereto and incorporated by this
reference herein.
The true consideration for this conveyance is $_______ (However,
the actual consideration consists of other value given which is [the whole/part
of the] consideration).
Until a change is requested, all tax statements shall be sent to
the following address:
Nationwide Health Properties, Inc.
4675 MacArthur Court, Suite 1170
Newport Beach, CA 92660
THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN
THIS INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS.
BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO
THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING
DEPARTMENT TO VERIFY APPROVED USES AND TO DETERMINE ANY LIMITS ON LAWSUITS
AGAINST FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930.
DATED this ____ day of December, 1995.
--------------------------
By:
-----------------------
Its:
----------------------
G-5
<PAGE> 87
STATE OF WASHINGTON )
) ss.
COUNTY OF _________ )
On this ___ day of December, 1995, before me personally appeared
_________________ to me known to be the _________________ of _________________
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation for
the uses and purposes therein mentioned and on oath stated that he was
authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
------------------------------
Notary Public in and for the
State of Washington
My Commission Expires: ______
After Recording Return To:
- -------------------------
O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, CA 92660
Attn: Tracy D. Johnson, Esq.
(614,055-78)
G-6
<PAGE> 88
SCHEDULE 1
LEGAL DESCRIPTION OF THE REAL PROPERTY
G-7
<PAGE> 89
SCHEDULE 2
PERMITTED ENCUMBRANCES
G-8
<PAGE> 90
WHEN RECORDED RETURN TO:
O'Melveny & Myers
610 Newport Center.Drive
Suite 1700
Newport Beach, CA 92660
Attn: Tracy D. Johnson, Esq.
(614,055-78)
MAIL TAX STATEMENTS TO;
Nationwide Health Properties, Inc.
4675 MacArthur Blvd., Suite 1170
Newport Beach, CA 92660
STATUTORY WARRANTY DEED
[Washington Form]
The undersigned grantor, ______________, for and in consideration
of TEN DOLLARS ($10.00) in hand paid, conveys and warrants to NATIONWIDE HEALTH
PROPERTIES, INC., a Maryland corporation, effective as of the date hereof, the
real property in [County], Washington, described in Exhibit "A" attached hereto
and incorporated herein and subject to the encumbrances set forth in Exhibit
"B" attached hereto.
Dated: December ___, 1995
[GRANTOR NAME]
--------------------------------,
a
-------------------------------
By:
-----------------------------
Name:
---------------------------
Its:
----------------------------
G-9
<PAGE> 91
STATE OF WASHINGTON )
) ss.
COUNTY OF ___________ )
On this ____ day of December, 1995, before me personally appeared
__________________ to me known to be the _________________ of ________________
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation for
the uses and purposes therein mentioned and on oath stated that he was
authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
--------------------------------------
Notary Public in and for the State of
Washington
My Commission Expires: ______________
G-10
<PAGE> 92
SCHEDULE 1
LEGAL DESCRIPTION
G-11
<PAGE> 93
SCHEDULE 2
PERMITTED ENCUMBRANCES
G-12
<PAGE> 94
WARRANTY DEED
[Colorado Form]
THIS DEED, made this ____ day of December, 1995, between [Seller] of the
City of _______________ County of ___________________, State of Colorado,
grantor and NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation whose
legal address is 4675 MacArthur Court, Suite 1170, Newport Beach, of the County
of Orange, State of California, grantee:
WITNESSETH, That the grantor, for and in consideration of the sum of TEN
DOLLARS, the receipt and sufficiency of which is hereby acknowledges, has
granted, bargained, sold and conveyed, and by these presents does grant,
bargain, sell, convey, and confirm, unto the grantee, its heirs and assigns
forever, all the real property together with improvements, if any, situate,
lying and being in the City of ______, County of _____________, State of
Colorado, described as follows:
[Insert Legal Description]
also known by street and number as:_________________________________________,
assessor's schedule or parcel number _________________________:
TOGETHER with all and singular the hereditament and appurtenances
thereto belonging, or in anyway appertaining, and the reversion and reversions,
remainder and remainders, rents, issues and profits thereof, and all the
estate, right, title, interest, claim and demand whatsoever of the grantor,
either in law or equity, or, in and to the above bargained premises, with the
hereditaments and appurtenances.
TO HAVE AND TO HOLD the said premises above bargained and described with
the appurtenances, unto the grantee, its heirs and assigns forever. And the
grantor for itself, its heirs and personal representatives, does covenant,
grant, bargain, and agree to and with the grantee, its heirs and assigns, that
at the time of the ensealing and delivery of these presents, it is well seized
of the premises above conveyed, has good, sure, perfect, absolute and
indefeasible estate of inheritance, in law, in fee simple, and has good right,
full power and authority to grant, bargain, sell and convey the same in manner
and form as aforesaid, and that the same are free and clear from all former and
other grants, bargains, sales, liens, taxes, assessments, encumbrances, and
restrictions of whatever kind or nature soever, except
The grantor shall and will WARRANT AND FOREVER DEFEND the above-
bargained premises in the quiet and peaceable possession of the grantee(s), its
heirs
G-13
<PAGE> 95
and assigns, against all and every person or persons lawfully claiming the
whole or any part thereof.
IN WITNESS WHEREOF, the grantor has executed this deed on the date set
forth above.
---------------------------------
---------------------------------
---------------------------------
G-14
<PAGE> 96
STATE OF WASHINGTON )
) ss.
COUNTY OF __________________ )
On this ____ day of December, 1995, before me personally
appeared ________________ to me known to be the ________________ of __________
__________ that executed the within and foregoing instrument, and acknowledged
said instrument to be the free and voluntary act and deed of said corporation
for the uses and purposes therein mentioned and on oath stated that he was
authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first written above.
-------------------------------------
Notary Public in and for the State of
Washington
My Commission Expires:_______________
G-15
<PAGE> 97
EXHIBIT H
FORM OF WRITTEN AUTHORIZATION TO CLOSE
December
________
1 9 9 5
Chicago Title Insurance Company
National Business Unit
16969 Van Karman
Irvine, California 92714
Re: Purchase and Sale Agreement dated December 1995, (the
"Purchase Agreement") by and among Crossings International
Corporation, a Washington corporation ("Seller"), Nationwide
Health Properties, Inc., a Maryland corporation ("Buyer"),
New Crossings International Corporation a Nevada corporation
("Tenant") and 2010 Union Limited Partnership, a Washington
limited partnership ("Union Limited Partnership"); Your
Order Nos.: NBU 148041 (Albany Residential - No. 19-26221);
NBU 148042 (The Atrium - No. 1029353); NBU 148043
(Canterbury Gardens - No. 1029348); NBU 148044 (Columbia
Edgewater - No. 46957-SW); NBU 148045 (Courtyard Village -
No. 19-26220); NBU 148046 (Forest Grove Residential - No.
145187); NBU 148047 (Heritage Mt. Hood - No. 145219); NBU
1480489 (McMinnville Residential Estates - No. 3676574);
NBU 148049 (Ridge Point - No. 1029352); NBU 148050 (River
Place - No. P142614); NBU 148051 (The Heritage at Rogue
Valley - No. 03-30651); and NBU 148052 (Union Park at
Allenmore No. 131438)
Ladies and Gentlemen:
You are hereby authorized to comply with the instructions
delivered to you in our Closing Procedure Letter dated December __, 1995.
Please confirm your receipt hereof and compliance with the
aforementioned instructions by contacting, via telephone, either Steven L.
Edwards, Esq., at (714) 669-7903 or Tracy D. Johnson, Esq., at (714) 669-7924.
This Written Authorization to Close may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
H-1
<PAGE> 98
"BUYER"
NATIONWIDE HEALTH PROPERTIES, INC.
a Maryland corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
"SELLER"
CROSSINGS INTERNATIONAL CORPORATION,
a Washington corporation
By:
---------------------------------
Richard W. Boehlke,
President
"TENANT"
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By:
---------------------------------
Richard W. Boehlke,
President
"UNION LIMITED PARTNERSHIP"
2010 UNION LIMITED PARTNERSHIP,
a Washington limited partnership
By:
---------------------------------
Richard W. Boehlke,
its general partner
H-2
<PAGE> 99
EXHIBIT I
SCHEDULE OF ENVIRONMENTAL AUDIT REPORTS
1. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.02, for Albany
Residential, Albany, Oregon.
2, Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.04, for The
Atrium, Boulder, Colorado.
3, Phase I Environmental Site Assessment prepared by Terracon Consultants
Western, Inc., dated November, 2, 1995, Project Number 46955032, for
Canterbury Gardens, Aurora, Colorado.
4. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.06, for
Columbia Edgewater, Richland, Washington.
5. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.01, for
Courtyard Village, Albany, Oregon.
6. Phase I Environmental Site Assessment prepared by Hahn and Associates,
Inc., Environmental Management, dated November 8, 1995, for Forest Grove
Residential, Forest Grove, Oregon.
7. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.07, for The
Heritage at Rogue Valley, Medford, Oregon.
8. Phase One Environmental Property Assessment prepared by PBS
Environmental, dated November, 1995, Project Number 8322.03, for The
Heritage, Mt. Hood, Gresham, Oregon.
9. Phase I Environmental Site Assessment prepared by Hahn and Associates,
Inc., Environmental Management, dated November 7, 1995, for McMinnville
Residential Estates, McMinnville, Oregon.
10. Phase I Environmental Site Assessment prepared by Terracon Consultants
Western, Inc., dated November 3, 1995, Project Number 22957023, for
Ridge Point, Boulder, Colorado.
I-1
<PAGE> 1
EXHIBIT 10.39
ASSUMPTION AGREEMENT
This AGREEMENT is made this 23rd day of July, 1990, by and between Albany
Residential Center, an Oregon General Partnership and Beaulieu-Draper Limited,
an Oregon Corporation, hereinafter referred to as "Seller," the Oregon Housing
Agency, State of Oregon, having its principal office at 1600 State Street,
Suite 100, Salem, Oregon, 97310, hereinafter referred to as the "Agency," and
Crossings International Corporation, hereinafter referred to as "Purchaser."
RECITALS
1. On May 30, 1984, Seller received a loan from the Agency in the amount of
Two Million Two Hundred Thousand dollars (U.S. $2,200,000), hereinafter
referred to as the "Loan," to aid Seller in the construction and financing
of a housing development located in the area commonly known as Albany,
Oregon, and legally described as follows:
See Exhibit A
2. The Loan is evidenced by a Promissory Note in the sum of Two Million Two
Hundred Thousand dollars (U.S. $2,200,000), dated May 30, 1984, and
executed by Seller, which Promissory Note is hereinafter referred to as
the "Note." The Note is, by this reference, incorporated herein.
A true and accurate copy of the Note is available upon request from
the Agency, 1600 State Street, Suite 100, Salem, OR 97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located. Said
Trust Deed, dated May 30, 1984, executed by Seller, as grantor, and in
which the Agency is named as beneficiary and Safeco Title Insurance Co.,
as trustee, was recorded on June 4, 1984, in the office of the county
clerk of the County of Linn, State of Oregon, Vol. MF361, Page 71, and
is hereinafter referred to as "Trust Deed." The Trust Deed is, by this
reference, incorporated herein. A true and accurate copy of the Trust Deed
is available upon request from the Agency, 1600 State Street, Suite 100,
Salem, OR 97310.
4. The debt evidenced by the Note is further secured by the following
written agreements made by and between Seller and the Agency:
a. two Security Agreements dated May 30, 1984, hereinafter referred to as
"Security Agreements";
b. a Regulatory Agreement dated May 30, 1984, hereinafter referred to as
"Regulatory Agreement";
c. an Assignment of Rents and Leases dated May 30, 1984, hereinafter
referred to as Rents and Leases";
d. a Management Agreement dated July 12, 1983, hereinafter referred to as
"Management Agreement".
<PAGE> 2
The Security Agreements, Regulatory Agreement, Rents and Leases, and
Management Agreement are, by this reference, incorporated herein. True and
accurate copies of these documents are available upon request from the
Agency, 1600 State Street, Suite 100, Salem, OR 97310.
5. The Trust Deed, Security Agreements and Regulatory Agreement provide that
Seller shall not sell, convey or otherwise transfer any of the Development
or property described in the Trust Deed or Security Agreements without the
express written approval of the Agency.
6. The Seller has sold and conveyed, or is to sell and convey, the
Development and all of the property described in the Trust Deed and
Security Agreements to Purchaser, and both Seller and Purchaser have
requested the Agency to approve the sale.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
I
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Two Million One Hundred Seventy Three
Thousand Eight Hundred Forty-Seven 06/100 dollars (U.S. $2,173,847.06) as of
May 15, 1990.
II
PURCHASER'S ASSUMPTION OF LIABILITY
Purchaser agrees to pay the Note in installments at the times, in the manner,
and in all other respects as therein provided; to perform all of the
obligations provided in the Note, Trust Deed, Security Agreements, Regulatory
Agreements, Rents and Leases, and Management Agreement to be performed by
Seller at the times, in the manner, and in all respects as therein provided;
and to be bound by all of the terms of the Note, Trust Deed, Security
Agreements, Regulatory Agreement, Rents and Leases, and Management Agreement.
III
AGENCY'S CONSENT TO SALE OF DEVELOPMENT
The Agency hereby consents to the above-mentioned sale of the Development by
Seller to Purchaser, and to Purchaser's assumption of the obligations of Seller
under the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents
and Leases, and Management Agreement.
-2-
<PAGE> 3
IV
SELLER'S LIABILITY
Seller agrees that Purchaser's assumption of the obligations of Seller under
the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and
Leases, and Management Agreement, and the Agency's consent to said assumption,
does not release or discharge Seller or any other party from liability under
the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and
Leases or Management Agreement.
V
DISCLOSURE OF FINANCIAL INFORMATION
Seller and Purchaser hereby covenant and agree to furnish to the Agency on or
before 90 days from closing, a complete financial statement audited by an
Independent Certified Public Accountant, in a form acceptable to the Agency and
the Secretary of the U.S. Department of Housing and Urban Development, setting
forth the results of operation of the Development for the fiscal year
beginning July 1, 1989 and ending as of the date of closing, and such other
financial information as the Agency may reasonably request. Seller and
Purchaser further agree that violation of this provision shall constitute a
violation of the Regulatory Agreement and HAP Contract by Seller and Purchaser,
who shall be jointly and severally liable for performance of the obligations
described in this paragraph V.
VI
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed and Security Agreements shall
remain subject to the liens, charges, and encumbrances of the Trust Deed and
Security Agreements, and nothing contained herein or done pursuant hereto shall
affect or be construed to affect the liens, charges, and encumbrances of the
Trust Deed and Security Agreements, or the priority thereof over other liens,
charges, or encumbrances, or to release or affect the liability of any party or
parties whomsoever would now or may hereafter be liable under or on account of
the Note, Trust Deed, or Security Agreements.
VII
TRANSFER OF DEVELOPMENT PROPERTY
Purchaser covenants and agrees that it shall not, without the express prior
written approval of the Agency, sell, lease, assign, dispose of, convey or
otherwise transfer or encumber any of the Development or the real or personal
property, including rents, covered by the Trust Deed or Security Agreements.
-3-
<PAGE> 4
VIII
CONSENT TO FUTURE MODIFICATION
Seller, Purchaser, and any person or persons at any time obligated for the
performance of the terms of the Note, Trust Deed, Security Agreements,
Regulatory Agreement, Rents and Leases, or Management Agreement, hereby waive
notice and consent to any and all extensions and modifications of any of said
instruments, deeds and agreements granted at any time by the Agency to Seller,
Purchaser, or any person or persons now or hereafter obligated or liable under
any of the said instruments, deeds or agreements.
IX
INTERPRETATION
in this Agreement, the singular number includes the plural and the plural
number includes the singular. If this Agreement is executed by more than one
person, firm or corporation as Purchaser, or Seller, the obligations of each
such person, firm, or corporation hereinunder shall be joint and several.
X
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, and of the
Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and Leases,
and Management Agreement, shall govern and control notwithstanding any
conflicting provision in any existing or future agreement between Seller and
Purchaser.
XI
LIMITATIONS
The right to plead any statute of limitations as a defense to any obligations
or demands secured by or mentioned in the Note, Trust Deed, Security
Agreements, Regulatory Agreement, Rents and Leases, or Management Agreement is
hereby waived by Seller and Purchaser to the full extent permissible by law.
XII
APPLICATION OF AGREEMENT
This Agreement applies to, inures to the benefit of, and binds all parties
hereto and their respective heirs, legatees, devisees, and administrators,
executors, successors and assigns.
XIII
GOVERNING LAW
This Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws
of the State of Oregon.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement at Portland, OR,
the day and year first above written.
OREGON HOUSING AGENCY PURCHASER: Crossings International
STATE OF OREGON Corporation, a Washington Corporation
By: /s/ Larry Dowd By: /s/
------------------------- -----------------------------
Larry Dowd, Manager
Rental Programs
Title: President
---------------------------
By:
------------------------------
Title:
---------------------------
SELLER: Albany Residential Center
By: /s/ Larry Dowd
------------------------------
Title: General Partner
--------------------------
By: /s/ Christini Beachlini-Barta
-------------------------------
Title: General Partner
-----------------------------
STATE OF OREGON )
) ss.
County of Marion)
July 5, 1990
Personally appeared LARRY DOWD who, being first duly sworn, did say that she is
authorized to execute such instrument in behalf of the OREGON HOUSING AGENCY,
STATE OF OREGON, and acknowledged said instrument to be its voluntary act and
deed.
Before me: /s/ Kari Petersen
---------------------
Notary Public for Oregon
My Commission expires: 11-26-91
STATE OF OREGON )
) ss.
County of Multnomah)
Personally appeared Richard Boehlke, president of Crossings International
Corporation (Purchaser) this 2nd day of August, 1990, and acknowledged the
foregoing instrument to be his voluntary act and deed.
/s/ M. Kimball
-------------------------------
Notary Public for Oregon
My Commission expires: 03/09/93
-5-
<PAGE> 6
STATE OF OREGON )
) ss.
County of Multnomah)
Personally appeared Larry H. Draper & Christine Beaulieu, general partners of
Albany Residential Center (Seller) this 23rd day of July, 1990, and
acknowledged the foregoing instrument to be his voluntary act and deed.
/s/ M. Kimball
-------------------
Notary Public for Oregon
My Commission expires: 03/09/93
DG:dg
1976g
-6-
<PAGE> 7
Exhibit A
Beginning at a point which is on the North right-of-way line of 16th Avenue
in the City of Albany, Linn County, Oregon, said point being 1899.48 feet North
88 (degrees) 51' East, 390.16 feet North l (degree) 25' 10" West and 70.00 feet
North 89 (degrees) 48' 05" West of the Southeast corner of the Abram Hackleman
Donation Land Claim No. 62 in Section 8, Township 11 South, Range 3 West,
Willamette Meridian, Linn County, Oregon; thence along said Northerly line of
16th Avenue, North 89 (degrees) 481 05" West, 1.97 feet; thence along said
Northerly line on a 250 foot radius curve to the right, the long chord of which
bears North 65 (degrees) 49' 13" West, 203.22 feet; thence along said Northerly
line on a 250 foot radius curve to the left, the long chord of which bears North
56 (degrees) 06' 27" West, 123.23 feet; thence North l (degree) 25' 10" West,
189.79 feet; thence North 88 (degrees) 34' 50" East, 324.73 feet to the Westerly
right-of-way line of Davidson Street; thence along said Westerly line on a 375
foot radius curve to the right, the long chord of which bears South 9 (degrees)
40' 05" West, 51.20 feet; thence along said Westerly line on a 430 foot radius
curve to the left, the long chord of which bears South 7 (degrees) 31' 44" West,
90-70 feet; thence along said Westerly line, South l (degree) 28' 29" West,
198.05 feet and South 22 (degrees) 29' 06" West, 12.29 feet to the place of
beginning.
<PAGE> 8
ASSUMPTION AGREEMENT
This AGREEMENT is made this 23rd day of July, 1990, by and between Albany
Residential Center, an Oregon General Partnership and Beaulieu-Draper Limited,
an Oregon Corporation, hereinafter referred to as "Seller," the Oregon Housing
Agency, State of Oregon, having its principal office at 1600 State Street,
Suite 100, Salem, Oregon, 97310, hereinafter referred to as the "Agency" and
Crossings International Corporation, hereinafter referred to as "Purchaser."
RECITALS
1. On May 30, 1984, Seller received a loan from the Agency in the amount of
Two Million Two Hundred Thousand dollars (U.S. $2,200,000), hereinafter
referred to as the "Loan," to aid Seller in the construction and financing
of a housing development located in the area commonly known as Albany,
Oregon, and legally described as follows:
See Exhibit A
2. The Loan is evidenced by a Promissory Note in the sum of Two Million Two
Hundred Thousand dollars (U.S. $2,200,000), dated May 30, 1984, and
executed by Seller, which Promissory Note is hereinafter referred to as
the "Note." The Note is, by this reference, incorporated herein. A true
and accurate copy of the Note is available upon request from the Agency,
1600 State Street, Suite 100, Salem, OR 97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located. Said
Trust Deed, dated May 30, 1984, executed by Seller, as grantor, and in
which the Agency is named as beneficiary and Safeco Title Insurance Co.,
as trustee, was recorded on June 4, 1984, in the office of the county
clerk of the County of Linn, State of Oregon, Vol. MF361, Page 71, and
is hereinafter referred to as "Trust Deed." The Trust Deed is, by this
reference, incorporated herein. A true and accurate copy of the Trust
Deed is available upon request from the Agency, 1600 State Street, Suite
100, Salem, OR 97310.
4. The debt evidenced by the Note is further secured by the following
written agreements made by and between Seller and the Agency:
a. two Security Agreements dated May 30, 1984, hereinafter referred
to as "Security Agreements";
b. a Regulatory Agreement dated May 30, 1984, hereinafter referred
to as "Regulatory Agreement";
c. an Assignment of Rents and Leases dated May 30, 1984, hereinafter
referred to as Rents and Leases";
d. a Management Agreement dated July 12, 1983, hereinafter referred
to as Management Agreement".
<PAGE> 9
The Security Agreements, Regulatory Agreement, Rents and Leases, and
Management Agreement are, by this reference, incorporated herein. True and
accurate copies of these documents are available upon request from the
Agency, 1600 State Street, Suite 100, Salem, OR 97310.
5. The Trust Deed, Security Agreements and Regulatory Agreement provide that
Seller shall not sell, convey or otherwise transfer any of the
Development or property described in the Trust Deed or Security Agreements
without the express written approval of the Agency.
6. The Seller has sold and conveyed, or is to sell and convey, the
Development and all of the property described in the Trust Deed and
Security Agreements to Purchaser, and both Seller and Purchaser have
requested the Agency to approve the sale.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby,
the parties hereto covenant and agree as follows:
I
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Two Million One Hundred Seventy Three
Thousand Eight Hundred Forty-Seven 06/100 dollars (U.S. $2,173,847.06) as of
May 15, 1990.
II
PURCHASER'S ASSUMPTION OF LIABILITY
Purchaser agrees to pay the Note in installments at the times, in the manner,
and in all other respects as therein provided; to perform all of the
obligations provided in the Note, Trust Deed, Security Agreements, Regulatory
Agreements, Rents and Leases, and Management Agreement to be performed by
Seller at the times, in the manner, and in all respects as therein provided;
and to be bound by all of the terms of the Note, Trust Deed, Security
Agreements, Regulatory Agreement, Rents and Leases, and Management Agreement.
III
AGENCY'S CONSENT TO SALE OF DEVELOPMENT
The Agency hereby consents to the above-mentioned sale of the Development by
Seller to Purchaser, and to Purchaser's assumption of the obligations of
Seller under the Note, Trust Deed, Security Agreements, Regulatory Agreement,
Rents and Leases, and Management Agreement.
-2-
<PAGE> 10
IV
SELLER'S LIABILITY
Seller agrees that Purchaser's assumption of the obligations of Seller under
the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and
Leases, and Management Agreement, and the Agency's consent to said assumption,
does not release or discharge Seller or any other party from liability under
the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and
Leases or Management Agreement.
V
DISCLOSURE OF FINANCIAL INFORMATION
Seller and Purchaser hereby covenant and agree to furnish to the Agency on or
before 90 days from closing, a complete financial statement audited by an
Independent Certified Public Accountant, in a form acceptable to the Agency and
the Secretary of the U.S. Department of Housing and Urban Development, setting
forth the results of operation of the Development for the fiscal year
beginning July 1, 1989 and ending as of the date of closing, and such other
financial information as the Agency may reasonably request. Seller and
Purchaser further agree that violation of this provision shall constitute a
violation of the Regulatory Agreement and HAP Contract by Seller and Purchaser,
who shall be jointly and severally liable for performance of the obligations
described in this paragraph V.
VI
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed and Security Agreements shall
remain subject to the liens, charges, and encumbrances of the Trust Deed and
Security Agreements, and nothing contained herein or done pursuant hereto shall
affect or be construed to affect the liens, charges, and encumbrances of the
Trust Deed and Security Agreements, or the priority thereof over other liens,
charges, or encumbrances, or to release or affect the liability of any party or
parties whomsoever would now or may hereafter be liable under or on account of
the Note, Trust Deed, or Security Agreements.
VII
TRANSFER OF DEVELOPMENT PROPERTY
Purchaser covenants and agrees that it shall not, without the express prior
written approval of the Agency, sell, lease, assign, dispose of, convey or
otherwise transfer or encumber any of the Development or the real or personal
property, including rents, covered by the Trust Deed or Security Agreements.
-3-
<PAGE> 11
VIII
CONSENT TO FUTURE MODIFICATIONS
Seller, Purchaser, and any person or persons at any time obligated for the
performance of the terms of the Note, Trust Deed, Security Agreements,
Regulatory Agreement, Rents and Leases, or Management Agreement, hereby waive
notice and consent to any and all extensions and modifications of any of said
instruments, deeds and agreements granted at any time by the Agency to Seller,
Purchaser, or any person or persons now or hereafter obligated or liable under
any of the said instruments, deeds or agreements.
IX
INTERPRETATION
In this Agreement, the singular number includes the plural and the plural
number includes the singular. If this Agreement is executed by more than one
person, firm or corporation as Purchaser, or Seller, the obligations of each
such person, firm, or corporation hereinunder shall be joint and several.
X
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, and of the
Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and Leases,
and Management Agreement, shall govern and control notwithstanding any
conflicting provision in any existing or future agreement between Seller and
Purchaser.
XI
LIMITATIONS
The right to plead any statute of limitations as a defense to any obligations
or demands secured by or mentioned in the Note, Trust Deed, Security
Agreements, Regulatory Agreement, Rents and Leases, or Management Agreement is
hereby waived by Seller and Purchaser to the full extent permissible by law.
XII
APPLICATION OF AGREEMENT
This Agreement applies to, inures to the benefit of, and binds all parties
hereto and their respective heirs, legatees, devisees, and administrators,
executors, successors and assigns.
XIII
GOVERNING LAW
This Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws of
the State of Oregon.
-4-
<PAGE> 12
IN WITNESS, WHEREOF, the parties have executed this Agreement at Portland, OR,
the day and year first above written.
OREGON HOUSING AGENCY PURCHASER: Crossings International
STATE OF OREGON Corporation, a Washington Corporation
By: /s/ Larry Dowd By: /s/
------------------------- -----------------------------
Larry Dowd, Manager
Rental Programs Title: President
---------------------------
By:
------------------------------
Title:
---------------------------
SELLER: Albany Residential Center
By: /s/ Larry Dowd
Title: General Partner
--------------------------
By: /s/ Christine Beaulieu-Barta
-------------------------------
Title: General Partner
-----------------------------
STATE OF OREGON )
) ss.
County of Marion)
July 5, 1990
Personally appeared LARRY DOWD who, being first duly sworn, did say that she is
authorized to execute such instrument in behalf of the OREGON HOUSING AGENCY,
STATE OF OREGON, and acknowledged said instrument to be its voluntary act and
deed.
Before me: /s/ Kari Petersen
---------------------
Notary Public for Oregon
My Commission expires: 11-26-91
STATE OF OREGON )
) ss.
County of Multnomah)
Personally appeared Richard Boehlke, president of Crossings International
Corporation (Purchaser) this 2nd day of August, 1990, and acknowledged the
foregoing instrument to be his voluntary act and deed.
/s/ M. Kimball
-------------------------------
Notary Public for Oregon
My Commission expires: 03/09/93
-5-
<PAGE> 13
STATE OF OREGON )
) ss.
County of Multnomah)
Personally appeared Larry H. Draper & Christine Beaulieu, general partners of
Albany Residential Center (Seller) this 23rd day of July, 1990, and acknowledged
the foregoing instrument to be his voluntary act and deed.
/s/ M. Kimball
-------------------
Notary Public for Oregon
My Commission expires: 03/09/93
DG:dg
1976g
-6-
<PAGE> 14
Exhibit A
Beginning at a point which is on the North right-of-way line of 16th Avenue in
the City of Albany, Linn County, Oregon, said point being 1899.48 feet North
88(degree) 51' East, 390.16 feet North 1(degree) 25' 10" West and 70.00 feet
North 89(degree) 48' 5" West of the Southeast corner of the Abram Hackleman
Donation Land Claim No. 62 in Section 8, Township 11 South, Range 3 West,
Willamette Meridian, Linn County, Oregon; thence along said Northerly line of
16th Avenue, North 89(degree) 48' 05" West, 1.97 feet; thence along said
Northerly line on a 250 foot radius curve to the right, the long chord of which
bears North 65(degree) 49' 13" West, 203.22 feet; thence along said Northerly
line on a 250 foot radius curve to the left, the long chord of which bears North
56(degree) 06' 27" West, 123.23 feet; thence North 1(degree) 25' 10" West,
189.79 feet; thence North 88(degree) 34' 50" East, 324-73 feet to the Westerly
right-of-way line of Davidson Street; thence along said Westerly line on a 375
foot radius curve to the right, the long chord of which bears South 9(degree)
40' 05" West, 51.20 feet; thence along said Westerly line on a 430 foot radius
curve to the left, the long chord of which bears South 7(degree) 31' 44" West,
90.70 feet; thence along said Westerly line, South 1(degree) 28' 29" West,
198.05 feet and South 22(degree) 29' 06" West, 12.29 feet to the place of
beginning.
<PAGE> 1
EXHIBIT 10.40
OREGON HOUSING AGENCY
STATE OF OREGON
L O A N A G R E E M E N T
THIS AGREEMENT is made this 31st day of October, 1988, by and between Forest
Grove Residential Center Limited Partnership, an Oregon Limited Partnership,
located at 19428 SW 35th Court, Lake Oswego OR 97035 (hereinafter referred to
as "Borrower"), and the State of Oregon, acting by and through the Oregon
Housing Agency, having its principal office at 1600 State Street, Suite 100,
Salem, Oregon 97310 (hereinafter referred to as the "Agency").
RECITALS:
Borrower has requested the Agency to make a loan to Borrower in the principal
amount of Three Million Five Hundred Twenty Seven Thousand Five Hundred Dollars
($3,527,500) for the long-term financing of a housing project for elderly and
disabled persons and families. The Agency is willing to make this loan on the
terms and conditions of this Agreement. Accordingly, the parties agree as
follows:
Section 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Act" shall mean ORS 456.515 to 456.720, as amended, which were in
effect when the loan closed.
(b) "Administrator" shall mean the chief administrative officer of the
Oregon Housing Agency appointed pursuant to ORS 456.554.
(c) "Allocable Portion" shall mean an amount equal to the ratio of the
total principal amount of obligations issued by the Agency to the principal
amount of the Loan, determined at closing.
(d) "Break-Even Occupancy" shall mean the point in time when the
Project's monthly rental income meets its monthly Operating Expenses and Loan
payments.
(e) "Contingency Escrow Reserve Account" shall mean the account
established under Section 5(c) hereof, consisting of three percent (3%) of the
principal of the Loan or such other amount as the Agency in its sole discretion
shall require.
(f) "Financing Securities" shall mean the Allocable Portion of any
obligations issued by the Agency to finance the Loan.
(g) "Loan" shall mean long-term financing of Property for a housing
project for Occupants as set out in Section 2(a) hereof.
(h) "Occupant" shall mean people who meet the requirements of Section 8
hereof and occupy rental space in the Project.
1 - LOAN AGREEMENT
<PAGE> 2
(i) "Operating Expenses" shall mean all federal, state, county, and
local government taxes, assessments, or charges; water and sewer charges;
operating costs incurred in maintaining and operating the Project, including
without limitation costs of utilities, supplies, insurance, compensation of all
persons who perform duties connected with the operation, maintenance, and
repair of the Project, management of the Project, legal, accounting, and other
professional fees incurred in connection with the operation. maintenance, and
management of the Project; and any other costs or expenses incurred by Borrower
or its agent with respect to the Project and not otherwise reimbursed by
Occupants of the Project, which are properly allocable to the operation or
maintenance of the Project in accordance with generally accepted accounting
principles.
(j) "Operating Receipts" shall mean rents paid by Occupants and all
other receipts of the Project.
(k) "Operating Receipts and Expense Account" shall mean the account
established under Section 5(a) hereof.
(l) "Project" shall mean the Property plus all assets of whatsoever
nature used in and owned by Borrower on the Property.
(m) "Property" shall mean property financed by the Loan.
(n) "Rental Reserve Account" shall mean the account established under
Section 5(e) hereof to assure sufficient funds to pay Operating Expenses and
Loan payments before Break-Even Occupancy.
(o) "Rent Up Schedule" shall mean the projection prepared by Borrower
prior to closing of the Loan and the number of months it will take the Project
to reach Break-Even Occupancy.
(p) "Replacement Cost Reserve Account" shall mean the account
established under Section 5(d) hereof to aid in extraordinary maintenance,
repair, and replacement of capital items of a Project.
(q) "Security Deposit Account" shall mean the account established under
Section 5(b) hereof.
Notice to Borrower: Do not sign this Agreement before you read it. This
Agreement authorizes the Agency to refuse to accept repayment of the Loan
before maturity of the Loan and provides for payment of a penalty if you repay
the Loan with the Agency's permission before that date.
Section 2. Payments of Principal and Interest, Prepayments
(a) Borrower promises to repay the principal of and accrued interest on
the Loan made hereunder in immediately available funds monthly. $32,776.32
shall be due and payable monthly for 35 years, beginning on December 15, 1988.
(b) Borrower promises to pay interest on the unpaid principal amount of
the Loan for the period commencing at closing and until such Loan is paid in
full, at the rate of 10.9 percent per annum.
2 - LOAN AGREEMENT
<PAGE> 3
(c) The Loan may not be prepaid without the prior written consent of the
Agency. The Agency may consent to a prepayment of the principal provided that
the sum to be prepaid, computed as of the date of prepayment, shall equal the
unpaid principal balance of the Loan plus accrued interest, plus a premium for
the privilege of prepayment equal to:
(1) The difference between the unpaid principal balance of the Loan and
the amount of the Financing Securities, each as of the date of such
prepayment; plus
(2) Interest on the amount of the Financing Securities at the same rate
as interest is payable on the Loan from the date of prepayment to the
earliest date on which the Financing Securities may be redeemed, other
than by reference to Special or extraordinary redemption provision, at the
option of the Agency; plus
(3) The aggregate premium payable upon the redemption of the Financing
Securities on the earliest redemption date; plus
(4) The amount determined by the Agency as necessary to reimburse the
Agency for fees and expenses of the trustee, paying agents, and counsel as
may be necessary in connection with the redemption of such Financing
Securities (such amount in no event to exceed 2% of the amount of the
Financing Securities).
Upon disbursement of the Loan, the Agency will specify the principal amount of
obligations deemed necessary, in the sole judgment of the Agency, to provide
funds to pay the Agency's costs incurred in making the Loan. Such costs may
include, in addition to the principal amount of the Loan, an allocable share of
underwriter's discount, costs of issuance, capitalized interest, necessary
reserves and any other similar costs incurred by the Agency in connection with
the financing of the Loan. Such amount, reduced at any point in time in
proportion to the reduction of the principal amount of the Loan, shall be
conclusively deemed to be the amount of the Financing Securities to be redeemed
in the event of advance payment of the Loan.
(d) In the event of default which results in the Borrower paying the
entire amount of the Loan prior to the date set forth in section 2(a) hereof,
the Borrower shall pay a default penalty equal to the amount set forth in
section 2(c) hereof. Notice to Borrower: Do not sign this Agreement before you
read it. This Agreement provides for the payment of a penalty if Borrower
defaults and repays the Loan prior to the date set out in section 2(a) hereof.
(e) All other payments and prepayments of principal and other amounts
payable to the Agency hereunder will be made to the Agency at its office
located at 1600 State Street, Suite 100, Salem, Oregon 97310, or at such other
place designated by the Agency to Borrower in writing.
Section 3. Low or Moderate Income Persons
To the end of satisfying the requirements of Section 142(d) of the
3 - LOAN AGREEMENT
<PAGE> 4
Code during the Qualified Project period, the Borrower hereby represents,
warrants, covenants, and agrees as follows:
(a) Throughout the Qualified Project Period, (i) at least twenty percent
(20%) of the completed residential units in the project shall be occupied by
Low or Moderate Income Persons, prior to the satisfaction of which no
additional units shall be rented or leased to any other tenants, and (ii) after
initial rental occupancy of residential units by Low or Moderate Income
Persons, at least twenty percent (20%) of the completed residential units in
the Project shall be occupied by Low or Moderate Income Persons, and at all
times shall be rented to and occupied (or held available for rent if previously
rented to and occupied by a Low or Moderate Income Person) by Low or Moderate
Income Persons as required by Section 142(d) of the Code. If a resident was a
Low or Moderate Income Person on commencement of his or her occupancy of a
unit, the resident shall be treated as continuing to be a Low or Moderate
Income Person to the applicable income limit. Once it is determined that the
income of a resident who was formerly a Low or Moderate Income Person exceeds
140 percent of the maximum income which would qualify the resident as a Low or
Moderate Income Person, then no residential unit in the Project of comparable
or smaller size shall be occupied by a new resident who is not a Low or
Moderate Income Person, unless, as of the date of occupancy, at least 20
percent of the units are occupied by Low or Moderate Income Persons.
(b) Throughout the Qualified Project period, the Borrower shall obtain
and maintain on file from each Low or Moderate Income Person residing in the
Project a certification of tenant eligibility and income verification in a form
and manner required by the Agency.
(c) Throughout the Qualified Project period, the Borrower shall permit
any duly authorized representative of the Agency to inspect the books and
records of the Borrower pertaining to the incomes of Low and Moderate Income
Persons residing in the Project.
(d) The Borrower shall prepare and submit to the Agency each quarter
during the Qualified Project Period a certification of continuing program
compliance, in the form required by the Agency, which certification shall be
executed by the Borrower, and shall set forth such information as the Agency
may require, including the percentage of the residential units of the Project
which are occupied by Low or Moderate Income Persons at all times during the
period since the filing of the last certification of continuing program
compliance. The Borrower shall have attached to the Agency's copy of the
certification of continuing program compliance the certifications of tenant
eligibility and income verification.
(e) Throughout the Qualified Project period, the Borrower shall prepare
and file with the Agency an annual certification that the Project continues to
meet the requirements of this Loan Agreement and Section 142(d) of the Code.
(f) Throughout the Qualified Project Period, the Borrower shall assure
that each lease or rental agreement used by the Borrower in renting any
residential units in the Project to Low or Moderate Income
4 - LOAN AGREEMENT
<PAGE> 5
Persons provides for termination of the lease and consent by such person to
immediate eviction for failure to qualify as a Low or Moderate Income Person,
as a result of any material misrepresentation made by such person with respect
to such person's income and income verification.
(g) The Borrower shall cause to be submitted to the Secretary of
Treasury of the United States (at such time and in such manner as the Secretary
shall prescribe) an annual certification as to whether the Project continues to
meet the requirements of Section 142(d) of the Code. Failure to comply with
this certification requirement shall subject the Borrower and any operator of
the Project to penalty, as provided in Section 6652(j) of the Code.
(h) The Borrower hereby expressly agrees to comply with all applicable
regulations which may have been promulgated under Section 142(d) of the Code.
The Borrower acknowledges that regulations have not been promulgated under
Section 142(d) of the Code, and that the Secretary of Treasury of the United
States may promulgate regulations under Section 142(d) of the Code which will
be retroactive in effect.
Section 4. Rental Rates and Operating Expenses
(a) Borrower shall submit to the Agency a proposed schedule of rental
rates for the Project on forms approved by the Agency not less than sixty (60)
days prior to the date of a proposed rent increase. A new rental rate schedule
must be submitted prior to any change in rental rates. Upon approval by the
Agency, the proposed schedule of rental rates shall be effective after all
required notifications.
(b) Borrower shall operate the Project in such a manner so as to
maintain the Project in good condition. All Operating Expenses shall be paid
by Borrower during the life of this Agreement even if an operating deficit
occurs.
Section 5. Accounts and Funds.
(a) Operating Receipts and Expense Account: Borrower shall establish and
maintain a Project Operating Receipts and Expense Account with a depository
approved by the Agency. All Operating Receipts shall be immediately deposited
in the account, and Borrower shall promptly pay all Operating Expenses out of
this account.
(b) Security Deposit Account: Borrower shall segregate and hold all
Occupant security deposits in an interest-bearing account in a depository
approved by the Agency. The balance of this account must at all times be equal
to the total amount collected from the Occupants plus any accrued interest.
All pro rata interest on this account shall be payable to the Occupants if the
security deposit is returned to them.
(c) Contingency Escrow Reserve Account: At closing, the Borrower shall:
(1) Deposit with the Agency or a depository approved in writing by
the Agency, cash in the amount of One Hundred Five Thousand Eight
5 - LOAN AGREEMENT
<PAGE> 6
Hundred Twenty Five Dollars ($105,825). Said funds will be held by the
Agency or an approved depository in an interest-bearing Contingency Escrow
Reserve Account for three years or such longer period as the Agency in its
sole discretion shall determine. Accrued and unspent interest on the
account, if any, shall be payable to the Borrower when the account is
closed. This account shall not be funded with Loan proceeds. Said funds
may be applied by the Agency, in such amounts and at such times as the
Agency, in its sole discretion, determines: (A) to correct or repair any
defects in the mechanical or structural systems of the Project; (B) to
correct any violations of local, state, or federal ordinances, statutes or
regulations; (C) at the request of Borrower, to provide design
modifications or tenant services which will materially benefit the
Occupants or reduce Operating Expenses; (D) at the election of the Agency,
to cure any breaches of the obligations of Borrower in this Agreement, the
Trust Deed, or Trust Deed Note; (E) to perform necessary Project
maintenance which the Borrower has failed to perform; (F) to payment of
delinquent principal and interest payments required to be paid to the
Agency by the Trust Deed Note and Trust Deed, (G) to maintenance of the
Replacement Cost Reserve Account; or (H), to payment of the current and
delinquent Operating Expenses of the Project which the Borrower has failed
to pay.
or
(2) Deliver to the Agency an unconditional and irrevocable letter of
credit in favor of the Agency, with a term of three (3) years, in a form
and from a financial institution acceptable to the Agency in the amount of
One Hundred Five Thousand Eight Hundred Twenty Five Dollars ($105,825).
The Agency may, in its sole discretion, draw against the letter of credit
for the purposes set forth in section 5(c)(i)(1) to (H) above.
If Borrower is unable to obtain a letter of credit of three (3) years'
duration, the Agency may consent to delivery by Borrower of successive
unconditional and irrevocable letters of credit in a form and from a
financial institution acceptable to the Agency. Each letter shall have a
term of not less than one (1) year, and the three letters of credit shall
be in force and effect continuously for three years from closing. If
Borrower chooses to deliver successive letters of credit, Borrower
unconditionally consents to the Agency's right and privilege, in its sole
option and discretion, to draw and receive funds up to the full amount of
each letter of credit at any time during the last three (3) business days
for which each letter of credit is effective, unless, before the three (3)
business day period, Borrower shall deliver to the Agency a renewal of the
letter of credit for an additional period of not less than one (1) year.
(3) Borrower shall have two (2) working days to cure any problem set out
in section 5(c)(1)(A) to (H) hereof after receipt of written notice from
the Agency before the Agency disburses or applies for funds from the
Contingency Escrow Reserve Account.
6 - LOAN AGREEMENT
<PAGE> 7
(4) The amount of Borrower's Contingency Escrow Reserve Account may be
reduced from the amount set forth in Section 2(c)(1) or (2) above by
one-third (1/3) of the original amount of the deposit or letter of credit
per year upon approval of the Agency. Three (3) years from the date of
Loan closing, if the terms of this Agreement are fulfilled by Borrower,
the funds in such account shall be returned to Borrower. Notwithstanding
the above, the amount of Borrower's Contingency Escrow Reserve Account
will not be reduced if at any time, in the sole discretion of the Agency,
it is determined that a ready source of funds may be needed to meet any
contingencies as described in section 5(c)(1) above.
(d) Replacement Cost Reserve Account: Borrower shall establish, prior to
or concurrently with the first payment on the Loan, an account under the control
of the Agency with the Agency or in a depository designated by the Agency.
Borrower shall deposit the amount of______________________($__________) per
month into this account. Disbursements from this account shall only be made for
replacement of capital items. Requests for disbursement shall be made in
writing to the Agency by Borrower. Agency may disapprove a request if the
balance in the account is less than an amount equal to 12 monthly payments to
the account, plus any insurance deductible required.
No deposits need to be made to this account after the account balance equals
144 times the monthly payment. When expenditures reduce the account balance
below this figure, Borrower shall resume monthly deposits until the account
balance again equals 144 times the monthly payment.
If an event of default under the terms of the Trust Deed, Loan Agreement, or
Trust Deed Note occurs and as a consequence of such default, the Agency elects
to declare immediately due and payable all amounts due on the Loan and secured
by the Trust Deed, the Agency may apply or authorize the application of the
balance in this account to the amounts due on the Loan as accelerated.
(e) Rental Reserve Account: Borrower shall, at Loan closing, establish a
federally insured checking or savings account in the amount of Fifty One
Thousand Dollars ($51,000) in the name of Borrower and the Agency. This
account shall not be funded with Loan proceeds.
This account shall be used to pay Operating Expenses, Loan payments, and
Replacement Cost Reserve Account payments as they are incurred during the
initial months of occupancy of the Project. After closing, Borrower shall
submit to the Agency each month a statement of income and expenses. The Agency
shall review the statement for accuracy and authorize payment of funds from
this account to pay Operating Expenses, Loan Payments, and Replacement Cost
Reserve Account payments as long as the statement of income and expenses is in
accordance with the Rent Up Schedule. If not in accordance with the Rent Up
Schedule, the Borrower shall pay any deficiency. The Agency authorization to
withdraw funds from this account shall be in a form agreed upon by Borrower,
the depository where the account is located and Agency. Borrower may then
withdraw funds to pay Operating Expenses, Loan Payments, and Replacement Cost
Reserve Account Payments.
7 - LOAN AGREEMENT
<PAGE> 8
After Break-Even Occupancy has been maintained for 90 days continuously, the
Agency shall have no further interest in the account. At this time, any funds
remaining in the account shall be returned to Borrower.
(f) Escrow for Taxes, Insurance, and Other Charges: The Agency or its
agent shall bill the Borrower and the Borrower shall pay the Agency or the
Agency's agent the following sums:
(1) Commencing on such date as the Agency, at its discretion, shall
designate, Borrower shall pay, in addition to the monthly payments
required by the Trust Deed Note, a sum equal to the land lease payments, if
any, next due, plus the premiums that will next become due and payable on
the policy or policies of fire and extended coverage and other property
insurance covering the Property, plus taxes and assessments next due on
the Property, all estimated by the Agency, minus all sums already paid for
these items, divided by the number of months to elapse before one month
prior to the date when such land lease payments, premiums, taxes, and
assessments will become delinquent or due. These sums shall be held by
the Agency or the Agency's agent in escrow to pay said land lease
payments, premiums, taxes, and special assessments at such time as such
obligations become due.
(2) All payments required to be made by Borrower pursuant to this
section and all payments to be made under the Trust Deed Note shall be
added together and the aggregate amount thereof shall be paid each month
in a single payment by Borrower to the Agency. Agency shall apply the
payments to the following items in the following order of priority: (a)
land lease payments, taxes, special assessments, fire and other insurance
premiums; (b) interest on the Note; and (c) amortization of the principal
of the Note.
Section 6. Distribution of Income and Assets.
Neither the Borrower nor those having a beneficial interest in Borrower shall
make, receive, or retain any distribution of any assets or any income of any
kind from the Project for the term of the Loan except from the Operating
Receipts and Expense Account and then only subject to the following conditions:
(a) Nonprofit Borrowers are not entitled to distributions from the
Operating Receipts and Expense Account.
(b) For-profit Borrowers are entitled to distributions from the
Operating Receipts and Expense Account only at the end of each month of Project
operation and only after all Operating Expenses, including Loan payments, have
been paid, or funds have been set aside for payment, and all reserve accounts
have been paid.
(c) No distribution shall be made from the Operating Receipts and
Expense Account when there is any default under this Agreement, the Trust Deed
Note, or Trust Deed, or when the Agency at its discretion determines that the
Replacement Cost Reserve Account is too low to provide adequate funds for
needed foreseeable repairs or replacements pursuant to section
8 - LOAN AGREEMENT
<PAGE> 9
5(d) of this Agreement, or when there is, in the Agency's estimation, any
reasonable probability that the Operating Receipts and Expense Account will not
be sufficient to pay for all of the Operating Expenses of the Project.
(d) Any distribution of funds from the Operating Receipts and Expense
Account which does not comply with the terms of this section shall be deemed to
be held in constructive trust for the benefit of the Agency by the possessor of
those funds. Borrower, if not the possessor of the trust funds, shall make
demand upon the possessor of those funds at the request of the Agency. Any
unauthorized distribution of funds shall be repaid to the Operating Receipts
and Expense Account from sources other than the reserve accounts set up in this
Agreement.
Section 7. Management.
Borrower shall provide for management of the project in a manner satisfactory
to the Agency and in accordance with a management-agreement between Borrower
and the management agent, or Borrower and the Agency, if Borrower is acting as
the management agent. The Agency shall approve the management agent and plan
before Borrower enters into the management agreement. Borrower shall not
amend, modify, or terminate the management agreement or enter into any other
management agreement without the express written consent of the Agency. Any
management agreement entered into by Borrower shall contain a provision that it
shall be subject to termination at the sole discretion of the Agency for
failure to carry out the management plan without penalty to any party.
Section 8. Occupant Qualifications.
Borrower covenants and agrees that no occupant of the Project shall be approved
by Borrower unless the following conditions shall have been met at the time of
such approval, unless any requirement has been waived by the Administrator as
allowed by the Act:
(a) The Occupant is a low or below median-income person or family as
defined by the Act and the Agency's Rules and the head of the household is 58
years of age or older at the time the person or family occupies the dwelling
unit; or
(b) The Occupant meets the definition of a disabled person under the Act
and Agency Rules;
The Occupant shall execute and deliver to Borrower, on forms prescribed by the
Agency, a certification of the Occupant's status under subsections (a) or (b)
above.
Section 9. Borrower's Representations and Warranties.
Borrower represents and warrants to the Agency that:
(a) Borrower is a Limited Partnership duly organized, validly existing,
and in good standing under the laws of Oregon; and Borrower has full power and
authority to transact the business in which it is engaged,
9 - LOAN AGREEMENT
<PAGE> 10
and full power, authority. and legal right to make this Agreement, the Trust
Deed, and the Trust Deed Note and to incur and perform its obligations
hereunder and under the Trust Deed and Trust Deed Note.
(b) The making and performance by Borrower of this Agreement, the
Promissory Note and the Trust Deed and the borrowing by Borrower hereunder (i)
have been duly authorized by all necessary action of the Borrower, (ii) do not
and will not violate any provision of any applicable law, rule, regulation, or
order of any court, regulatory commission, board, or other administrative
agency or any provision of Borrower's articles of incorporation or bylaws
(articles of partnership) and (iii) do not and will not result in the breach
of, or constitute a default or require any consent under, or result in the
creation of any lien upon any properties or assets of Borrower pursuant to any
other indenture, bank, or other credit agreement, mortgage or other agreement
or instrument to which Borrower is a party or by which Borrower or any of its
properties may be bound or affected.
(c) This Agreement, the Trust Deed Note, and the Trust Deed have been
duly executed and delivered by Borrower and will constitute the legal, valid,
and binding obligation of Borrower, enforceable in accordance with their terms
subject to the laws of bankruptcy, insolvency, or other similar laws affecting
the enforcement of creditors' rights generally.
(d) No authorization, consent, license, or approval of, or filing or
registration with, or notification to, any governmental body or regulatory or
supervisory authority is required for the execution, delivery, or performance
by Borrower of this Agreement, the Trust Deed Note, or the Trust Deed or for
the borrowing hereunder.
(e) Since Borrower applied to Agency for the Loan, there has been no
material adverse change in the financial condition of Borrower.
(f) No representation or warranty by Borrower in this Agreement or on
any written statement, including information, data, exhibits, and other
materials submitted in connection with the Loan, furnished to the Agency
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, when taken together, contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements not misleading.
Section 10. Affirmative Covenants of Borrower.
Borrower covenants and agrees to all of the following:
(a) It shall abide by the terms of the Trust Deed and Trust Deed Note
dated the date hereof and by this reference incorporated herein.
(b) The Project shall be open to all persons without discrimination as
to race, color, creed, religion, national origin, sex, marital status, or
status with regard to public assistance or local residency, unless otherwise
specified by law or this Agreement.
(c) Any commercial facilities located in the Project will be rented
10 - LOAN AGREEMENT
<PAGE> 11
at the rental prescribed or approved by the Agency, and all such commercial
rental and lease agreements are subject to the prior written approval of the
Agency.
(d) Payment for services, supplies, or materials for the Project shall
not exceed the amount ordinarily paid for such services, supplies, or materials
in the area where the services are rendered or the supplies or materials are
furnished.
(e) Borrower shall at all times maintain books, contracts, records,
documents, and other papers relating to the Property and the Project in
reasonable condition for proper audit, and all such books, contracts, records,
documents, and other papers shall be subject to inspection by the Agency or
its authorized agents upon reasonable notice.
(f) For-profit Borrowers shall submit monthly/quarterly financial
statements as required by the Agency to the Agency. Nonprofit Borrowers shall
submit financial statements as requested by the Agency. Within sixty (60) days
following the end of each fiscal year, all Borrowers shall furnish to the
Agency a complete financial statement in a form acceptable to the Agency, based
upon an examination of the books, records, and accounts of the Project, setting
forth the financial condition of the Project as of the end of such fiscal year,
the results of operation of the Project for such fiscal year, and such other
financial information as the Agency may reasonably request.
(g) At the request of the Agency, Borrower shall furnish to the Agency
monthly occupancy reports and provide specific information relating to the
income and assets of the Occupants.
(h) Borrower shall at closing provide the Agency with certificates of
insurance from companies approved by the Agency with the following coverages
and provisions and shall maintain such insurance coverage so long as any amount
of the Loan is outstanding. Each policy shall provide that the Agency shall be
given thirty (30) days advance written notice of the cancellation, expiration,
or termination of the policy or any material change in the coverage afforded
thereunder. In the event of loss, Borrower shall give prompt written notice to
the insurance carrier and the Agency, and the Agency may make proof of loss, if
not made promptly by Borrower. The Agency is hereby authorized in the event of
loss to compromise and settle all loss claims on said policies on such terms as
it deems appropriate. Borrower shall promptly furnish to the Agency a copy of
any proof of loss given to the insurance carrier.
(1) Liability insurance in an amount equal to $100,000 per individual
occurrence and $500,000 aggregate.
(2) Fire and extended coverage insurance equal to the replacement value
of the Project with no more than a $2,500 deductible. Such policies shall
be endorsed with a standard mortgagee clause with loss payable to Agency
and shall have a replacement clause endorsement.
(3) Business income insurance equal to one month's Operating Receipts.
The payment under the policy must continue until the
11 - LOAN AGREEMENT
<PAGE> 12
damaged portion of the Project is again ready for occupancy. This policy
shall be endorsed with a standard mortgagee clause.
(i) The Agency or its agents may enter upon the Property or the
Project for the purpose of inspection during Borrower's normal business hours.
(j) Borrower shall comply with the requirements of all applicable
laws, rules, regulations, and orders of any governmental authority, except where
contested in good faith and by proper proceedings.
Section 11. Negative Covenants of the Borrower.
Borrower covenants and agrees that it shall not, without the express prior
written approval of the Agency:
(a) Sell, lease (except individual units), convey or otherwise transfer
or encumber any of the Project or the Property, or permit such sale, lease,
conveyance, or other transfer or encumbrance of the Project or the Property or
any portion thereof, except as provided in the Trust Deed.
(b) Sell, assign, dispose of, or otherwise transfer or encumber any
personal property of the Project, including rents, or pay out any money except
for reasonable Operating Expenses and necessary repairs as provided herein.
(c) Remodel, add to, reconstruct, or demolish any part of the Property or
the Project.
(d) Require, as a condition of the occupancy or leasing of any unit in
the Project, any consideration or deposit other than the prepayment of the
first month's rent plus a refundable security deposit in an amount not in
excess of $100.
(e) Permit the use of the individual units of the Project for any
purpose except the use which was originally approved by the Agency
(f) Pay any compensation, including wages or salaries, from the
Operating Receipts and Expense Account or any other Project account.
(g) Incur any obligations on behalf of the Project to any of
Borrower's officers, directors, stockholders, members, trustees, partners,
beneficiaries under a trust, or any of their nominees.
(h) Enter into any contract or contracts for supervisory or managerial
services with respect to the Project's operation, other than the management
agreement set out in section 7 hereof.
(i) Transfer, assign, or pledge any right to, interest in, or title to
any funds deposited by Borrower with the Agency or reserved by the Agency for
Borrower.
(j) Make any capital expenditures not approved by the Agency
12 - LOAN AGREEMENT
<PAGE> 13
Section 12. Further Provisions Applicable to Borrower.
(a) No amendments will be made to a Borrower's certificate of limited
partnership or articles of incorporation or other documents establishing the
legal status of Borrower which would affect the Agency's rights under this
Agreement, the Trust Deed, or Trust Deed Note, without the Agency's prior
written approval.
(b) In the event of retirement, death, insanity, incapacity, withdrawal,
dissolution, liquidation, bankruptcy, or assignment for benefit of creditors of
a general partner of a limited partnership, the business may be continued by
the remaining general partners pursuant to a right set forth in the certificate
of limited partnership. In the event of dissolution of the limited
partnership, no title or right to possession and control of the Project, and no
right to collect the rents therefrom, shall pass to any person who is not bound
by this Agreement.
(c) If Borrower is a limited partnership, no general partner may
voluntarily withdraw from or be substituted by the partnership without the
prior written approval of the Agency.
(d) At the option of the Agency, the Loan may be reamortized within the
original term of the Loan if a partial prepayment results from an award in
condemnation, or from an insurance payment resulting from a loss on the
Property.
(e) The Agency warrants that it will not seek a deficiency judgment
against a limited partnership Borrower or any partner thereof personally
following a foreclosure and sale of the completed Project if the Agency has
acknowledged, in writing, satisfactory completion and acceptance of the
Project.
(f) Borrower shall save and hold harmless the State of Oregon and the
Agency and their officers, agents, employees, and members from all claims,
suits, or actions of whatsoever nature resulting from or arising out of the
activities of Borrower or its subcontractors, agents, or employees in
connection with this Loan or the Project.
Section 13. Covenants Related to Tax-Exempt Status of Bonds Issued to
Finance the Loan.
The Loan is being funded, in part, with the proceeds of bonds of the
Agency. The bonds are "qualified private activity bonds" under Section 141 of
the Code. The Borrower agrees to comply with all reasonable requirements of
the Agency which it may subsequently impose in order to ensure that interest on
the bonds remains excludable from gross income under the federal income tax
laws under Section 103 of the Code. In addition, the Borrower specifically
covenants:
(a) All property financed with the Loan will be owned by the Borrower.
(b) The Borrower will not permit the facilities to be used under a
lease, rental agreement, or any other agreement, by an entity other than an
elderly or disabled person.
13 - LOAN AGREEMENT
<PAGE> 14
(c) Neither the Borrower, nor any entity or person related to the
Borrower in any way, has or will enter into any arrangement, whether formal or
informal, to purchase the bonds used to finance the Loan in an amount which is
related to the amount of the Loan.
(d) The average maturity of the Note executed in connection with this
Loan Agreement does not exceed 120 percent of the average reasonably expected
economic life of the facilities being financed with the net proceeds of the
Loan.
(e) No portion of the facilities financed with the Loan will be used to
provide any airplane, skybox, or other private luxury box, health club
facility, facility primarily used for gambling, or store the principal business
of which is the sale of alcoholic beverages for consumption off-premises.
Section 14. Events of Default.
If any of the following events occurs and is continuing, namely:
(a) Borrower defaults in the performance or observation of any of its
covenants or agreements contained herein or in the Trust Deed Note and Trust
Deed, and the default continues for 30 days after the Agency gives written
notice thereof; or
(b) any representation or warranty with respect to current or historical
information made to Agency herein or in any certificate, notice, report,
financial statement, or other instrument or document furnished to Agency
hereunder or in connection herewith proves to have been incorrect in any
material respect when made; or
(c) any authorization, consent, license, approval, filing, or
registration now or hereafter necessary to enable Borrower to comply with its
obligations hereunder or under the Trust Deed or Trust Deed Note or incurred
pursuant hereto or thereto fails to be timely issued or granted, or expires or
lapses and is not forthwith renewed or extended, or is revoked, withdrawn,
withheld, or modified so as to materially interfere with such compliance; or
(d) Borrower (i) applies for or consents to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of
itself or of all of its property, (ii) admits in writing its inability, or is
generally unable, to pay its debts as they become due, (iii) makes a general
assignment for the benefit of its creditors, (iv) commences a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) is
adjudicated as bankrupt or insolvent, (vi) files a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, (vii) fails to controvert in
a timely and appropriate manner, or acquiesces in writing to, any petition
filed against it in an involuntary case under such Bankruptcy Code, or (viii)
takes any corporate action for the purpose of effecting any of the foregoing;
or
14 - LOAN AGREEMENT
<PAGE> 15
(e) a proceeding or case is commenced, without the application or
consent of Borrower, in any court of competent jurisdiction, seeking (i) the
liquidation, dissolution or winding-up, or the composition or readjustment of
debts, of Borrower, (ii) the appointment of a trustee, receiver, custodian,
liquidator, or the like of Borrower or of all or any substantial part of its
assets, or (iii) similar relief in respect to Borrower under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case continues undismissed, or an
order, judgment, or decree approving or ordering any of the foregoing is
entered and continues unstayed and in effect for a period of 60 consecutive
days, or an order for relief against Borrower is entered in an involuntary case
under the Federal Bankruptcy Code (as now or hereafter in effect); or
(f) Borrower effects a change or ownership, a change of control of the
business, or transfers any interest in properties securing the Loan without the
prior written consent of the Agency; or
(g) Borrower fails to terminate the management agreement after request
by the Agency or fails to make satisfactory arrangements for a new management
agent.
Thereupon, and in each such case, if such violation is not corrected to
the satisfaction of the Agency within thirty (30) days after the date the
Agency gives written notice to Borrower or within such additional time as the
Agency allows Borrower to correct the violation, the Agency may, without
further notice, declare a default under this Agreement, effective on the date
of such declaration, and thereupon the Agency may (in addition to those actions
permitted under the Trust Deed or Trust Deed Note in the event of default)
apply to any appropriate court, state or federal, for specific performance of
the covenants and agreements contained herein, or for an injunction against any
violation of such covenants and agreements, or for the appointment of a
receiver to take over and operate the Project, or for such other relief as may
be appropriate and allowed by law, since the injury to the Agency arising from
a default under any of the terms of this Agreement would be irreparable and the
amount of damage would be difficult to ascertain. All such remedies shall be
cumulative and the Agency's election to pursue any one or more of the above
remedies shall not be construed to preclude or to be a waiver of the Agency's
right to pursue any other remedy. The Agency may also take possession of the
Project, bring any action necessary to enforce the rights of the Agency
growing out of the operation of the Project and to collect the rents and
operate the Project until such time as the Agency, in its discretion,
determines that Borrower is again in a position to operate the Project in
accordance with the terms of this Agreement and in compliance with the
requirements of the Trust Deed Note and Trust Deed evidencing and securing the
Loan.
It is expressly understood and agreed that the provision for thirty (30) days'
notice to Borrower for violation of the terms of this Agreement contained in
this section is inapplicable to the provisions for disbursement by the Agency
from the accounts described in sections 5(c) and (d) of this Agreement.
15 - LOAN AGREEMENT
<PAGE> 16
Section 15. Mutual Covenants and Agreements.
Both parties covenant and agree that:
(a) If any term, covenant, or condition of this Agreement, the Trust
Deed, or Trust Deed Note shall be finally determined by a court of competent
jurisdiction to be invalid, the term, covenant, or condition so determined to
be invalid is hereby declared severable and shall not affect the validity of
the remaining portions of this Agreement;
(b) No waiver by either party of any term, covenant, or condition of
this Agreement shall be binding unless in writing and signed by both parties
hereto;
(c) No amendment, modification, or termination of this Agreement or any
provision hereof shall be effective unless in writing and signed by both
parties;
(d) Except as otherwise provided, whenever any approval or notice by the
Agency is required under this Agreement, or whenever any action by the Agency
is required or permitted, the Administrator of the Agency or the
Administrator's successor or authorized agent shall have the power and right to
approve, give notice, or act on behalf of the Agency, as the case may be; and
(e) This Agreement shall be binding upon the parties hereto and their
respective permitted successors and assigns.
(f) The prevailing party in any dispute arising from this Agreement
shall be entitled to recover from the other its reasonable attorney's fees and
costs at trial and on appeal.
(g) This Agreement constitutes the entire agreement between the parties.
(h) Any and all notices by the Agency to Borrower, or by Borrower to the
Agency, shall be in writing and shall be deemed to have been duly given or made
when deposited in the mails, certified and postage prepaid addressed to the
parties at the addresses stated on page one, or at such other address of which
such party shall have notified in writing the other parties hereto.
(i) This Agreement shall be governed by the laws of the State of Oregon.
(j) Whenever used, the singular number should include the plural, and
the plural the singular; and the use of any gender shall apply to all genders.
(k) All covenants and agreements of Borrower shall be joint and several.
(l) The captions and headings of the sections of this Agreement are for
convenience only and are not to be used to interpret or define the provisions
hereof.
16 - LOAN AGREEMENT
<PAGE> 17
(m) Time is of the essence in the performance of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
BORROWER: FOREST GROVE RESIDENTIAL
CENTER LIMITED PARTNERSHIP
By: /s/
-------------------------------
Title:
By: /s/
-------------------------------
Title:
STATE OF OREGON, acting by and through
OREGON HOUSING AGENCY
By: /s/
--------------------------------
Architect
Multi-Family Housing Programs
STATE OF OREGON )
)
County of Multnomah )
------------
The foregoing instrument was acknowledged before me this 31st day of October,
1988, by Larry H. Draper, Christine Beaulieu-Barta and Robert Cook partner(s) on
behalf of Forest Grove Residential Center Limited Partnership, a limited
partnership, of the State of Oregon.
/s/
---------------------------------
Notary Public for Oregon
My Commission Expires: 3-18-91
-----------
STATE OF OREGON )
)
County of )
-------------
The foregoing instrument was acknowledged before me this 28th day of October,
1988, by ???, Multi-Family Housing Programs, Oregon Housing Agency, on behalf of
the Agency.
/s/ Geraldine Wade
---------------------------------
Notary Public for Oregon
My Commission Expires: 5/29/92
-----------
17 - LOAN AGREEMENT
<PAGE> 1
EXHIBIT 10.41
OREGON HOUSING AGENCY
STATE OF OREGON
L O A N A G R E E M E N T
THIS AGREEMENT is made this 22nd day of March, 1991, by and between McMinnville
Residential Estates Limited Partnership an Oregon limited partnership, located
at 19468 SW 35th Court, Lake Oswego OR 97034 (hereinafter referred to as
"Borrower"), and the State of Oregon, acting by and through the Oregon Housing
Agency, having its principal office at 1600 State Street, Suite 100, Salem,
Oregon 97310 (hereinafter referred to as the "Agency").
RECITALS:
Borrower has requested the Agency to make a loan to Borrower in the principal
amount of Three Million Nine Hundred Thousand Dollars ($3,900,000) for the
long-term financing of a housing project for elderly and disabled persons and
families. The Agency is willing to make this loan on the terms and conditions
of this Agreement. Accordingly, the parties agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Act" shall mean ORS 456.515 to 456.720, as amended, which were
in effect when the loan closed.
(b) "Administrator" shall mean the chief administrative officer of
the Oregon Housing Agency appointed pursuant to ORS 456.554.
(c) "Allocable Portion" shall mean an amount equal to the ratio of
the total principal amount of obligations issued by the Agency to
the principal amount of the Loan, determined at closing.
(d) "Break-Even Occupancy" shall mean the point in time when the
Project's monthly rental income meets its monthly Operating
Expenses and Loan payments.
(e) "Contingency Escrow Reserve Account" shall mean the account
established under Section 5(c) hereof, consisting of three
percent (3%) of the principal of the Loan or such other amount as
the Agency in its sole discretion shall require.
(f) "Financing Securities" shall mean the Allocable Portion of any
obligations issued by the Agency to finance the Loan.
(g) "Loan" shall mean long-term financing of Property for a housing
project for Occupants as set out in Section 2(a) hereof.
(h) "Occupant" shall mean people who meet the requirements of Section
8 hereof and occupy rental space in the Project.
(i) "Operating Expenses" shall mean all federal, state, county, and
local government taxes, assessments, or charges; water and sewer
charges; operating costs incurred in maintaining and operating
<PAGE> 2
the Project, including without limitation costs of utilities,
supplies, insurance, compensation of all persons who perform
duties connected with the operation, maintenance, and repair of
the Project, management of the Project, legal, accounting, and
other professional fees incurred in connection with the
operation, maintenance, and management of the Project; and any
other costs or expenses incurred by Borrower or its agent with
respect to the Project and not otherwise reimbursed by Occupants
of the Project, which are properly allocable to the operation or
maintenance of the Project in accordance with generally accepted
accounting principles.
(i) "Operating Receipts" shall mean rents paid by Occupants and all
other receipts of the Project.
(k) "Operating Receipts and Expense Account" shall mean the account
established under Section 5(a) hereof.
(l) "Project" shall mean the Property plus all assets of whatsoever
nature used in and owned by Borrower on the Property.
(m) "Property" shall mean property financed by the Loan.
(n) "Rental Reserve Account" shall mean the account established under
Section 5(e) hereof to assure sufficient funds to pay Operating
Expenses and Loan payments before Break-Even Occupancy.
(o) "Rent Up Schedule" shall mean the projection prepared by Borrower
prior to closing of the Loan and the number of months it will take
the Project to reach Break-Even Occupancy.
(p) "Replacement Cost Reserve Account" shall mean the account
established under Section 5(d) hereof to aid in extraordinary
maintenance, repair, and replacement of capital items of a
Project.
(q) "Security Deposit Account" shall mean the account established
under Section (5)b hereof.
Notice to Borrower: Do not sign this Agreement before you read it. This
Agreement authorizes the Agency to refuse to accept repayment of the Loan before
maturity of the Loan and provides for payment of a penalty if you repay the
Loan with the Agency's permission before that date.
Section 2. Payments of Principal and Interest, Prepayments
(a) Borrower promises to repay the principal of and accrued interest
on the Loan made hereunder in immediately available funds
monthly. $30,333.80 shall be due and payable monthly for 30
years, beginning on April 15, 1991.
(b) Borrower promises to pay interest on the unpaid principal amount
of the Loan for the period commencing at closing and until such
Loan is paid in full, at the rate of 8.625 percent per annum.
Page 2 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 3
(c) The Loan may not be prepaid without the prior written consent of
the Agency. The Agency may consent to a prepayment of the
principal provided that the sum to be prepaid, computed as of the
date of prepayment, shall equal the unpaid principal balance of
the Loan plus accrued interest, plus a premium for the privilege
of prepayment equal to:
(1) The difference between the unpaid principal balance of the Loan
and the amount of the Financing Securities, each as of the date
of such prepayment; plus
(2) Interest on the amount of the Financing Securities at the same
rate as interest is payable on the Loan from the date of
prepayment to the earliest date on which the Financing Securities
may be redeemed, other than by reference to Special or
extraordinary redemption provision, at the option of the Agency;
plus
(3) The aggregate premium payable upon the redemption of the
Financing Securities on the earliest redemption date; plus
(4) The amount determined by the Agency as necessary to reimburse the
Agency for fees and expenses of the trustee, paying agents, and
counsel as may be necessary in connection with the redemption of
such Financing Securities (such amount in no event to exceed 2%
of the amount of the Financing Securities).
Upon disbursement of the Loan, the Agency will specify the
principal amount of obligations deemed necessary, in the sole
judgment of the Agency, to provide funds to pay the Agency's
costs incurred in making the Loan. Such costs may include, in
addition to the principal amount of the Loan, an allocable share
of underwriter's discount, costs of issuance, capitalized
interest, necessary reserves and any other similar costs
incurred by the Agency in connection with the financing of the
Loan. Such amount, reduced at any point in time in proportion
to the reduction of the principal amount of the Loan, shall be
conclusively deemed to be the amount of the Financing Securities
to be redeemed in the event of advance payment of the Loan.
(d) In the event of default which results in the Borrower paying the
entire amount of the Loan prior to the date set forth in section
2(a) hereof, the Borrower shall pay a default penalty equal to
the amount set forth in section 2(c) hereof. Notice to Borrower:
Do not sign this Agreement before you read it. This Agreement
provides for the payment of a penalty if Borrower defaults and
repays the Loan prior to the date set out in Section 2(a) hereof.
(e) All other payments and prepayments of principal and other amounts
payable to the Agency hereunder will be made to the Agency at its
office located at 1600 State Street, Suite 100, Salem, Oregon
97310, or at such other place designated by the Agency to
Borrower in writing.
Page 3 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 4
Section 3. Regulatory Agreement and Declaration of Restrictive Covenants
The Borrower has read the Regulatory Agreement and will comply with all
provisions of the Regulatory Agreement between the Borrower and the Housing
Agency, which was executed in connection with this Loan Agreement (the
"Regulatory Agreement").
Section 4. Rental Rates and Operating Expenses
(a) Borrower shall submit to the Agency a proposed schedule of rental
rates for the Project on forms approved by the Agency not less
than sixty (60) days prior to the date of a proposed rent
increase. A new rental rate schedule must be submitted prior to
any change in rental rates. Upon approval by the Agency, the
proposed schedule of rental rates shall be effective after all
required notifications.
(b) Borrower shall operate the Project in such a manner so as to
maintain the Project in good condition. All Operating Expenses
shall be paid by Borrower during the life of this Agreement even
if an operating deficit occurs.
Section 5. Accounts and Funds.
(a) Operating Receipts and Expense Account: Borrower shall establish
and maintain a Project Operating Receipts and Expense Account
with a depository approved by the Agency. All Operating Receipts
shall be immediately deposited in the account, and Borrower shall
promptly pay all Operating Expenses out of this account.
(b) Security Deposit Account: Borrower shall segregate and hold all
Occupant security deposits in an interest-bearing account in a
depository approved by the Agency. The balance of this account
must at all times be equal to the total amount collected from the
Occupants plus any accrued interest. All pro rata interest on
this account shall be payable to the Occupants if the security
deposit is returned to them.
(c) Contingency Escrow Reserve Account: At closing, the Borrower
shall:
Deposit with the Agency or a depository approved in writing by
the Agency, cash in the amount of One Hundred Seventeen Thousand
Dollars ($117,000). Said funds will be held by the Agency or an
approved depository in an interest-bearing Contingency Escrow
Reserve Account for three years or such longer period as the
Agency in its sole discretion shall determine. Accrued and
unspent interest on the account, if any, shall be payable to the
Borrower when the account is closed. This account shall not be
funded with Loan proceeds. Said funds may be applied by the
Agency, in such amounts and at such times as the Agency, in its
sole discretion, determines:
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(A) to correct or repair any defects in the mechanical or structural
systems of the Project;
(B) to correct any violations of local, state, or federal ordinances,
statutes or regulations;
(C) at the request of Borrower, to provide design modifications or
tenant services which will materially benefit the Occupants or
reduce Operating Expenses;
(D) at the election of the Agency, to cure any breaches of the
obligations of Borrower in this Agreement, the Trust Deed, or
Trust Deed Note;
(E) to perform necessary Project maintenance which the Borrower has
failed to perform;
(F) to payment of delinquent principal and interest payments required
to be paid to the Agency by the Trust Deed Note and Trust Deed,
(G) to maintenance of the Replacement Cost Reserve Account; or
(H) to payment of the current and delinquent Operating Expenses of
the Project which the Borrower has failed to pay.
or
Deliver to the Agency an unconditional and irrevocable letter of credit in
favor of the Agency, with a term of three (3) years, in a form and from a
financial institution acceptable to the Agency in the amount of One Hundred
Seventeen Thousand Dollars ($117,000). The Agency may, in its sole discretion,
draw against the letter of credit for the purposes set forth in section
5(c)(1)(A) to (H) above.
If Borrower is unable to obtain a letter of credit of three (3) years'
duration, the Agency may consent to delivery by Borrower of successive
unconditional and irrevocable letters of credit in a form and from a financial
institution acceptable to the Agency. Each letter shall have a term of not
less than one (1) year, and the three letters of credit shall be in force and
effect continuously for three years from closing. If Borrower chooses to
deliver successive letters of credit, Borrower unconditionally consents to the
Agency's right and privilege, in its sole option and discretion, to draw and
receive funds up to the full amount of each letter of credit at any time during
the last three (3) business days for which each letter of credit is effective,
unless, before the three (3) business day period, Borrower shall deliver to the
Agency a renewal of the letter of credit for an additional period of not less
than one (1) year.
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(3) Borrower shall have two (2) working days to cure any problem set
out in section 5(c)(1)(A) to (H) hereof after receipt of written
notice from the Agency before the Agency disburses or applies for
funds from the Contingency Escrow Reserve Account.
(4) The amount of Borrower's Contingency Escrow Reserve Account may
be reduced from the amount set forth in Section 5(c)(1) or (2)
above by one-third (1/3) of the original amount of the deposit or
letter of credit per year upon approval of the Agency. Three (3)
years from the date of Loan closing, if the terms of this
Agreement are fulfilled by Borrower, the funds in such account
shall be returned to Borrower. Notwithstanding the above, the
amount of Borrower's Contingency Escrow Reserve Account will not
be reduced if at any time, in the sole discretion of the Agency,
it is determined that a ready source of funds may be needed to
meet any contingencies as described in Section 5(c) (1) above.
(d) Replacement Cost Reserve Account: Borrower shall establish, prior
to or concurrently with the first payment on the Loan, an account
under the control of the Agency with the Agency or in a
depository designated by the Agency. Borrower shall deposit the
amount of One Thousand Five Hundred Forty-Five and 71/100 Dollars
($1,545.71) per month into this account. Disbursements from
this account shall only be made for replacement of capital items.
Requests for disbursement shall be made in writing to the Agency
by Borrower. Agency may disapprove a request if the balance in
the account is less than an amount equal to 12 monthly payments
to the account, plus any insurance deductible required.
No deposits need to be made to this account after the account
balance equals 144 times the monthly payment. When expenditures
reduce the account balance below this figure, Borrower shall
resume monthly deposits until the account balance again equals
144 times the monthly payment.
If an event of default under the terms of the Trust Deed, Loan
Agreement, or Trust Deed Note occurs and as a consequence of such
default, the Agency elects to declare immediately due and payable
all amounts due on the Loan and secured by the Trust Deed, the
Agency may apply or authorize the application of the balance in
this account to the amounts due on the Loan as accelerated.
(e) Rental Reserve Account: Borrower shall, at Loan closing,
establish a federally insured checking or savings account in the
amount of Forty Thousand Seven Hundred Sixty-Four Dollars
($40,764) in the name of Borrower and the Agency. This account
shall not be funded with Loan proceeds.
This account shall be used to pay Operating Expenses, Loan
payments, and Replacement Cost Reserve Account payments as they
are incurred during the initial months of occupancy of the
Project. After closing, Borrower shall submit to the Agency each
month a statement of income and expenses. The Agency shall
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review the statement for accuracy and authorize payment of funds
from this account to pay Operating Expenses, Loan Payments, and
Replacement Cost Reserve Account payments as long as the
statement of income and expenses is in accordance with the Rent
Up Schedule. If not in accordance with the Rent Up Schedule, the
Borrower shall pay any deficiency. The Agency authorization to
withdraw funds from this account shall be in a form agreed upon
by Borrower, the depository where the account is located and
Agency. Borrower may then withdraw funds to pay Operating
Expenses, Loan Payments, and Replacement Cost Reserve Account
Payments.
After Break-Even Occupancy has been maintained for 90 days
continuously, the Agency shall have no further interest in the
account. At this time, any funds remaining in the account shall
be returned to Borrower.
(f) Escrow for Taxes, Insurance, and Other Charges: The Agency or
its agent shall bill the Borrower and the Borrower shall pay the
Agency or the Agency's agent the following sums:
(1) Commencing on such date as the Agency, at its discretion, shall
designate, Borrower shall pay, in addition to the monthly
payments required by the Trust Deed Note, a sum equal to the land
lease payments, if any, next due, plus the premiums that will
next become due and payable on the policy or policies of fire and
extended coverage and other property insurance covering the
Property, plus taxes and assessments next due on the Property,
all estimated by the Agency, minus all sums already paid for
these items, divided by the number of months to elapse before one
month prior to the date when such land lease payments, premiums,
taxes, and assessments will become delinquent or due. These sums
shall be held by the Agency or the Agency's agent in escrow to
pay said land lease payments, premiums, taxes, and special
assessments at such time as such obligations become due.
(2) All payments required to be made by Borrower pursuant to this
section and all payments to be made under the Trust Deed Note
shall be added together and the aggregate amount thereof shall be
paid each month in a single payment by Borrower to the Agency.
Agency shall apply the payments to the following items in the
following order of priority: (a) land lease payments, taxes,
special assessments, fire and other insurance premiums; (b)
interest on the Note; and (c) amortization of the principal of
the Note.
Section 6. Distribution of Income and Assets.
Neither the Borrower nor those having a beneficial interest in Borrower shall
make, receive, or retain any distribution of any assets or any income of any
kind from the Project for the term of the Loan except from the Operating
Receipts and Expense Account and then only subject to the following conditions:
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(a) Nonprofit Borrowers are not entitled to distributions from the
Operating Receipts and Expense Account.
(b) For-profit Borrowers are entitled to distributions from the
Operating Receipts and Expense Account only at the end of each
month of Project operation and only after all Operating Expenses,
including Loan payments, have been paid, or funds have been set
aside for payment, and all reserve accounts have been paid.
(c) No distribution shall be made from the Operating Receipts and
Expense Account when there is any default under this Agreement,
the Trust Deed Note, or Trust Deed, or when the Agency at its
discretion determines that the Replacement Cost Reserve Account
is too low to provide adequate funds for needed foreseeable
repairs or replacements pursuant to section 5(d) of this
Agreement, or when there is, in the Agency's estimation, any
reasonable probability that the Operating Receipts and Expense
Account will not be sufficient to pay for all of the Operating
Expenses of the Project.
(d) Any distribution of funds from the Operating Receipts and Expense
Account which does not comply with the terms of this section
shall be deemed to be held in constructive trust for the benefit
of the Agency by the possessor of those funds. Borrower, if not
the possessor of the trust funds, shall make demand upon the
possessor of those funds at the request of the Agency. Any
unauthorized distribution of funds shall be repaid to the
Operating Receipts and Expense Account from sources other than
the reserve accounts set up in this Agreement.
Section 7. Management.
Borrower shall provide for management of the project in a manner satisfactory
to the Agency and in accordance with a management agreement between Borrower
and the management agent, or Borrower and the Agency, if Borrower is acting as
the management agent. The Agency shall approve the management agent and plan
before Borrower enters into the management agreement. Borrower shall not
amend, modify, or terminate the management agreement or enter into any other
management agreement without the express written consent of the Agency. Any
management agreement entered into by Borrower shall contain a provision that it
shall be subject to termination at the sole discretion of the Agency for
failure to carry out the management plan without penalty to any party.
Section 8. Occupant Qualifications.
Borrower covenants and agrees that no occupant of the Project shall be approved
by Borrower unless the following conditions shall have been met at the time of
such approval, unless any requirement has been waived by the Administrator as
allowed by the Act:
(a) The Occupant is a low or below median-income person or family as
defined by the Act and the Agency's Rules and the head of the
household is 58 years of age or older at the time the person or
family occupies the dwelling unit; or
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(b) The Occupant meets the definition of a disabled person under the
Act and Agency Rules;
The Occupant shall execute and deliver to Borrower, on forms
prescribed by the Agency, a certification of the Occupant's
status under subsections (a) or (b) above.
Section 9. Borrower's Representations and Warranties.
Borrower represents and warrants to the Agency that:
(a) Borrower is a limited partnership duly organized, validly
existing, and in good standing under the laws of Oregon; and
Borrower has full power and authority to transact the business in
which it is engaged, and full power, authority, and legal right
to make this Agreement, the Trust Deed, and the Trust Deed Note
and to incur and perform its obligations hereunder and under the
Trust Deed and Trust Deed Note.
(b) The making and performance by Borrower of this Agreement, the
Promissory Note and the Trust Deed and the borrowing by Borrower
hereunder
(i) have been duly authorized by all necessary action of the
Borrower,
(ii) do not and will not violate any provision of any
applicable law, rule, regulation, or order of any court,
regulatory commission, board, or other administrative
agency or any provision of Borrower's articles of
incorporation or bylaws (articles of partnership) and
(iii) do not and will not result in the breach of, or constitute
a default or require any consent under, or result in the
creation of any lien upon any properties or assets of
Borrower pursuant to any other indenture, bank, or other
credit agreement, mortgage or other agreement or
instrument to which Borrower is a party or by which
Borrower or any of its properties may be bound or
affected.
(c) This Agreement, the Trust Deed Note, and the Trust Deed have been
duly executed and delivered by Borrower and will constitute the
legal, valid, and binding obligation of Borrower, enforceable in
accordance with their terms subject to the laws of bankruptcy,
insolvency, or other similar laws affecting the enforcement of
creditors' rights generally.
(d) No authorization, consent, license, or approval of, or filing or
registration with, or notification to, any governmental body or
regulatory or supervisory authority is required for the
execution, delivery, or performance by Borrower of this
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<PAGE> 10
Agreement, the Trust Deed Note, or the Trust Deed or for the
borrowing hereunder.
(e) Since Borrower applied to Agency for the Loan, there has been no
material adverse change in the financial condition of Borrower.
(f) No representation or warranty by Borrower in this Agreement or on
any written statement, including information, data, exhibits, and
other materials submitted in connection with the Loan, furnished
to the Agency pursuant to this Agreement or in connection with
the transactions contemplated by this Agreement, when taken
together, contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact
necessary to make the statements not misleading.
Section 10. Affirmative Covenants of Borrower.
Borrower covenants and agrees to all of the following:
(a) It shall abide by the terms of the Trust Deed and Trust Deed Note
dated the date hereof and by this reference incorporated herein.
(b) The Project shall be open to all persons without discrimination
as to race, color, creed, religion, national origin, sex, marital
status, or status with regard to public assistance or local
residency, unless otherwise specified by law or this Agreement.
(c) Any commercial facilities located in the Project will be rented
at the rental prescribed or approved by the Agency, and all such
commercial rental and lease agreements are subject to the prior
written approval of the Agency.
(d) Payment for services, supplies, or materials for the Project
shall not exceed the amount ordinarily paid for such services,
supplies, or materials in the area where the services are
rendered or the supplies or materials are furnished.
(e) Borrower shall at all times maintain books, contracts, records,
documents, and other papers relating to the Property and the
Project in reasonable condition for proper audit, and all such
books, contracts, records, documents, and other papers shall be
subject to inspection by the Agency or its authorized agents upon
reasonable notice.
(f) For-profit Borrowers shall submit monthly/quarterly financial
statements as required by the Agency to the Agency. Nonprofit
Borrowers shall submit financial statements as requested by the
Agency. Within sixty (60) days following the end of each fiscal
year, all Borrowers shall furnish to the Agency a complete
financial statement in a form acceptable to the Agency, based
upon an examination of the books, records, and accounts of the
Project, setting forth the financial condition of the Project as
of the end of such fiscal year, the results of operation of
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<PAGE> 11
the Project for such fiscal year, and such other financial
information as the Agency may reasonably request.
(9) At the request of the Agency, Borrower shall furnish to the
Agency monthly occupancy reports and provide specific information
relating to the income and assets of the Occupants.
(h) Borrower shall at closing provide the Agency with certificates of
insurance from companies approved by the Agency with the
following coverage and provisions and shall maintain such
insurance coverage so long as any amount of the Loan is
outstanding. Each policy shall provide that the Agency shall be
given thirty (30) days' advance written notice of the
cancellation, expiration, or termination of the policy or any
material change in the coverage afforded thereunder. In the
event of loss, Borrower shall give prompt written notice to the
insurance carrier and the Agency, and the Agency may make proof
of loss, if not made promptly by Borrower. The Agency is hereby
authorized in the event of loss to compromise and settle all loss
claims on said policies on such terms as it deems appropriate.
Borrower shall promptly furnish to the Agency a copy of any proof
of loss given to the insurance carrier.
(1) Liability insurance in an amount equal to $100,000 per
individual occurrence and $500,000 aggregate.
(2) Fire and extended coverage insurance equal to the
replacement value of the Project with no more than a
$2,500 deductible. Such policies shall be endorsed with a
standard mortgagee clause with loss payable to Agency and
shall have a replacement clause endorsement.
(3) Business income insurance equal to one month's Operating
Receipts. The payment under the policy must continue
until the damaged portion of the Project is again ready
for occupancy. This policy shall be endorsed with a
standard mortgagee clause.
(i) The Agency or its agents may enter upon the Property or the
Project for the purpose of inspection during Borrower's normal
business hours.
(j) Borrower shall comply with the requirements of all applicable
laws, rules, regulations, and orders of any governmental
authority, except where contested in good faith and by proper
proceedings.
Section 11. Negative Covenants of the Borrower.
Borrower covenants and agrees that it shall not, without the express prior
written approval of the Agency:
(a) Sell, lease (except individual units), convey or otherwise
transfer or encumber any of the Project or the Property, or
permit such sale, lease, conveyance, or other transfer or
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<PAGE> 12
encumbrance of the Project or the Property or any portion
thereof, except as provided in the Trust Deed.
(b) ell, assign, dispose of, or otherwise transfer or encumber any
personal property of the Project, including rents, or pay out any
money except for reasonable Operating Expenses and necessary
repairs as provided herein.
(c) Remodel, add to, reconstruct, or demolish any part of the
Property or the Project.
(d) Require, as a condition of the occupancy or leasing of any unit
in the Project, any consideration or deposit other than the
prepayment of the first month's rent plus a refundable security
deposit in an amount not in excess of $100.
(e) Permit the use of the individual units of the Project for any
purpose except the use which was originally approved by the
Agency
(f) Pay any compensation, including wages or salaries, from the
Operating Receipts and Expense Account or any other Project
account.
(g) Incur any obligations on behalf of the Project to any of
Borrower's officers, directors, stockholders, members, trustees,
partners, beneficiaries under a trust, or any of their nominees.
(h) Enter into any contract or contracts for supervisory or
managerial services with respect to the Project's operation,
other than the management agreement set out in section 7 hereof.
(i) Transfer, assign, or pledge any right to, interest in, or title
to any funds deposited by Borrower with the Agency or reserved by
the Agency for Borrower.
(j) Make any capital expenditures not approved by the Agency
Section 12. Further Provisions Applicable to Borrower.
(a) No amendments will be made to a Borrower's certificate of limited
partnership or articles of incorporation or other documents
establishing the legal status of Borrower which would affect the
Agency's rights under this Agreement, the Trust Deed, or Trust
Deed Note, without the Agency's prior written approval.
(b) In the event of retirement, death, insanity, incapacity,
withdrawal, dissolution, liquidation, bankruptcy, or assignment
for benefit of creditors of a general partner of a limited
partnership, the business may be continued by the remaining
general partners pursuant to a right set forth in the certificate
of limited partnership. In the event of dissolution of the
limited partnership, no title or right to possession and control
of the Project, and no right to collect the rents therefrom,
shall pass to any person who is not bound by this Agreement.
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(c) If Borrower is a limited partnership, no general partner may
voluntarily withdraw from or be substituted by the partnership
without the prior written approval of the Agency.
(d) At the option of the Agency, the Loan may be reamortized within
the original term of the Loan if a partial prepayment results
from an award in condemnation, or from an insurance payment
resulting from a loss on the Property.
(e) The Agency warrants that it will not seek a deficiency judgment
against a limited partnership Borrower or any partner thereof
personally following a foreclosure and sale of the completed
Project if the Agency has acknowledged, in writing, satisfactory
completion and acceptance of the Project.
(f) Borrower shall save and hold harmless the State of Oregon and the
Agency and their officers, agents, employees, and members from
all claims, suits, or actions of whatsoever nature resulting from
or arising out of the activities of Borrower or its
subcontractors, agents, or employees in connection with this Loan
or the Project.
Section 13. Requirements Relating to Tax-Exempt Financing.
The Borrower acknowledges that the Loan is being funded with proceeds of the
Housing Agency's General Obligation Elderly and Disabled Housing Bonds. 1989
Series A (the "Bonds"), which are subject to the limitations Oregon Revised
Statutes, Section 456.515 to 456.720 (the "Act"), and are private activity
bonds issued under Section 142 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Borrower agrees to be bound by all requirements of the Act,
and by all requirements of the Code which are necessary in order for interest
paid on bonds issued to finance the Loan to be excludable from gross income
under the Code. The Borrower specifically represents and covenants as follows:
(a) The Borrower reasonably expects to proceed with due diligence to
complete the acquisition, construction and equipping of the
Development and to expend the full amount of the proceeds of the
Loan for Qualified Development Costs before June 27, 1989.
(b) All proceeds of the Loan will be expended by the Borrower for
Development Costs, and except as specifically provided in this
subsection, all proceeds of the Loan will be expended for
Qualified Development Costs. No Loan proceeds may be expended
for Qualified Development Costs. No Loan proceeds may be
expended for Development Costs which are not Qualified
Development Costs unless the State consents in advance and in
writing. The amount of Loan proceeds which are expended for
Development Costs which are not Qualified Development Costs shall
never at any time exceed three percent of the amount of the Loan
which has been previously expended for Qualified Development
Costs. "Qualified Development Costs" means Development Costs
which constitute land costs or costs for property of a character
subject to the allowance for
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<PAGE> 14
depreciation, specifically excluding working capital and
inventory costs, and provided further that (a) costs or expenses
paid or incurred prior to [insert official action date] shall not
be deemed to be Qualified Development Costs; (b) costs of issuing
bonds shall not be deemed to be Qualified Development Costs; (c)
interest during the construction period shall be allocated
between Qualified Development Costs and other costs and expenses
to be paid from the proceeds of the Bonds; and (d) interest
following the construction period shall not constitute a
Qualified Development Cost. "Development Costs" means costs and
expenses incurred by the Housing Agency or the Borrower in
connection with the acquisition, construction and equipping of
that portion of the Development which constitutes a "qualified
residential rental project" under Section 142(d) of the Code,
including, without limitation, costs for site preparation, the
planning of housing and improvements, the acquisition of
property, the removal or demolition of existing structures, the
construction and purchase of housing, related facilities and
improvements, and all other work in connection therewith, and all
costs of financing, including, without limitation, the costs of
consultant, accounting and legal services, other expenses
necessary or incident to determining the feasibility,
administrative and other expenses necessary or incident to the
portion of the Development which constitutes a "qualified
residential rental project" under Section 142(d) of the Code and
the financing thereof and interest accrued during construction
and prior to the completion of construction of the portion of the
Development which constitutes a "qualified residential rental
project" under Section 142(d) of the Code. Additional
information on the meaning of the term "qualified residential
rental project" may be found in the Regulatory Agreement.
(c) Upon substantial completion of acquisition, construction and
equipping of the Development, the Borrower shall submit to the
Housing Agency a certificate containing the following: (i) the
Borrower's statement that the Development has been substantially
completed and is ready and available for occupancy as of a
specified date; (ii) the Borrower's statement of the aggregate
amount advanced against the Loan prior to and upon the Completion
Date; and (iii) the Borrower's certification that as of the
Completion Date, there has been full compliance with the
provisions of this Loan Agreement and the Regulatory Agreement.
(d) The Borrower does not own any buildings or structures which are
proximate to the Development other than those buildings or
structures which comprise the Development, which are being
financed pursuant to a common plan under which the Development is
also being financed.
(e) The Development is located entirely within the State of Oregon.
(f) The Development will at all times constitute a Multifamily
Housing Project, as defined herein and in accordance with the
rules of the Housing Agency. "Multifamily Housing Project"
means a structure or facility which provides more than one
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<PAGE> 15
living unit for Elderly Households or Disabled Persons; it may
provide spaces for common use by the occupants in social and
recreational activities. Multifamily Housing Project for the
elderly may include individual living units with in such
structures, mobile home parks and residential facilities licensed
under ORS 443.400 to 443.455 and other congregate care facilities
with or without domiciliary care. Multifamily Housing Project
for the disabled includes only residential facilities licensed
under ORS 443.400 to 443.455 and other congregate care facilities
with or without comiciliary care. Multifamily Housing Projects
do not include nursing homes, hospitals, places primarily engaged
in recreational activities and single-family, detached dwellings,
except mobile homes situated in a mobile home park. In addition,
a Multifamily Housing Project must comply with all applicable
rules of the Housing Agency.
(g) The average maturity of the bonds shall not exceed 120 percent
of the average reasonably expected economic life of the portion
of the Development being financed with the proceeds of the bonds.
The average maturity of the bonds is thirty years. The average
reasonably expected economic life of the facilities being
financed with the bonds shall be determined by taking into
account the respective costs of such facilities, and shall be
determined as of the later of June 27, 1989, or the date on which
the Development is placed in service (or expected to be placed in
service). Land shall not be taken into account in determining
the reasonably expected economic life of the Development.
(h) No more than 25 percent of the proceeds of the Loan will be used
(directly or indirectly) of the acquisition of land (or an
interest therein) and no portion of the proceeds of the loan will
be used (directly or indirectly) for the acquisition of land (or
an interest therein) to be used for farming purposes.
(i) No portion of the proceeds of the Loan will be used to acquire
any property (or an interest therein) unless the first use of
such property is pursuant to such acquisition, in accordance with
Section 147(d) of the Code. This requirement prohibits the
acquisition of used property. However, this prohibition does not
apply with respect to any building (and the equipment therefore)
if the rehabilitation expenditures with respect to such building
equal or exceed 15 percent of the portion of the cost of
acquiring the building (and equipment) financed with the net
proceeds of the Loan. For purposes of this section,
rehabilitation expenditures mean any amount properly chargeable
to capital account which is incurred by the person acquiring the
building or property (or additions or improvements to the
property) in connection with the rehabilitation of the building,
as indicated in Section 147(d)(3) of the Code. Rehabilitation
expenditures must be incurred within two years after the later of
the date on which the building is acquired, or the Closing Date.
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(j) No portion of the proceeds of the Loan shall be used to provide
any airplane, skybox or other private luxury box, health club
facility, facility primarily used for gambling, or store the
principal business of which is the sale of alcoholic beverages
for consumption off premises.
Section 14. Events of Default.
If any of the following events occurs and is continuing, namely:
(a) Borrower defaults in the performance or observation of any of its
covenants or agreements contained herein, in the Trust Deed Note
and Trust Deed or in the Regulatory Agreement, and the default
continues for 30 days after the Agency gives written notice
thereof; or
(b) any representation or warranty with respect to current or
historical information made to Agency herein or in any
certificate, notice, report, financial statement, or other
instrument or document furnished to Agency hereunder or in
connection herewith proves to have been incorrect in any material
respect when made; or
(c) any authorization, consent, license, approval, filing, or
registration now or hereafter necessary to enable Borrower to
comply with its obligations hereunder or under the Trust Deed or
Trust Deed Note or incurred pursuant hereto or thereto fails to
be timely issued or granted, or expires or lapses and is not
forthwith renewed or extended, or is revoked, withdrawn,
withheld, or modified so as to materially interfere with such
compliance; or
(d) Borrower
(i) applies for or consents to the appointment of,
or the taking of possession by, a receiver,
custodian, trustee, or liquidator of itself or
of all of its property,
(ii) admits in writing its inability, or is generally
unable, to pay its debts as they become due,
(iii) makes a general assignment for the benefit of
its creditors,
(iv) commences a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect),
(v) is adjudicated as bankrupt or insolvent,
(vi) files a petition seeking to take advantage of
any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or
composition or adjustment of debts,
Page 16 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 17
(vii) fails to controvert in a timely and appropriate
manner, or acquiesces in writing to, any
petition filed against it in an involuntary case
under such Bankruptcy Code, or
(viii) takes any corporate action for the purpose of
effecting any of the foregoing; or
(e) a proceeding or case is commenced, without the application or
consent of Borrower, in any court of competent jurisdiction,
seeking
(i) the liquidation, dissolution or winding-up, or
the composition or readjustment of debts, of
Borrower,
(ii) the appointment of a trustee, receiver,
custodian, liquidator, or the like of Borrower or
of all or any substantial part of its assets, or
(iii) similar relief in respect to Borrower under any
law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case
continues undismissed, or an order, judgment, or
decree approving or ordering any of the
foregoing is entered and continues unstayed and
in effect for a period of 60 consecutive days,
or an order for relief against Borrower is
entered in an involuntary case under the Federal
Bankruptcy Code (as now or hereafter in effect);
or
(f) Borrower effects a change of ownership, a change of control of
the business, or transfers any interest in properties securing
the Loan without the prior written consent of the Agency; or
(9) Borrower fails to terminate the management agreement after
request by the Agency or fails to make satisfactory arrangements
for a new management agent.
Thereupon, and in each such case, if such violation is not corrected to
the satisfaction of the Agency within thirty (30) days after the date
the Agency gives written notice to Borrower or within such additional
time as the Agency allows Borrower to correct the violation, the Agency
may, without further notice, declare a default under this Agreement,
effective on the date of such declaration, and thereupon the Agency may
(in addition to those actions permitted under the Trust Deed or Trust
Deed Note in the event of default) apply to any appropriate court, state
or federal, for specific performance of the covenants and agreements
contained herein, or for an injunction against any violation of such
covenants and agreements, or for the appointment of a receiver to take
over and operate the Project, or for such other relief as may be
appropriate and allowed by law, since the injury to the Agency arising
from a default under any of the terms of this Agreement would be
irreparable and the amount of damage would be difficult to ascertain.
All such remedies shall be cumulative and the Agency's election to
pursue any one or more of the above remedies shall not be construed to
preclude or to
Page 17 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 18
be a waiver of the Agency's right to pursue any other remedy. The
Agency may also take possession of the Project, bring any action
necessary to enforce the rights of the Agency growing out of the
operation of the Project and to collect the rents and operate the
Project until such time as the Agency, in its discretion, determines
that Borrower is again in a position to operate the Project in
accordance with the terms of this Agreement and in compliance with the
requirements of the Trust Deed Note and Trust Deed evidencing and
securing the Loan.
It is expressly understood and agreed that the provision for thirty (30)
days' notice to Borrower for violation of the terms of this Agreement
contained in this section is inapplicable to the provisions for
disbursement by the Agency from the accounts described in sections 5(c)
and (d) of this Agreement.
Section 15. Mutual Covenants and Agreements.
Both parties covenant and agree that:
(a) If any term, covenant, or condition of this Agreement, the Trust
Deed, or Trust Deed Note shall be finally determined by a court
of competent jurisdiction to be invalid, the term, covenant, or
condition so determined to be invalid is hereby declared
severable and shall not affect the validity of the remaining
portions of this Agreement;
(b) No waiver by either party of any term, covenant, or condition of
this Agreement shall be binding unless in writing and signed by
both parties hereto;
(c) No amendment, modification, or termination of this Agreement or
any provision hereof shall be effective unless in writing and
signed by both parties;
(d) Except as otherwise provided, whenever any approval or notice by
the Agency is required under this Agreement, or whenever any
action by the Agency is required or permitted, the Administrator
of the Agency or the Administrator's successor or authorized
agent shall have the power and right to approve, give notice, or
act on behalf of the Agency, as the case may be; and
(e) This Agreement shall be binding upon the parties hereto and their
respective permitted successors and assigns.
(f) The prevailing party in any dispute arising from this Agreement
shall be entitled to recover from the other its reasonable
attorney's fees and costs at trial and on appeal.
(g) This Agreement constitutes the entire agreement between the
parties.
(h) Any and all notices by the Agency to Borrower, or by Borrower to
the Agency, shall be in writing and shall be deemed to have been
duly given or made when deposited in the mails, certified and
Page 18 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 19
postage prepaid addressed to the parties at the addresses stated
on page one, or at such other address of which such party shall
have notified in writing the other parties hereto.
(i) This Agreement shall be governed by the laws of the State of
Oregon.
(j) Whenever used, the singular number should include the plural,
and the plural the singular; and the use of any gender shall
apply to all genders.
(k) All covenants and agreements of Borrower shall be joint and
several.
(l) The captions and headings of the sections of this Agreement are
for convenience only and are not to be used to interpret or
define the provisions hereof.
(m) Time is of the essence in the performance of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
BORROWER: /s/ Robert F. Cerol
-------------------
By: General Partner
--------------------------
Title:
-----------------------
By: John W. Petson
--------------------------
Title: General Partner
----------------------
STATE OF OREGON, acting by and through
OREGON HOUSING AGENCY
By: /s/ Stephen Gordon
-----------------------
Stephen Gordon, Manager
Housing Finance Section
/s/ Linda C. Patten
STATE OF OREGON ) /s/ Donna L. Cook
) /s/ Mark R. Cook
County of ) /s/ Bonnie Cook
The foregoing instrument was acknowledged before me this ____day of _______,
19____, by_______________________________________, of __________________, by
__________________, an Oregon_____________corporation, on behalf of the
corporation.
-------------------------------
Notary Public for Oregon
My Commission Expires:
---------
Page 19 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 20
STATE OF OREGON )
)
County of Multnomah )
The foregoing instrument was acknowledged before me this 22nd day of March,
1991, by * partner(s) on behalf of **, a ___________ partnership, of the State
of Oregon. *ROBERT A. COOK, GLENNA L. COOK, JOHN D. PETSHOW, LINDA C. PETSHOW,
MARK R. COOK and BONNIE COOK
** MACMINNVILLE RESIDENTIAL ESTATES LIMITED PARTNERSHIP
/s/ Margaret M. Newkirk
------------------------
Notary Public for Oregon
My Commission Expires: 3-18-91
(SEAL)
STATE OF OREGON )
)
County of Marion )
The foregoing instrument was acknowledged before me this 11th day of March,
1991, by Stephen Gordon, Manager, Housing Finance Section, Oregon Housing
Agency, on behalf of the Agency.
/s/ Kari Petersen
------------------------
Notary Public for Oregon
My Commission Expires: 11-26-91
Page 20 - LOAN AGREEMENT
McMinnville Residential
<PAGE> 21
L-E-G-A-L D-E-S-C-R-I-P-T-I-0-N
McMINNVILLE RESIDENTIAL ESTATES
A tract of land in the southwest quarter of Section 9 and the northwest
quarter of Section 16, Township 4 South, Range 4 West of the Willamette
Meridian in the John G. Baker Donation Land Claim and a portion of Lots 6 & 7,
Joplings Subdivision, McMinnville, Yamhill County, Oregon, being more
particularly described as follows:
Beginning at the northeast corner of said Baker Donation Land Claim; thence
South 00 20'00" West 480.63 feet along the center line of North Hembree
Street; thence South 89 32'15" West 30.00 feet to an iron rod set in CSP-9363
and the TRUE POINT OF BEGINNING of this description; thence continuing South 00
20'00" West 454.94 feet parallel with the centerline of North Hembree Street
to an iron rod set in CSP-9363 on the north right-of-way line of 27th street;
thence South 89 32'15" West 305.00 feet along said north right-of-way line;
thence North 00 20'00" 454.94 feet; thence North 89 32'15" East 305.00 feet to
the true point of beginning.
Containing 3.19 acres.
NOTE: This description is based on survey (CSP-9363) performed by Matthew
Dunckel for Oregon Mutual Insurance Company September 5, 1989.
<PAGE> 1
EXHIBIT 10.44
OPERATING LEASE
THIS LEASE ("Lease"), dated as of the 1st day 1990, between CAPITAL
CONSULTANTS, INC., as Agent for the OREGON LABORERS-EMPLOYERS PENSION
TRUST FUND (referred to in its capacity as agent as "Lessor") and CROSSINGS
INTERNATIONAL CORPORATION ("Lessee").
Recitals.
A. Lessor is the lessee under that certain ground lease between Lessor, as
lessee, and Meridian Park Hospital, as lessor, dated as of February 29, 1988.
the lessee's interest under which was assigned to Lessor by Assignment of even
date herewith (the "Ground Lease"). The Ground Lease covers the real property
more particularly described in Exhibit A (the "Land").
B. Lessor owns that certain assisted care center located on the Land and
known as the Heritage at Meridian Park (the "Facility"). Lessee desires to
lease and to operate the Facility for its own account, and Lessor is willing to
lease the Facility to Lessee on the terms and conditions set forth in this
Lease.
C. The Facility is subject to that certain deed of trust under which Far
West Federal Bank is the beneficiary, given by Lessor's predecessor, dated May
20, 1988 and recorded May 27, 1988, at Fee No. 88 21026 in the real property
records of Clackamas County (the "Mortgage').
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree:
Section 1. Lease, Initial and Renewal Term,
Effect of Mortgage Ground Lease.
1.1 Leased Property; Term. Subject to the terms and conditions set forth
in this Lease, Lessor subleases to Lessee and Lessee rents from Lessor, the
Land, and Lessor leases to Lessee and Lessee rents from Lessor all of Lessor's
rights and interest in and to the following property (together with the
interest in the Land subleased hereunder, the "Leased Property"):
(a) all buildings, structures, fixtures (as defined below) and other
improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks,
<PAGE> 2
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively the "Leased Improvements");
(b) all easements, rights, and appurtenances relating to the Land and the
Leased Improvements (collectively the "Related Rights");
(c) all permanently affixed equipment, machinery, fixtures, and other
items of real and/or personal property, including all components thereof, now
and hereafter located in, on or used in connection with, and permanently
affixed to or incorporated into the Leased Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, and
built-in oxygen and vacuum systems, together with all replacements,
modifications, alternations and additions thereto (collectively the
"Fixtures"); and
(d) all machinery, equipment, furniture, furnishings, plants, fixtures or
other personal property located at and used in conjunction with operation of
the Leased Property (the "Personal Property").
SUBJECT, HOWEVER, to the matters set forth in Exhibit B, to have and to
hold for an initial term (the "Initial Term") commencing on the effective date
of this Lease (the "Commencement Date"), and ending at midnight on December 31,
2000, unless this Lease is sooner terminated as hereinafter provided or the
Initial Term is extended pursuant to Section 1.2.
1.2 Renewal Term. Provided that Lessee is not then in default under this
Lease, Lessee shall have the option to renew this Lease for two successive
additional periods (the "Renewal Terms") of five years each. Lessee may
exercise its renewal option by giving Lessor not less than one hundred eighty
(180) days prior written notice before the commencement date of a Renewal Term
of its intent to renew this Lease. Each Renewal Term shall be upon the same
terms and conditions stated in this Lease, except that Minimum Rent (defined at
Section 3.1) shall equal the fair rental value of the Leased Property at
commencement of such Renewal Term, as determined pursuant to Section 3.3.
1.3 Except as set forth herein, the sublease of the Land is made upon and
upon and
-2-
<PAGE> 3
shall be subject to all the terms, covenants and conditions of the Ground
Lease, a copy of which is attached to this Lease as Exhibit C, and this Lease
shall be subject to all of the terms, covenants and conditions of the Mortgage.
Except as provided in this Section 1.3, Lessee shall perform, observe and be
bound by all of the terms, covenants, acknowledgments and conditions by or to
be performed on the part of the Tenant under the Ground Lease or on the part of
the Grantor under the Mortgage, from and after the date hereof, and shall
indemnify, defend and hold Lessor harmless from and against any liabilities
arising under or pursuant to the Ground Lease or Mortgage by reason of Lessee's
failure to fully comply with any and all of said duties, covenants and
obligations, or by reason of Lessee's conduct upon or management of the Leased
Property. Lessee acknowledges that Lessor does not, pursuant to this Lease,
covenant or agree to do or perform any obligations undertaken or assumed by
Landlord under the Ground Lease or Mortgage, except that Lessor shall continue
to pay, as and when due, rent payable under the Ground Lease and principal and
interest payments under the note secured by the Mortgage.
If Lessor fails to pay when due any sums required by Lessor to be paid
under the Ground Lease or the Note secured by the Mortgage, Lessee may, upon
prior notice to Lessor, but shall not be obligated to, pay any and all such
amounts. If Lessee makes any such payments, the amount so paid shall be
immediately due and payable by Lessor to Lessee and shall bear interest at the
Overdue Rate set forth at Section 2.7 from the date of expenditure by Lessee
until repaid. Such amount, plus the interest accrued thereon, shall, until
discharged in full, be off-set and deducted from the next installment or
installments of minimum rent then due or coming due under this Operating Lease.
Section 2. Definitions.
Words with initial capitals as used in this Lease shall have the meanings
given them in this Section 2 or at the Section or Recital where such word is
first used.
2.1 Consolidated Financial means any fiscal year or other accounting
period for Lessee and its consolidated subsidiaries, statements of earnings and
retained earnings and of changes in financial positions for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together
with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with generally accepted
accounting principles.
-3-
<PAGE> 4
2.2 Facility means the assisted care facility being operated on and with
the Leased Property.
2.3 Facility means, collectively, all taxes (including, without
limitation, all real, personal, county, state, business, gross receipts,
transaction privilege, rent or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed before the date hereof and whether or not to be
completed before the date or within the Initial or any Option Term of this
Lease) ground rents (exclusive of any rents payable under the Ground Lease),
water, sewer or other rents and charges, excises, tax levies, fee (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other government charges, in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property that at any time before, during or
in respect of the Initial or any Renewal Term may be assessed or imposed on or
in respect of, or be a lien upon (a) Lessor or Lessor's interest in the Leased
Property, (b) the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein, or (c) any occupancy, operation,
use of the Leased Property or any part thereof; provided, however, nothing
contained in this Lease shall be construed to require Lessee to pay (i) any tax
based on net income (whether denominated as a franchise or capital stock or
other tax) imposed on Lessor or any other person or (ii) any transfer, or net
revenue tax of any other person, (iii) any tax imposed with respect to the
sale, exchange or other disposition by Lessor of any leased Property, or the
proceeds of any such sale or exchange.
2.4 Insurance Requirements means all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
2.5 Legal Requirements means all federal, state, county, municipal and
other governmental statues, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting either the Leased Property or the
construction, use or alteration thereof, whether now or hereafter enacted and
in force, including any that may (i) require repairs, modifications or
alterations in or Leased Property or (ii) in any way adversely affect the
enjoyment of the Leased Property, and all permits, licenses and authorizations
and regulations relating to the Leased Property, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Lessee (other than encumbrances created by Lessor after the
Commencement Date without the consent of Lessee) affecting the Leased Property.
-4-
<PAGE> 5
2.6 Lessee's Property means any items of personal property owned by Lessee
and located at or used in connection with the Facility.
2.7 Overdue Rate means, on any date, a rate equal to 2% above the Prime
Rate on such date, but in no event a rate greater than the maximum rate then
permitted under applicable law.
2.8 Payment Date means any due date for the payment of the installments of
Minimum Rent or any other sums payable under this Lease.
2.9 Prime Rate means the prime interest rate announced by First Interstate
Bank of Oregon, N.A., from time to time.
2.10 Rent means, collectively, the Minimum Rent payable pursuant to
Section 3.1 and the Additional Charges payable pursuant to Section 3.2.
Section 3. Minimum Rent and Additional Charges.
3.1 Minimum Rent; Initial and Renewal Terms. Lessee will pay to Lessor in
lawful money of the United States of America at such places and to such person,
firm or corporation as Lessor from time to time may designate in writing,
Minimum Rent (as defined below), in advance, in equal, consecutive monthly
installments on the first day of each calendar month of the Initial Term, each
such installment to be in the amount set forth in Exhibit D. Minimum Rent
during any Renewal Term shall be in an amount equal to the fair market rental
value of the Leased Property during such Term, as determined as of the first
day of such Renewal Term pursuant to Section 3.3 (the "Fair Rental Value"),
provided, that the annual Minimum Rent for any year during a Renewal Term shall
in no event be less than the annual Minimum Rent applicable during the last
year of the expiring Initial Term or Renewal Term, as the case may be.
"Minimum Rent" shall mean the amount of monthly or annual rent due pursuant to
this Section 3.1 from time to time during the Initial Term or any Renewal Term.
The amount of Minimum Rent is subject to adjustment as provided in Sections
5.2, 14.6, 15.3 and 15.5.
3.2 Additional Charges. In addition to the Minimum Rent, (i) Lessee
shall pay and discharge as and when due and payable all other amounts,
liabilities, obligations and Impositions that Lessee assumes or agrees to pay
under this Lease, and (ii) in the event of any failure on the part of Lessee to
pay any of those items referred to in clause (i), Lessee shall promptly pay and
discharge every fine, penalty,
-5-
<PAGE> 6
interest and cost that may be added for non-payment or late payment of such
items (the items referred to in clauses (i) and (ii) are collectively called
"Additional Charges".
3.3 Determination of Minimum Rent-Renewal Term. Fair Rental Value shall
mean the rental value of the Leased Property for a Renewal Term, determined as
of the first day of such Term, by
(a) agreement of Lessor and Lessee on or before the date that is five
months preceding the date on which the Renewal Term commences, or, if Lessor
and Lessee cannot agree upon the Fair Rental value of the Leased Property
within the time given for such agreement under this clause (a), then the Fair
Rental Value of the Leased Property shall be determined by
(b) a qualified MAI appraiser experienced in the Portland, Oregon
metropolitan market area and selected as follows: on or before five (5) months
before commencement of the Renewal Term each party shall appoint a qualified
MAI appraiser experienced in the Portland, Oregon market area and shall advise
the other party of the choice. On the failure of either party to appoint an
appraiser on or before five (5) months before such commencement date, the
person appointed as appraiser by the other party may appoint a second appraiser
to represent the party in default. The two appraisers appointed in either
manner shall at once proceed to determine the Fair Rental Value of the Leased
Property, but if they cannot agree upon the Fair Rental value of the Leased
Property, they shall, not later than two (2) months before such commencement
date, appoint a third appraiser and the three appraisers shall proceed at once
to determine the Fair Rental Value of the Leased Property. The appraisal shall
be conducted in Oregon, and a determination signed by any two of the three
appraisers shall be binding and conclusive on each party. Lessor and Lessee
shall each bear the costs and expenses of the appraiser representing such
party, and the costs and expenses of the third appraiser, if any, shall be
borne equally by Lessor and Lessee.
3.4 Late Payment; Lessor's Payment of Additional Charges. Lessor shall
have all legal, equitable and contractual rights, powers and remedies provided
either in this Lease or by statute or otherwise in the case of non-payment of
Rent.
3.4.1 If any installment of Minimum Rent shall not be paid within ten
(10) days after its due date, Lessee will pay Lessor on demand, as Additional
Charges, the late fee as provided in Section 3.6 hereof and, at such time that
such failure constitutes an Event of Default pursuant to Section 16, a late
charge (to the extent permitted by law) computed at the
-6-
<PAGE> 7
Overdue Rate (or at the maximum rate permitted by law, whichever is less) on
the amount of such installment, from the due date of such installment to the
date of payment thereof.
3.4.2 If Lessee shall fail to pay any Additional Charges when due and if,
pursuant to this Lease, Lessor shall discharge the same, then an amount equal
to such Additional Charges shall become immediately due and payable by Lessee
to Lessor, together with interest at the Overdue Rate accruing from the date
such amount was expended by Lessor until the same is repaid by Lessee. To the
extent that Lessee pays any Additional Charges to Lessor pursuant to any
requirement of this Lease, Lessee shall be relieved of its obligation to pay
such Additional Charges to the entity to which they would otherwise be due.
3.5 Net Lease. Except as otherwise provided in Section 1.3, the Rent
shall be paid absolutely net to Lessor, so that this Lease shall yield
to lessor the full amount of the installments of Minimum Rent and Additional
Charges throughout the Term, all as more fully set forth in Section 5 and
subject to any other provisions of this Lease that expressly provide for
adjustment or abatement of Rant or other charges.
3.6 Late Fee. Lessee shall pay a late fee of five percent (5%) of the
monthly rent for any payment not received within ten (10) days of its due date.
Such late charge is intended to compensate Lessor for additional expenses
incurred by Lessor in processing such late payments. Nothing herein is
intended to violate any applicable law, code or regulation, and in case of any
such violation all impermissible charges shall automatically be reduced to any
maximum applicable legal rate or charge. The late fee pursuant to this Section
3.6 shall be imposed monthly for each late payment. This late fee is in
addition to all other remedies available to Lessor and shall not be considered
as limiting other remedies Lessor may have under this Lease or under Law.
Section 4. Taxes, Assessments and Other Impositions.
4.1 Payment of Impositions. Subject to Section 12 relating to permitted
contests, Lessee will pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost is assessed or added for non-payment, such
payments to be made directly to the taxing authorities. Lessee will promptly,
upon request, furnish to Lessor copies of official receipts or other
satisfactory proof evidencing such payments. Lessee's obligation to pay such
Impositions shall be deemed absolutely fixed upon the date such Impositions
become a lien upon the Leased Property or any part thereof. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in
-7-
<PAGE> 8
installments (whether or not interest shall accrue on the unpaid balance of
such Imposition), Lessee may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and
in such event, shall pay such installments during the Initial and any Renewal
Term (subject to Lessee's right of contest pursuant to the provisions of
Section 12) as the same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto. Lessor, at its
expense, shall, to the extent permitted by applicable law, prepare and file all
tax returns and reports as may be required to governmental authorities in
respect of Lessor's net income, gross receipts, franchise taxes and taxes on
its capital stock, and Lessee, at its expense, shall, to the extent permitted
by applicable laws and regulations, prepare and file all other tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. If any refund shall be due from any taxing authority in respect
of any Imposition paid by Lessee, the same shall be paid over to or retained by
Lessee if no Event of Default (defined at Section 16) shall have occurred
hereunder and be continuing. Any such funds paid or payable by Lessor due to
an Event of Default shall be applied as provided in Section 16.
Lessor or Lessee shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports. If
governmental authorities classify any property covered by this Lease as
personal property, Lessee shall file all personal property tax returns.
Lessor, to the extent it possesses the same, will, upon request, provide Lessee
with cost and depreciation records necessary for filing returns for any
property so classified as personal property. If Lessor is legally required to
file personal property tax returns, Lessee will be provided with copies of
assessment notices indicating a value in excess of the reported value in
sufficient time for Lessee to file a protest. Lessee may, upon notice to
Lessor and subject to the provisions of Section 12 relating to permitted
contests, at Lessee's option and at Lessee's sole cost and expense, protest,
appeal, or institute such other proceedings as Lessee may deem appropriate to
effect a reduction of real estate or personal property assessments and Lessor,
at Lessee's expense as aforesaid, shall fully cooperate with Lessee in such
protest, appeal or other action. Billings for reimbursement by Lessee to
Lessor of personal property taxes shall be accompanied by copies of a bill
therefor and payments thereof which identify the personal property with respect
to which such payments are made.
4.2 Notice of Imposition. Lessor shall give prompt notice to Lessee of
all Impositions payable by Lessee hereunder
-8-
<PAGE> 9
of which Lessor at any time acquires knowledge, but Lessor's failure to give
any such notice shall in no way diminish Lessee's obligations hereunder to pay
such Impositions; provided, however, that if Lessor fails to give such notice
to Lessee and Lessee was otherwise without actual or constructive notice of any
such Imposition, Lessor shall be responsible for any fine, penalty, interest
and costs added because of late payment of such Imposition and Lessee shall not
be deemed to be in default hereunder for late payment thereof.
4.3 Adjustment of Impositions. Impositions imposed in respect of the tax
or fiscal period during which the Initial or any Renewal Term terminates shall
be adjusted and prorated between Lessor and Lessee, whether or not such
Imposition is imposed before or after such termination, and Lessee's obligation
to pay its prorated share thereof shall survive such termination.
4.4 Utility Charges. Lessee will pay or cause to be paid all charges for
electricity, power, gas, oil, water and other utilities used in the Leased
Property during the Term.
4.5 Insurance Premiums. Lessee will pay or cause to be paid all premiums
for the insurance coverage required to be maintained pursuant to Section 13
during the Term.
Section 5. Rent Adjustments.
5.1 No Termination or Abatement. Except as otherwise specifically
provided in this Lease, Lessee, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the consent of Lessor to modify, surrender or terminate the
same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent, nor shall the respective
obligations of Lessor and Lessee be otherwise affected by reason of (a) any
damage to, or destruction of, any Leased Property or any portion thereof from
whatever cause or any Taking of the Leased Property or, any portion thereof;
(b) the lawful or unlawful prohibition of, or restriction upon, Lessee's use of
the Leased Property, or any portion thereof, the interference with such use by
any person, corporation, partnership or other entity, or by reason of eviction
by paramount title, unless such prohibition, restriction or interference arises
from Lessor's failure to pay when due any sums required of Lessor to be paid
under the Ground Lease or the Note secured by the Mortgage; (c) except as
otherwise specifically provided in this Lease, any claim that Lessee has or
might have against Lessor by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which
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Lessor and Lessee are parties; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Lessor or any assignee or transferee of Lessor, or (e)
any other cause whether similar or dissimilar to any of the foregoing other
than a discharge of Lessee from any such obligations as a matter of law.
Lessee hereby waives all rights, arising from any occurrence whatsoever, that
may now or hereafter be conferred upon it by law (i) to modify, surrender or
terminate this Lease or (ii) that entitle Lessee to any abatement, reduction,
suspension or deferment of Rent or other sums payable by Lessee hereunder,
except as otherwise specifically provided in this Lease. The obligations of
Lessor and Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.
5.2 Abatement Procedures. In the event of a partial taking as described
in Section 15.3, temporary taking as described in Section 15.5 or damage to or
destruction of the Leased Property as described in Section 14.6, which taking,
damage or destruction does not render the Leased Property unsuitable for its
Primary Intended Use (defined at Section 7.2.2), this Lease shall not
terminate, but the Minimum Rent, subject to the foregoing, shall be abated in
an amount determined by Lessor in the reasonable exercise of its judgment,
taking into consideration what is fair, just and equitable to both Lessee and
Lessor. Lessor shall notify Lessee in writing of any abatement determined
pursuant to this Section 5.2. If Lessee shall object in writing to the
abatement determined by Lessor within fifteen (15) days of Lessor's notice
thereof to Lessee, then each party shall appoint an appraiser within fifteen
(15) days following the date Lessor received Lessee's objection, and such
abatement shall be determined by appraisal as otherwise provided in Section
3.3(b).
Section 6. Ownership of Leased Property.
6.1 Limited Rights of Lessee. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
exclusive possession and use of the Leased Property upon the terms and
conditions of this Lease.
6.2 Personal Property. After the commencement of this Lease, Lessee may,
at its expense, install, affix, assemble or place, on any parcels of the Land
or in any of the Leased Improvements, any items of personal property. Lessee
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shall provide and maintain during the entire Lease term all personal property,
including without limitation, all personal property necessary in order to
operate the Facility in compliance with all licensure and certification
requirements, in compliance with all applicable Legal Requirements and
Insurance Requirements and otherwise in accordance with customary practice in
the industry for the Primary Intended Use of the Facility.
6.3 Transfer of Personal Property to Lessor. Upon the earlier of the
expiration of twenty (20) years after the effective date of this Lease or the
termination of this Lease, all (a) fixtures acquired by Lessee and placed on
the Land or in the Facility after the effective date of this Lease, and
replacements therefor or thereto, (b) all replacements of the personal property
located on the Land or in the Facility on the effective date of this Lease and
(c) any other personal property acquired by Lessee after the effective date of
this Lease and placed on the Land or in the Facility that is reasonably
necessary to operation of the Facility, shall become the property of Lessor, if
not already owned by Lessor, and Lessee shall execute all documents and take
any actions reasonably necessary to evidence such ownership. The term
"Personal Property" shall include any such additional personal property as may
be transferred to Lessor pursuant to this Section 6.3.
6.4 Replacements. If during the term of this Lease, Lessee should replace
any of the Personal Property or Fixtures used in the operation of the Leased
Property or the business conducted thereon, such replacement or substitute
property shall become the property of Lessor (as Personal Property or Fixtures
defined herein), free and clear of liens, encumbrances or claims by Lessee.
Section 7 Condition and Use of Leased Property
7.1 Conditions of the Leased Property. Lessee has occupied and been in
possession of the Leased Property since _______ 1988, and Lessee has examined
and otherwise has knowledge of the condition of the Leased Property and has
found the same to be in good order and repair and satisfactory for its purposes
hereunder. Lessee is leasing the Leased Property "AS IS," and Lessee waives
any claim or action against Lessor in respect of the condition of the Leased
Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS
FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR
AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT
BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE
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ACKNOWLEDGES THAT LESSEE HAS INSPECTED THE LEASED PROPERTY AND THAT THE LEASED
PROPERTY IS SATISFACTORY TO LESSEE.
7.2 Use of the Leased Property.
7.2.1 Lessee shall proceed with all due diligence and shall exercise its
best efforts to obtain and to maintain all approvals needed to use and operate
the Leased Property and the Facility under applicable local, state and federal
law, including but not limited to licensure of the Leased Property where
appropriate as a boarding and assisted care living facility.
7.2.2 After the Commencement Date and during the Initial and any Renewal
Term, Lessee shall continuously use or cause to be used the Leased Property and
the Improvements thereon as a boarding and assisted care living facility and
for such other uses as may be necessary or incidental to such use (the "Primary
Intended Use"). Lessee shall not use the Leased Property or any portion
thereof for any other use without the prior written consent of Lessor. No use
shall be made or permitted to be made of the Leased Property, and no acts shall
be done, that will cause the cancellation of any insurance policy covering
the Leased Property or any part thereof, nor shall Lessee sell or otherwise
provide to residents therein, or permit to be kept, used or sold in or about
the Leased Property, any article that may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriters regulations. Lessee
shall, at its sole cost, (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not compliance therewith shall
require structural changes in any of the Leased Improvements or interfere with
the use and enjoyment of the Leased Property and (b) procure, maintain and
comply with all licenses and other authorizations required for any use of the
Leased Property then being made, and for the proper erection, installation,
operation and maintenance of the Leased Property or any part thereof.
7.2.3 Lessee shall not commit or suffer to be committed any waste on the
Leased Property, or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
7.2.4 Lessee shall neither suffer nor permit the leased Property, or any
portion thereof, to be used in such manner as (i) might reasonably tend to
impair Lessor's title thereto or to any portion thereof, or (ii) may reasonably
make possible a claim or claims of adverse usage or adverse possession by the
public, as such, or of implied dedication of the Leased Property or any portion
thereof.
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7.2.5 Lessee shall not use or permit the Leased Property to be used, in
any manner that would (i) violate any certificate of occupancy affecting the
Leased Property, (ii) cause the value or usefulness of the Leased Property or
any part thereof to diminish, (iii) cause the loss of a license, approval,
permit or agreement required by Section 7.2.1 hereof, (iv) violate any of the
provisions of any encumbrance, mortgage or Deed of Trust to which the Lease is
subordinated or that encumbers the Leased Property, or (v) violate any other
provision of this Lease.
7.2.6 Lessee shall inform Lessor immediately by telephone and by letter,
telefacsimile or telegraph of any action taken, commenced or instituted by any
state or federal authority having jurisdiction over the Leased Property as an
assisted care facility to terminate or revoke any license or certificate of
Lessee.
7.3 Management of Facility. At all times during the Initial and any
Renewal Term, Lessee shall have and retain primary and direct responsibility
for managing the Facility. The fee payable to Lessee from the revenues
generated by the Facility for providing such services shall at no time exceed@
five percent (5%) of the gross operating revenues of the Facility unless Lessor
shall have given its prior written consent to Lessee to charge and collect a
greater management fee.
Section 8. Compliance with Mortgages and Restrictions.
8.1 Mortgage Compliance. Lessee, at its sole expense, shall promptly and
diligently insure that it and the Leased Property and business conducted
thereon shall at all times comply with all of the terms, conditions and
provisions of any mortgage, deed of trust or other encumbrance now or in the
future covering the Leased Property, except for the obligations thereunder to
make payment on principal and interest.
8.2 Encroachments, Restrictions. If any of the Leased Improvements shall,
at any time, encroach upon any property, street or right-of-way adjacent to the
Land, or shall violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting the Leased Property, or any
part thereof, or shall impair the rights of others under any easement or
right-of-way to which the Leased Property is subject, then promptly upon the
request of Lessor or at the behest of any person affected by any such
encroachment, violation or impairment, Lessee shall, at its expense, subject to
its right pursuant to Section 12 to contest the existence of any encroachment,
violation or impairment and
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in such case, in the event of an adverse final determination, either (i) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lessor or Lessee or (ii) make such changes in the Leased
Improvements, and take such other actions, as Lessee in the good faith exercise
of its judgment deems reasonably practicable, to remove such encroachment, and
to end such violation or impairment, including, if necessary, the alteration of
any of the Leased Improvements, and in any event take all such actions as may
be necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to
the extent the Leased Improvements were operated before the assertion of such
violation or encroachment. Any such alteration shall be made in conformity
with the applicable requirement of Section 10. Lessee's obligations under this
Section 9.2 shall be in addition to and shall in no way discharge or diminish
any obligation of any insurer under any policy of title or other insurance and
Lessee shall be entitled to a credit for any sums recovered by Lessor under any
such policy of title or other insurance.
Section 9. Maintenance and Repair.
9.1 Lessee's Obligations.
9.1.1 Lessee, at its expense, will keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto and that are under Lessee's
control in good order and repair (whether or not the need for such repairs
occurs as a result of Lessee's use, any prior use, the elements or the age of
the Leased Property, or any portion thereof), and, except as otherwise provided
in Section 14, with reasonable promptness make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing before the commencement of the
Initial Term of this Lease (concealed or otherwise). All repairs shall, to the
extent reasonably achievable, be at least equivalent in quality to the original
work. Lessee will not take or omit to take any action the taking or omission
of which might materially impair the value or the usefulness of the Leased
Property or any part thereof for its Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to build or
rebuild any improvements in the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural
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or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Leased Property in any way. Lessee hereby waives, to the extent permitted
by law, the right to make repairs at the expense of Lessor pursuant to any law
in effect at the time of the execution of this Lease or that is hereafter
enacted.
9.1.3 Nothing contained in this Lease and no action or inaction by Lessor
shall be construed as (i) constituting the consent or request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (ii)
giving Lessee any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any materials or
other property in such fashion as would permit the making of any claim against
Lessor in respect thereof or to make any agreement that may create, or in any
way be the basis for, any right, title, interest, lien, claim or other
encumbrance upon the estate of Lessor in the Leased Property, or any portion
thereof, except as provided in Sections 11 and 12.
9.2. Lessor Repairs. If Lessor deems any maintenance or repairs required
to be made by Lessee necessary, Lessor may demand that Lessee make them
immediately, and if Lessee refuses or neglects to commence such maintenance or
repairs and to complete them with reasonable dispatch, Lessor may make or cause
such maintenance or repairs to be made. If Lessor makes or causes maintenance
or repairs to be made, Lessor shall not be responsible to Lessee for any loss or
damage that may accrue to Lessee's property or business by reason of the
maintenance or repair work, and Lessee shall, on demand, immediately pay to
Lessor the cost of such maintenance or repairs.
Section 10. Alterations.
Lessee shall have the right to make additions, modifications or
improvements to the Leased Property from time to time as it, in its discretion,
may deem to be desirable for its uses and purposes, provided that either (a)
Lessor has given its prior written consent for such alteration or (b) all of
the following apply: (i) the costs of such alteration do not exceed the sum of
$25,000.00, (ii) such action will not significantly alter the character or
purpose or detract from the value or operating efficiency of the Leased
Property, (iii) such alteration will not significantly impair the revenue
producing capability of the Leased Property, and (iv) such alteration will not
adversely affect the ability of Lessee to
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comply with the provisions of this Lease or increase the cost to Lessor of
performing its obligations hereunder. The cost of all permitted alterations,
modifications or improvements to the Leased Property shall be paid by the
Lessee, and all such alterations, modifications and improvements shall, without
payment by Lessor at any time, be included under the terms of this Lease and
upon expiration or earlier termination of this Lease shall revert to and become
the property of Lessor.
Lessee shall perform any alterations, modifications or improvements with
new materials, in a professional, workmanlike manner, and in accordance with
all applicable governmental restrictions, orders, regulations, laws and
ordinances and in compliance with any insurance policies or insurance
underwriting requirements.
Section 11. Liens.
Subject to the provision of Section 12 relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any part thereof, or
any attachment, levy, claim or encumbrance in respect of the Rent, not
including, however, (a) this Lease, (b) the matters, if any, set forth in
Exhibit B, restrictions, liens and other encumbrances to which Lessor gives its
prior written consent, (d) liens for those taxes of Lessor that Lessee is not
required to pay hereunder, (e) liens for real property taxes not yet due, (f)
liens for impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are payable without the addition of any
fine or penalty or (ii) such liens are in the process of being contested as
permitted by Section 12, (g) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due, provided that (i)
the payment of such sums shall not be postponed under any related contract for
more than sixty (60) days after the completion of the action giving rise to
such lien and such reserve or other appropriate provisions as shall be required
by law or generally accepted accounting principles shall have been made
therefore or (ii) any such liens are in the process of being contested as
permitted by Section 12, and (h) any liens that are the responsibility of
Lessor pursuant to the provisions of Section 36.
Section 12. Permitted Consents.
Lessee, on its own or on Lessor's behalf (or in Lessor's name), but at
Lessee's expense, may contest, by
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appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any Imposition or
any Legal Requirement or Insurance Requirement or any lien, attachment, levy,
encumbrance, charge or claim not otherwise permitted by Section 11, provided
that (a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof against Lessor and from the
Leased Property, (b) neither the Leased Property nor any Rent therefrom nor any
part thereof or interest therein would be in any immediate danger of being
sold, forfeited, attached or lost, (c) in the case of a Legal Requirement,
Lessor would not be in any immediate danger of civil or criminal liability for
failure to comply therewith pending the outcome of any proceedings, (d) such
contest may legally be maintained without the occurrence or imposition of any
lien, charge or liability against Lessor, the Leased Property or Lessee's
interest in the Leased Property or Lessee shall have given such reasonable
security as may be demanded by Lessor to insure ultimate payment of any such
lien, charge or liability by Lessee and prevent any sale or forfeiture of the
Leased Property or the Rent; provided, however, the provisions of this Section
12 shall not be construed to permit Lessee to contest the payment of Rent or
any other sums payable by Lessee to Lessor hereunder, (e) in the case of an
Insurance Requirement, the coverage required by Section 13 shall be maintained,
and (f) if such contest be finally resolved against Lessor or Lessee, Lessee
shall, as Additional Charges due hereunder, promptly pay the amount required to
be paid, together with all interest and penalties accrued thereon, to comply
with the applicable Legal Requirement or Insurance Requirement. Lessor, at
Lessee's expense, shall execute and deliver to Lessee such authorizations and
other documents as may reasonably be required in any such contest, and, if
reasonably requested by Lessee or if Lessor so desires, Lessor shall be joined
as a party therein. Lessee shall defend, indemnify and save Lessor harmless
from and against any liability, cost or expense of any kind that may be imposed
upon Lessor in connection with any such contest and any loss resulting
therefrom.
Section 13. Insurance.
13.1 General Insurance Requirements. During the term of this Lease,
Lessee shall at all times keep the Leased Property, and all property located in
or on the Leased Property, including Lessee's Property, insured with the kinds
and amounts of insurance described in this Section 13. This insurance shall be
written by companies authorized to do insurance business in the state in which
the Leased Property is located. The policies must name Lessor, Capital
Consultants,
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Inc. and those other parties designated by Lessor as an additional insured.
Losses shall be payable to Lessor and/or Lessee as provided in Section 14. In
addition, the policies shall name as an additional insured the holder of any
mortgage, deed of trust or other security agreement ("Facility Mortgagee") on
the Leased Property and any other encumbrance placed on the Leased Property in
accordance with the provisions of Section 36, by way of a standard form of
mortgagee's loss payable endorsement. Any loss adjustment shall require the
written consent of Lessor, Lessee, and each Facility Mortgagee. Evidence of
insurance shall be deposited with Lessor, and, if requested, with any Facility
Mortgagee(s). If any provision of any Facility Mortgage requires deposits in
respect of insurance to be made with such Facility Mortgagee, Lessee shall
either pay to Lessor monthly the amounts required and Lessor shall transfer
such amounts to each Facility Mortgagee, or, pursuant to written direction by
Lessor, Lessee shall make such deposits directly with such Facility Mortgagee.
The policies on Lessee's Property and the Leased Property, including the Leased
Improvements, Fixtures and Personal Property, shall insure against the
following risks:
13.1.1 Loss or damage by fire, vandalism and malicious mischief, extended
coverage perils commonly known as "All Risk", and all physical loss perils
including but not limited to sprinkler leakage in an amount not less than one
hundred percent (100%) of the then full replacement cost thereof (as defined
below in Section 13.2);
13.1.2 Loss or damage by explosion of steam boilers, pressure vessels or
similar apparatus, now or hereafter installed in the Facility, in such limits
with respect to any one accident as may be reasonably requested by Lessor from
time to time;
13.1.3 Loss of rental under a rental value insurance policy covering risk
of loss during the first twelve (12) months of reconstruction necessitated by
the occurrence of any of the hazards described in Section 13.1.1 or 13.1.2 in
an amount sufficient to prevent Lessor from becoming a co-insurer.
13.1.4 Claims for personal injury or property damage under a policy of
comprehensive general public liability insurance with amounts not less than
Five Million Dollars ($5,000,000.00) per occurrence in respect of bodily injury
and death and Five Million Dollars ($5,000,000.00) for property damage.
13.1.5 Claims arising out of professional malpractice in an amount not
less than One Million Dollars ($1,000,000.00) for each person and for each
occurrence; and
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13.1.6 Flood (when the Leased Property is located in whole or in part
within a designated flood plain area), earthquake and such other hazards and in
such amounts as may be customary for comparable properties in the areas and is
available from insurance companies authorized to do business in the State at
rates that are economically practicable in relation to the risks covered.
13.2 Replacement Cost. The term "full replacement cost" shall mean the
actual replacement cost of covered property from time to time including
an increased cost of construction endorsement, less exclusions
provided in the normal fire insurance policy. If either party believes that
full replacement cost (the then replacement cost less such exclusions) has
increased or decreased at any time during the Initial or any Renewal Term, it
shall have the right to have such full replacement cost determined by the fire
insurance company that is then carrying the largest amount of fire insurance
carried on the Leased Property, hereinafter referred to as "impartial
appraiser." The party desiring to have the full replacement cost so
redetermined shall forthwith, on receipt of such determination by such
impartial appraiser, give written notice thereof to the other party. The
determination of such impartial appraiser shall be final and binding on the
parties, and Lessee shall forthwith increase, or may decrease, the amount of
insurance carried pursuant to this Section, as the case may be, to the amount
so determined by the impartial appraiser, provided, that in no event shall the
full replacement cost ever be in an amount less than the indebtedness
encumbering the Leased Property. Lessee shall pay all of the fees, if any, of
the impartial appraiser and all fees and costs incurred by Lessor with regard
to Lessor's participation pursuant to this Section. If Lessee shall have made
improvements to the Leased Property Lessor may, at Lessee's cost, have such
full replacement cost redetermined at any time after such improvements are
made, regardless of when the full replacement cost was last determined.
13.3 Additional Insurance. In addition to the insurance coverage described
in Section 13.1, Lessee shall maintain such additional insurance as may be
required from time to time by any Facility Mortgagee and shall further maintain
at all times adequate worker's compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such worker's compensation
insurance shall be in accordance with the requirements of applicable local,
state and federal law.
13.4 Waiver of Subrogation. All insurance policies carried by either
party covering the Leased Property, and/or Lessee's Personal Property,
including without limitation, policies covering contents and fire and casualty
insurance, shall expressly waive any right of subrogation on the part of
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the insurer against the other party. The policies carried by each party will
include such waiver clause so long as the same is obtainable without extra
cost, and in the event of such an extra charge the other party, at its
election, may pay the same, but shall not be obligated to do so.
13.5 Form Satisfactory, etc. All of the policies of insurance referred to
in this Section shall be written in form satisfactory to Lessor and by
insurance companies satisfactory to Lessor. Lessor will not unreasonably
withhold its approval as to the form of the policies of insurance or as to the
insurance companies selected by Lessee. Lessee shall pay all of the premiums
therefor, and shall deliver such policies or certificates thereof to Lessor
before their effective date (and with respect to any renewal policy, at least
ten (10) days prior to the expiration of the existing policy), and in the event
of the failure of Lessee either to effect such insurance in the names herein
called for or to pay the premiums therefor, or to deliver such policies or
certificates thereof to Lessor at the times required, Lessor shall be entitled,
but shall have no obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be repayable to Lessor upon written demand
therefor, and failure to repay the same shall constitute an Event of Default
within the meaning of Section 16.1(c). Each insurer mentioned in this Section
shall agree, by endorsement on the policy or policies issued by it, or by
independent instrument furnished to Lessor, that it will give to Lessor thirty
(30) days written notice before the policy or policies in question shall be
altered, allowed to expire or cancelled.
13.6 Increase in Limits. If Lessor shall at any time deem the limits of
the personal injury or property damage or public liability insurance then
carried by Lessee to be either excessive or insufficient, the parties shall
endeavor to agree on the proper and reasonable limits for such insurance to be
carried, and such insurance shall thereafter be carried with the limits thus
agreed on until further change pursuant to the provisions of this Section. If
the parties shall be unable to agree thereon, the proper and reasonable limits
for such insurance to be carried shall be determined by an impartial third
party selected by the parties, the costs of which shall be paid by Lessee.
Lessee shall reimburse Lessor for all costs and fees incurred by Lessor with
regard to Lessor's participation with Lessee as provided in this Section 13.6.
Nothing herein shall permit the amount of insurance to be reduced below the
amount or amounts required by any Facility mortgagee, which for purposes of
this Lease shall at all times be the minimum amount of insurance coverage
required of Lessee.
13.7 Blanket Policy. Notwithstanding anything to the contrary contained
in this Section, Lessee's obligations to
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carry the insurance provided for herein may be brought within the coverage of a
so-called blanket policy or policies of insurance carried and maintained by
Lessee; provided, however, that the coverage afforded Lessor will not be
reduced or diminished or otherwise by different from that which would exist
under a separate policy meeting all other requirements of this Lease by reason
of the use of such blanket policy of insurance, and provided further that the
requirements of this Section 13 are otherwise satisfied.
Section 14. Insurance Proceeds and Reconstruction Obligation.
14.1 Insurance Proceeds. All proceeds payable by reason of any loss or
damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Section 13 of this Lease, shall be paid to
Lessor and held by Lessor in trust (subject to the provisions of section 14.7)
and shall be made available for the reconstruction or repair, as the case may
be, of any damage to or destruction of the Leased Property, or any portion
thereof, and shall be paid out by Lessor from time to time for the reasonable
costs of such reconstruction or repair. Any excess proceeds of insurance
remaining after the completion of the restoration or reconstruction of the
Leased Property (or in the event neither Lessor nor Lessee is required or
elects to repair and restore, all such insurance proceeds) shall be distributed
to Lessor free and clear upon completion of any such repair and restoration
except as otherwise specifically provided below in this Section 14.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
14.2.1 Except as provided in Section 14.7, if during the Initial or any
Renewal Term, the Leased Property is totally or partially destroyed from a risk
covered by the insurance described in Section 13 and the Leased Property
thereby is rendered unsuitable for its Primary Intended Use, which shall be
determined by Lessor exercising good faith, then if Lessor makes the proceeds
from such fire insurance policy available to Lessee, Lessee shall restore the
Leased Property to substantially the same condition as existed immediately
before the damage or destruction. If Lessor elects not to make the insurance
proceeds available, Lessee shall be under no obligation to reconstruct the
Leased Property, Lessor shall retain the insurance proceeds in full
satisfaction of this Lease and this Lease shall be terminated and future Rent
abated.
14.2.2 Except as provided in Section 14.7, if during the Initial or any
Renewal Term, the Leased Property is totally or partially destroyed from a risk
covered by the
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insurance described in Section 12, but the Leased Property is not thereby
rendered unsuitable for Its Primary Intended Use, Lessee shall immediately
restore the Leased Property to substantially the same condition as existed
immediately before the damage or destruction, and Lessor shall make available
to Lessee, pursuant to Section 14.1, insurance proceeds that may be held as the
result of such damage or destruction. Such damage or destruction shall not
terminate this Lease, which shall remain in full force and effect.
14.2.3 If the cost of the repair or restoration, required to be performed
by Lessee pursuant to this Section 14.2 exceeds the amount of proceeds received
by Lessor from the insurance required to be carried under Section 13, Lessee
shall contribute any excess amounts needed to restore the Leased Property.
Such difference shall be paid by Lessee to Lessor to be held in trust together
with any other insurance proceeds for application to the cost of repair and
restoration.
14.3 Reconstruction in the Event of Destruction Not Covered by Insurance.
If, during the Initial or any Renewal Term, the Leased Property is totally or
materially destroyed from a risk not covered by the insurance described in
Section 12, or if for any reason such insurance was not carried as required,
whether or not such damage or destruction renders the Leased Property
unsuitable for its Primary Intended Use, Lessee shall restore the Leased
Property to substantially the same condition as it was in immediately before
the damage or destruction and such damage or destruction shall not terminate
this Lease.
14.4 Lessee's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Lessee's Property shall be paid to Lessee and
Lessee shall hold such insurance proceeds in trust to pay the cost of repairing
such loss or damage.
14.5 Restoration of Lessee's Property. If Lessee is required to restore
the Leased Property as provided in Section 14.2 or 14.3, Lessee shall also
restore all alterations and improvements made by Lessee and Lessee's Property.
14.6 Abatement of Rent. Following damage to or destruction of the Leased
Property under circumstances where Lessee is required to restore the Leased
Property pursuant to Section 14.2 and where this Lease remains in full force
and effect, Lessee's obligation to pay Minimum Rent shall be abated as provided
at Section 5.2 until the earlier of (a) substantial completion of such repair
or restoration or (b) expiration of the first twelve (12) months of any period
required for repair and restoration, but Minimum Rent shall thereafter be
payable in full. Lessee shall at all times remain obligated to pay
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Additional Charges until expiration or earlier termination of this Lease.
14.7 Damage Near End of Term. Notwithstanding any provision of Section
14.2 appearing to the contrary, if damage to or destruction of the Leased
Property occurs during the last eighteen (18) months of the Initial or any
Renewal Term and is covered by insurance, and if such damage or destruction
cannot be fully repaired and restored within six (6) months immediately
following the date of loss, then Lessee shall have the right to terminate this
Lease by giving notice to Lessor within thirty (30) days after the date of
damage or destruction and all insurance proceeds shall be paid to Lessor and
this Lease shall be terminated effective on the date of such notice.
14.8 Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Leased Property.
14.9 Lessee Inconvenience. No damages, compensation or claim shall be
payable by Lessor to Lessee for inconvenience, loss of business or annoyance
arising from any repair or restoration of any portion of the Leased Property
pursuant to this Section 14.
14.10 Express Provision. The provisions of this Section shall be
considered an express agreement governing any case of damage or destruction of
the Leased Property by fire or other casualty, and no state statute providing
for such a contingency in the absence of an express agreement, and no other law
of like import, now or hereafter in force, shall have application in such case.
Section 15, Condemnation.
15.1 Definitions.
15.1.1 "Condemnation" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary
sale or transfer by Lessor to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
15.1.2 "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
15.1.3 "Award" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
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15.1.4 "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
15.2 Parties' Rights and Obligations. If during the Initial or any
Renewal Term there is any taking of all or any part of the Leased Property or
any interest in this Lease by condemnation, the rights and obligations of the
parties shall be determined by this Section 15.
15.3 Partial Taking. If a portion of the Leased Property is taken by
condemnation, this Lease shall remain in effect if the Leased Property is not
thereby rendered unsuitable for its Primary Intended Use (which shall be
determined by Lessor exercising good faith), but if the Leased Property is
thereby rendered unsuitable for its Primary Intended Use, this Lease shall
terminate on the Date of Taking.
If, as the result of any such partial taking by condemnation, this Lease
is not terminated as provided in Section 15.3, Lessee shall be entitled to
abatement of rent as provided in Section 5.2.
15.4 Award Distribution. The entire Award made in connection with the
condemnation of all or any part of the Leased Property shall belong to and be
paid to Lessor, subject only to the rights of the Facility Mortgagees. Lessee
shall be entitled to receive from the Award, if and to the extent such Award
specifically includes a sum attributable thereto, an amount for loss of or to
Lessee's Property and for reasonable removal and relocation costs.
15.5 Temporary Taking. The taking of the Leased Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month
period all the provisions of this Lease shall remain in full force and
effect except that the Minimum Rent shall be abated or reduced during such
period of taking as provided in Section 5.2.
Section 16. Events of Default.
16.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default:
(a) if Lessee shall fail to make payment of the Rent or any other amount
or sum payable by Lessee under this Lease when the same becomes due and payable
and such failure is not cured within a period of five (5) days of the written
notice from Lessor of the Lessee's failure to timely make the payment,
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(b) if Lessee shall fail to observe or perform any other term, covenant,
or condition of this Lease and such failure is not cured within a period of
thirty (30) days after receipt by Lessee of written notice thereof from Lessor,
unless such failure cannot, with due diligence, be cured within a period of
thirty (30) days, in which case such failure shall not be deemed to continue if
Lessee or Guarantor (defined at Section 35) proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof, and
the time in which Lessee shall be obligated to cure any such failure shall also
be subject to extension of time due to the occurrence of any unavoidable delay
not of Lessee's making,
(c) If Lessee or Guarantor shall:
(i) admit in writing its inability to pay its debts generally as they
become due,
(ii) file a petition in bankruptcy or a petition to take advantage of
any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or of the whole
or any substantial part of its property,
(v) file a petition or answer seeking reorganization or arrangement
under the Federal bankruptcy laws or any other applicable law or statute of
the United States of America or any State thereof,
(d) if Lessee or Guarantor shall, on a petition in bankruptcy filed
against it, be adjudicated a bankrupt or a court of competent jurisdiction
shall enter an order or decree appointing, without the consent of the Lessee or
Guarantor, as the case may be, a receiver of Lessee or Guarantor or of the
whole or substantially all of its property, or approving a petition filed
against it seeking reorganization or arrangement of the Lessee or Guarantor
under the Federal bankruptcy laws or any other applicable law or statute of the
United States of America or any State thereof, and such judgment, order or
decree shall not be vacated or set aside or stayed within sixty (60) days for
the date of the entry thereof,
(e) if Lessee shall be liquidated or dissolved, or shall begin proceedings
toward such liquidation or dissolution, or shall, in any manner, permit the
sale or divestiture of substantially all of its assets other than in connection
with a merger or consolidation of Lessee into, or a sale of substantially all
of Lessee's assets to, another
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corporation provided that the survivor of such merger or the purchaser of such
assets shall assume all of Lessee's obligations under this Lease by a written
instrument, in form and substance reasonably satisfactory to Lessor accompanied
by an opinion of counsel, reasonably satisfactory to Lessor and addressed to
Lessor stating that such instrument of assumption is valid, binding and
enforceable against the parties thereto in accordance with its terms (subject
to usual bankruptcy and other creditors' rights exceptions), and provided
further that immediately after giving effect to any such merger, consolidation
or sale the Lessee or other corporation (if not the Lessee) surviving the same,
together with Guarantor shall be a consolidated net worth of not less than 75%
of the consolidated net worth of Lessee and Guarantor collectively, immediately
before such merger, consolidation or sale, all as to be set forth in an
officer's certificate and delivered to Lessor within a reasonable period of
time after such merger, consolidation or sale,
(f) if the estate or interest of Lessee in the Leased Property or any part
thereof shall be levied upon or attached in any proceeding and the same shall
not be vacated or discharged within the later of ninety (90) days after
commencement thereof or thirty (30) days after receipt by Lessee of notice
thereof from Lessor, (unless Lessee shall be contesting such lien or attachment
in good faith in accordance with Section 12), or
(g) if, except as a result of damage, destruction or a partial or complete
condemnation, Lessee voluntarily ceases operations on the Leased Property for a
period in excess of two (2) days.
If an Event of Default occurs, Lessor may terminate this Lease by giving Lessee
not less than ten (10) days notice of such termination and, upon the expiration
of the time fixed in such notice, the Initial or Renewal Term, as the case may
be, shall terminate and all rights of Lessee under this Lease shall cease.
Lessor shall have all rights at law and in equity available to Lessor as a
result of an Event of Default under this Lease.
Lessee will, to the extent permitted by law, pay as Additional Charges all
costs and expenses incurred by or on behalf of Lessor, including, without
limitation, reasonable attorneys fees and expenses, as a result of any Event of
Default hereunder.
16.2 Certain Remedies. If an Event of Default shall have occurred (and
the event giving rise to such Event of Default has not been cured within the
curative period relating thereto as set forth in Section 16.1 above) and be
continuing,
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whether or not this Lease has been terminated pursuant to Section 16.1, Lessee
shall, to the extent permitted by law, if required by Lessor so to do,
immediately surrender to Lessor the Leased Property and quit the same, and
Lessor may enter upon and repossess the Leased Property by reasonable force,
summary proceeding, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal property from the Leased Property subject to
rights of any residents and to any requirement of law.
16.3. Damages. Neither (a) the termination of this Lease pursuant to
Section 16.1, (b) the repossession of the Leased Property, (c) the failure of
Lessor, notwithstanding reasonable good faith efforts, to relet the Leased
Property, (d) the reletting of all or any portion thereof, nor (e) the failure
of Lessor to collect or receive any rentals due upon such reletting, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination. Lessee shall also pay to Lessor, at Lessor's option, either:
(a) at the time due but unpaid rental is paid the additional sum of:
(i) the worth at the time of payment of the amount by which the unpaid
Rent for the balance of the Term after the time of payment exceeds the amount
of such rental loss that Lessee proves could be reasonably avoided, and
(ii) any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform its obligations
under this Lease or that in the ordinary course of things would be likely
to result therefrom.
In making the above determinations, the worth at the time of payment shall
be determined using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law. Alternatively,
(b) without termination of Lessee's right to possession of the Leased
Property, each installment of Rent and other sums payable by Lessee to Lessor
under the Lease as the same becomes due and payable, which Rent and other sums
shall bear interest at the Overdue Rate, from the date when due until paid, and
Lessor may enforce, by action or otherwise, any other term or covenant of this
Lease.
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16.4 Waiver. If this Lease is terminated pursuant to Section 16.1, Lessee
waives, to the extent permitted by applicable law, (a) any right of redemption,
re-entry or repossession, (b) any right to a trial by jury in the event of
summary proceedings to enforce the remedies set forth in this Section 16, and
(c) the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt.
16.5 Application Of Funds. Any payments received by Lessor under any of
the provisions of this Lease during the existence of continuance of any Event
of Default (if such payment is made to Lessor rather than Lessee due to the
existence of an Event of Default) shall be applied to Lessee's obligations in
the order in which Lessor may determine or as may be prescribed by the laws of
the State of Oregon.
Section 17. Lessor's Right to Cure Lessee's Default.
If Lessee shall fail to make any payment or to perform any act required to
be made or performed under this Lease, and to cure such failure within the
relevant time periods provided in Section 16.1, Lessor, after notice to and
demand upon Lessee, and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction
of Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys fees and expenses, in each case, to
the extent permitted by law) so incurred, together with a late charge thereon
(to the extent permitted by law) at the Overdue Rate from the date on which
such sums or expenses are paid or incurred by Lessor, shall be paid by Lessee
to Lessor on demand. The obligations of Lessee and rights of Lessor contained
in this Section shall survive the expiration or earlier termination of this
Lease.
Section 18. Holding Over.
If Lessee shall for any reason remain in possession of the Leased Property
after the expiration of the Initial Term or any Renewal Term under
circumstances where this Lease has not been renewed, or after earlier
termination of the Initial or any Renewal Term, such possession shall be as a
month-to-month
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Lessee during which time Lessee shall pay as rental each month, one and
one-half times the aggregate of (i) one twelfth of the aggregate Minimum Rent
payable at the time of expiration or termination; (ii) all Additional Charges
accruing during the month and (iii) all other sums, if any, payable by Lessee
pursuant to the provisions of this Lease with respect to the Leased Property.
During such period of month-to-month tenancy, Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to month-to-month tenancies, to continue its occupancy and use of the
Leased Property. Nothing contained herein shall constitute the consent,
express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.
Section 19. Obligations at Expiration or Termination.
19.1 End of Term. Upon the expiration or earlier termination of the Term,
Lessee shall quit and surrender to Lessor the Premises, broom clean, in good
order and condition, ordinary wear and tear excepted, and Lessee shall remove
all its property. Further, the Land, Leased Improvements, Fixtures and
Personal Property shall be returned in good operating order and condition, as
when received by Lessee at the commencement of the Lease term (or, for items of
Personal Property acquired by Lessee pursuant to Sections 6.2 and 6.3, as and
when acquired by Lessee), normal wear and tear excepted. If such property is
not so returned, Lessor-shall make such restorations, repairs or replacements
therefor and Lessee shall be liable for reimbursement for Lessor's expenses
incurred. Lessee's obligation to observe or perform this covenant shall
survive the expiration or other termination of this Lease. If the last day of
the term of this Lease falls on Sunday, this Lease shall expire at noon on
the preceding Saturday unless it be a legal holiday in which case it shall
expire at noon on the preceding business day.
19.2 Fixtures. All fixtures, equipment, structural components and like
installations installed in the Leased Property at any time by Lessee shall,
upon installation, become the property of Lessor and shall remain upon and be
surrendered with the Leased Property. Except as otherwise provided in this
Lease, nothing shall prevent Lessee's removal of Lessee's Property, but upon
any such removal, Lessee shall immediately and at its expense repair and
restore the Leased Property (inclusive of property formerly owned by Lessee
that became the property of Lessor pursuant hereto) to the condition existing
prior to such removal. All property permitted to be removed by Lessee at the
end of the term remaining in the Leased Property after Lessee' removal shall be
deemed abandoned and may, at the
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election of Lessor, either be retained as Lessor's property or may be removed
from the Leased Property by Lessor.
Section 20. Financial and Other Statements.
20.1 Statements, Reports. Lessee shall forward to Lessor copies of all
reports and documents relating to the Leased Property received from any state
or federal licensing or certification authorities having jurisdiction over the
Leased Property as an assisted care facility. Such copies shall be so
forwarded forthwith upon receipt of such reports and documents by Lessee.
20.2 Operating Statement. Lessee shall annually, on or before April 1 of
each year commencing April 1, 1991, provide Lessor with an operating statement
for the Leased Property for the preceding year, in form and content
satisfactory to Lessor, certified by an independent certified public accountant.
20.3 Financial Statements. Lessee shall, within one hundred twenty (120)
days after the end of Lessee's fiscal year, provide Lessor with copies of
Lessee's current Consolidated Financials, certified by Lessee to be true and
correct in all material respects.
Section 21. Risk of Loss.
During the Term of this Lease, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property in consequence of the
damage or destruction thereof by fire, the elements, casualties, termination of
required licensing, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than by Lessor and those
claiming from, through or under Lessor) is assumed by Lessee, and, in the
absence of gross negligence, willful misconduct by Lessor pursuant to Section
36.3, Lessor shall in no event be answerable or accountable therefor nor shall
any of the events mentioned in this Section entitle Lessee to any abatement of
Rent except as specifically provided in this Lease.
Section 22. Indemnification.
Notwithstanding the existence of any insurance provided for in Section 13,
and without regard to the policy limits of any such insurance, Lessee and each,
Guarantor, jointly and severally, will protect, indemnify, save harmless and
defend Lessor from and against all liabilities,
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obligations, claims, damages, penalties, and causes of action, costs and
expenses (including, without limitation, reasonable attorneys fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Lessor by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, including without limitation any claims of
malpractice, (b) any use, misuse, non-use, condition, maintenance or repair by
Lessee of the Leased Property, (c) any Impositions (which are the
obligations of Lessee to pay pursuant to the applicable provisions of this
Lease), or (d) any failure on the part of Lessee to perform or comply with any
of the terms of this Lease. Any amounts that become payable by Lessee under
this Section 22 shall be paid within ten (10) days after liability therefor on
the part of Lessee is determined by litigation or otherwise, and if not timely
paid, shall bear a late charge (to the extent permitted by law) at the Overdue
Rate from the date of such determination to the date of payment. Lessee, at
its expense, shall contest, resist and defend any such claim, action or
proceeding asserted or instituted against Lessor or may compromise or otherwise
dispose of the same as Lessee sees fit.
Lessee and each Guarantor's liability for a breach of the provisions of
this Section 22 arising during the Initial or any Renewal Term hereof shall
survive any termination of this Lease.
Section 23, Subletting And Assignment; Attornment.
23.1 Subletting and Assignment. Lessee shall not, without the express
written consent of Lessor, which may be withheld at Lessor's sole discretion,
assign this Lease or sublet all or any part of the Leased Property to any other
party or entity, except to residents of the retirement center facility.
23.2 Attornment. If Lessor consents to a sublease of the Leased Property,
Lessee shall insert in each sublease permitted herein, provisions to the effect
that (a) such sublease is subject and subordinate to all of the terms and
provisions of this Lease and to the rights of Lessor hereunder, (b) in the
event this Lease shall terminate before the expiration of such sublease, the
sublessee thereunder will, at Lessor's option, attorn to Lessor and waive any
right the sublessee may have to terminate the sublease or to surrender
possession thereunder, as a result of the termination of this Lease, and (c) in
the event the sublessee receives a written notice from Lessor or Lessor's
assignees, if any, stating that Lessee is in default under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
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sublease directly to the party giving such notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if
any, as the case may be, shall be credited against the amounts owing by Lessee
under this Lease.
Section 24, Officer's Certificate.
Annually, within 120 days after the end of each Lessee's fiscal year, and
together with the annual financial statements furnished in accordance with
Section 20.3 an officer's certificate stating that to the best of the signer's
knowledge and belief after making due inquiry, Lessee is not in default in the
performance or observance of any of the terms of this Lease, or if Lessee shall
be in default, specifying all such defaults, the nature thereof, and the steps
being taken to remedy the same.
Section 25. Lessor's Right to Inspect.
Lessee shall permit Lessor and its authorized representatives to inspect
the Leased Property during usual business hours subject to any security,
health, safety or confidentiality requirements of Lessee, or any governmental
agency or insurance requirement relating to the Leased Property.
Section 26, No Waiver.
No failure by Lessor to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy consequent upon a breach
thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the extent permitted by law, no waiver or any breach
shall affect or alter this Lease, which shall continue in full force and effect
with respect to any other then existing or subsequent breach.
Section 27. Remedies Cumulative.
To the extent permitted by law, each legal, equitable or contractual
right, power and remedy of Lessor or Lessee now or hereafter provided either in
this Lease or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power and remedy and the exercise or
beginning of the exercise by Lessor or Lessee or any one or more of such
rights, powers and remedies shall not preclude the simultaneous or subsequent
exercise by Lessor or Lessee of any or all of such other rights, powers and
remedies.
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Section 28. Acceptance of Surrender.
No surrender to Lessor of this Lease or of the Leased Property or any part
thereof, or of any interest therein, shall be valid or effective unless agreed
to and accepted in writing by Lessor and no act by Lessor or any representative
or agent of Lessor, other than such a written acceptance by Lessor, shall
constitute an acceptance of such surrender.
Section 29. No Merger of Title.
There shall be no merger of this Lease or of the leasehold estate created
hereby for reason of the fact that the same person, firm, corporation or other
entity may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
Section 30. Conveyance by Lessor.
If Lessor or any successor owner of the Leased Property shall convey the
Leased Property in accordance with the terms hereof other than as security for
a debt, and the grantee or transferee of the Leased Property shall expressly
assume all obligations of Lessor hereunder arising or accruing from and after
the date of such conveyance or transfer, and shall be reasonably capable of
performing the obligations of Lessor or such successor owner, as the case may
be, shall thereupon be released from all future liabilities and obligations of
the Lessor under this Lease arising or accruing from and after the date of such
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall there upon be binding upon the new owner.
Section 31. Quiet Enjoyment.
So long as Lessee shall pay all Rent and Additional Charges as the same
becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Lessee shall peaceably and quietly
have, hold and enjoy the Leased Property for the term hereof, free of any claim
or other action by Lessor or anyone claiming by, through or under Lessor, but
subject to all liens and encumbrances of record as of the date hereof. No
failure by Lessor to comply with the foregoing covenant shall give Lessee any
right to cancel or terminate this Lease or abate, reduce or make a deduction
from or offset against the Rent or any other sum payable under this Lease, or
to fail to perform any other
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obligation of Lessee hereunder. Notwithstanding the foregoing, Lessee shall
have the right, by separate and independent action, to pursue any claim it may
have against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in the Section.
Section 32. Notices.
All notices, demands, requests, consents, approvals and other
communications hereunder shall be in writing and delivered, telecopied or
mailed (by registered or certified mail, return receipt requested and postage
prepaid), addressed to the respective parties, as follows:
If to Lessee: Oregon Laborers-Employers
Pension Trust Fund
c/o Capital Consultants, Inc.
2300 S. W. First Avenue
Portland, OR 97201
Attn: Karen I. Blomquist
With a copy to: Robin S. Parisi, Esq.
Lane Powell Spears Lubersky
520 S. W. Yamhill Street
Portland, OR 97204
If to Lessee: Crossings International Corporation
4302 Ruston Way
Tacoma, WA 98404
Attn: Richard W. Boehlke
With a copy to: Brian G. Waliser, Esq.
Garvey, Schubert & Barer
121 S. W. Morrison Street
Portland, OR 97204
or to such other address as either party may hereafter designate, and shall be
effective upon receipt.
Section 33. Subordination.
This Lease is and shall be subordinate to any Deed of Trust or mortgage(s)
of the Leased Property now of record or recorded after the date hereof
affecting the Leased Property. Such subordination is effective without any
further act of Lessee. Lessee shall from time to time on request from Lessor
execute and deliver any documents or instruments that may be required to
effectuate any such subordination. If Lessee fails to execute and deliver any
such documents or instruments within
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ten (10) days after any such request by Lessor, Lessee irrevocably constitutes
and appoints Lessor as Lessee's special attorney-in-fact to execute and deliver
any such documents or instruments on Lessee's behalf.
Section 34. Estoppel Certificates.
Lessee shall, at any time and from time to time upon not less than ten
(10) days prior written request from Lessor execute, acknowledge and deliver to
Lessor, in form satisfactory to Lessor or Lessor's Mortgagee, a written
statement certifying (if true) that this Lease is unmodified and in full force
and effect (or, if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), that Lessee is not
in default hereunder, the date to which the rental and other charges have been
paid in advance, if any, and such other accurate certifications as may
reasonably be required by Lessor. It is intended that any such statement
delivered pursuant to this subsection may be relied upon by any prospective
purchaser or mortgagee of the Leased Property, and their respective successors
and assigns.
Section 35. Guarantee
Richard W. Boehlke ("Guarantor"), by his signature below, guarantees the
performance of each and every covenant, condition and agreement to be performed
by Lessee or to which Lessee is subject hereunder. Lessor shall not be
obligated to pursue any remedies against Lessee prior to demand for performance
by Guarantor. The guarantee provided herein is assignable in whole or in part
by Lessor.
Section 36. Lessor May Assign Lease or Grant Liens.
Without the consent of Lessee, Lessor may assign its interest under this
Lease and may, from time to time, directly or indirectly, create or otherwise
cause to exist any lien, encumbrance or title retention agreement upon the
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing.
Section 37. Option to Purchase.
37.1 Lessee's Option to Purchase. Subject to the prior right of the
lessor under the Ground Lease, as more fully provided therein, Lessee shall
have the option (the "Option")
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<PAGE> 36
to purchase all of the Lessor's right, title and interest in the Leased
Property ("Lessor's Interest") for a purchase price equal to the Fair Market
Value (defined pursuant to Section 3) of Lessor's Interest on and as of the day
the Option is exercised. Lessee may exercise the option by giving Lessor
written notice of exercise at any time during the Initial or any Renewal Term;
provided that, Lessor at its sole election may void any exercise without
further obligation or liability on Lessor's part if at the time such notice of
exercise is given or at any time thereafter to and including the closing of the
purchase pursuant to Section 37.3, there exists any condition or event that
constitutes, or that after notice or the lapse of time or both would
constitute, an Event of Default. The closing of a purchase and sale hereunder
pursuant to an exercise of the Option shall take place at a time and place
(within Multnomah County, Oregon) to be designated by Lessor within ninety (90)
days following the date on which the Option was exercised or, if later, within
14 days following a determination of Fair Market Value pursuant to Section
36.3. At the closing, Landlord and Tenant will comply with the provisions of
Section 37.2.
37.2 Closing of 0ption.
37.2.1 At the closing of a purchase and sale of the Lessee's Interest
pursuant to an exercise of the Option Lessor shall sell, convey, transfer and
assign to Lessee, by appropriate assignment, special warranty deed and bill of
sale, the property and interests in property comprising Lessor's Interest, free
and clear of all liens, encumbrances and adverse claims, excepting only (i)
those described in Exhibit B, (ii) those made or suffered by Lessee during the
term of the Lease and (iii) those created by Lessor pursuant to Section 36.
37.2.2 Simultaneously with such sale, transfer and conveyance, Lessee
shall pay to Lessor, in readily available funds, the purchase price determined
pursuant to Section 37.3, less the amount of any obligations of Lessor
expressly assumed in connection with the conveyance (and provided that Lessor
has consented to such assumption). Lessor shall pay the title insurance
premium for a standard purchaser's policy and its own legal fees and costs in
connection with Lessee's exercise of the Option. Interest on any debt secured
by the Leased Property and assumed by Lessee, and rental payments under the
Ground Lease, shall be pro-rated between Lessor and Lessee on and as of the
date of Closing. All other costs, fees, expenses and disbursements made or
incurred in connection with Lessee's exercise of the option shall be borne
solely by Lessee and shall be discharged in full as a condition of the Closing.
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<PAGE> 37
37.3 Determination of Fair Market Value. Fair Market Value shall mean the
fair market value of Lessor's Interest, determined as of the day on which the
Option is exercised, by
(a) agreement of Lessor and Lessee on or before the date that is 30 days
following the date on which the Option was exercised, or, if Lessor and Lessee
cannot agree upon the Fair Market value of the Lessor's Interest within the
time given for such agreement under this clause (a), then the Fair Market Value
of Lessor's Interest shall be determined by
(b) a qualified MAI appraiser experienced in the Portland, Oregon
metropolitan market area and selected as follows:
(i) on or before thirty (30) days after the date on which the Option
was exercised, each party shall appoint a qualified MAI appraiser experienced in
the Portland, Oregon market area and shall advise the other party of the
choice. On the failure of either party to appoint an appraiser on or before
thirty (30) days following such exercise date, the person appointed as
appraiser by the other party may appoint a second appraiser to represent the
party in default. The two appraisers appointed in either manner shall at once
proceed to determine the Fair Market Value of the Lessor's Interest, but if
they cannot agree upon the Fair Market Value of Lessor's Interest, they shall,
not later than seventy-five (75) days following such exercise date, appoint a
third appraiser and the three appraisers shall proceed at once to determine the
Fair Market Value of Lessor's Interest. The appraisal shall be conducted in
Oregon, and a determination signed by any two of the three appraisers shall be
binding and conclusive each party. Lessor and Lessee shall each bear the costs
and expenses of the appraiser representing such party, and the costs and
expenses of the third appraiser, if any, shall be borne equally by Lessor and
Lessee.
Section 38, Miscellaneous.
38.1 All claims against, and liabilities of, the Lessee or Lessor arising
prior to any date of termination of this Lease shall survive such termination.
If any term or provision of this Lease or any application thereof shall be
invalid or unenforceable, the remainder of this Lease and any other application
of such term or provision shall not be affected thereby. If any late charges
provided for in any provision of this Lease are based upon a rate in excess of
the maximum rate permitted by an applicable law, such charges shall be fixed at
the maximum permissible rate. Neither this Lease nor any provision hereof may
be changed, waived, discharged or terminated except by an instrument in writing
and in recordable
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<PAGE> 38
form signed by Lessor and Lessee. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance
with the laws of the State of Oregon.
38.2 Lessee shall look solely to the Leased Property for recovery of any
judgment from Lessor, and Lessor shall not be personally liable for any such
judgment or for the payment of any monetary obligation to Lessee. The
provision contained in the foregoing sentence is not intended to, and shall
not, limit any right that Lessee might otherwise have to obtain injunctive
relief against Lessor or Lessor's successors in interest, or any action not
involving the personal liability of Lessor (original or successor).
Furthermore, except as otherwise provided herein, in no event shall
Lessor (original or successor) ever be liable to Lessee for any indirect or
consequential damages suffered by Lessee from whatever cause.
38.3 Upon the expiration or earlier termination of the term of this Lease,
Lessee shall use its best efforts to transfer to Lessor or Lessor's nominee, or
to cooperate with Lessor or Lessor's nominee in connection with the processing
by Lessor or Lessor's nominee of, any applications for all licenses, operating
permits and other governmental authorization and all contracts, including
contracts with governmental or quasi-governmental entities that may be
necessary for the operation of the Facility for its Primary Intended Use;
provided that the costs and expenses of any such transfer or the processing of
any such application shall be paid by Lessor or Lessor's nominee.
38.4 Time is the essence of each and every term and provision of this
Lease Agreement.
Section 39. Memorandum of Lease.
Lessor and Lessee shall, concurrently with execution of this Lease, enter
into a short form memorandum of this Lease, in form suitable for recording
under the laws of the state in which the Leased Property is located, in which
reference to this Lease, and all options contained herein, shall be made.
Lessee shall pay all costs and expenses of recording such Memorandum of Lease.
-38-
<PAGE> 39
Section 40. Impound Account.
If required by any mortgage(s) or deed(s) of trust of the Leased Property,
or at Lessor's election, Lessee shall pay to Lessor, quarterly or more
frequently as the mortgagee(s) or trust deed holder under the mortgage(s) or
deed(s) of trust or as Lessor, may require, amounts necessary to create an
impound account sufficient to timely pay all real and personal property taxes
and assessments and/or insurance premiums required to be paid by Lessee
hereunder. Such amounts shall be adjusted from time to time to maintain an
adequate reserve for the payment of the foregoing sums. The interest earned on
the funds in the impound account, if any, shall be credited to Lessee, unless
otherwise provided in the underlying encumbrance.
Section 41. Security.
Lessee, to secure its faithful performance and observance of the terms,
provisions and conditions of this Lease and the payment of all mounts to be
paid by Lessee hereunder, grants a security interest in the assets set forth
hereunder.
41.1 Supplies, Equipment, Personal Property. Lessee's Property used in
connection with the operation of the Facility.
41.2 Assignment of Leases and Rents re Leased Property. All leases and
rents, income, accounts receivable, receipts, revenues, issues, proceeds and
profits resulting from the operation by Lessee of the Leased Property subject
to this Lease.
41.3 Cooperation for Perfection of Security Interest. Lessee agrees to
execute and file any and all documents deemed necessary by Lessor to create and
perfect the security interest of Lessor in the assets and rights of lessee
described in this Section 40, including but no limited to such documents as
required by the Uniform Commercial Code as adopted in the State of Oregon.
Further, Lessee hereby irrevocably appoints the President of Capital
Consultants, Inc. as its attorney in fact for the purpose of executing such
security agreements, financing statements or certificates, as Lessor deems
necessary to perfect its security interest as granted herein, if Lessee should
refuse to do so.
41.4 Transfer of Security. In the event of a sale or lease of the Leased
Property by Lessor or assignment of Lessor's interest under this Lease, Lessor
shall have the right to transfer the security granted pursuant to this Section
41 to the vendee, lessee or assignee and Lessor shall thereupon be released by
Lessee from all liability for the return of such
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<PAGE> 40
security. Lessee shall look to the new Lessor solely for the return of said
security and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Lessor.
41.5 Further Covenant. Lessee shall not further assign or encumber or
attempt to assign or encumber the assets in which a security interest has been
granted to Lessor, and neither Lessor nor its successors or assigns shall be
found by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
41.6 Security Agreement. Lessee's grant of the security interest provided
in this Section 41 constitutes a security agreement within the meaning of the
Uniform Commercial Code as enacted in the State of Oregon.
41.7 Attorneys Fees. Should any litigation be commenced between the
parties concerning this Lease or the transactions contemplated hereby, the
prevailing party in such litigation shall be entitled, in addition to such
other relief as may be granted, to receive from the losing party a reasonable
sum as and for its attorneys' fees, at trial and on appeal or review, said
amount to be set by the court before which the matter is heard.
41.8 Exhibits. The following exhibits referred to in this Lease are
incorporated herein, as if set out in full, by the respective references to
them:
Exhibit A - Land
Exhibit B - Permitted Encumbrances
Exhibit C - Ground Lease
Exhibit D - Minimum Rent Schedule
IN WITNESS WHEREOF, the parties have cause this Lease to be executed by
their respective officers thereunder duly authorized.
LESSOR: CAPITAL CONSULTANTS, INC., as Agent for
the Oregon Employers-Laborers Pension
Trust Fund
By /s/ W.D. Schaub
------------------------------------
Vice President
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<PAGE> 41
LESSEE: CROSSINGS INTERNATIONAL CORPORATION
By /s/ Richard W. Boehlke
--------------------------------
Title President
-----------------------------
GUARANTOR: /s/ Richard W. Boehlke
----------------------------------
Richard W. Boehlke
STATE OF OREGON )
) ss.
County of Multnomah )
On this 14th day of January, 1991, before me personally appeared William
Schaub who, being duly sworn, did say that he/she is the 1st Vice President of
CAPITAL CONSULTANTS, INC., as Agent for the Oregon Laborers-Employers Pension
Trust Fund, and that said instrument was signed on behalf of said corporation
by authority of its board of directors; and he/she acknowledged said instrument
to be its voluntary act and deed.
/s/ Carol L. Handu
-------------------------------
NOTARY PUBLIC FOR OREGON
My Commission Expires: 06/18/94
STATE OF OREGON )
) ss.
County of Multnomah )
On this 10th day of January 1991, before me personally appeared Richard W.
Boehlke who, being duly sworn, did say that he/she is the President of
CROSSINGS INTERNATIONAL CORPORATION, and that said instrument was signed on
behalf of said corporation by authority of its board of directors; and he/she
acknowledged said instrument to be its voluntary act and deed.
/s/ Carol L. Handu
---------------------------------
NOTARY PUBLIC FOR OREGON
My Commission Expires: 06/18/94
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<PAGE> 42
EXHIBIT A
TO OPERATING LEASE
Real Property Description
A tract of land in the southwest one-quarter of Section 19, Township 2 South,
Range 1 East of the Willamette Meridian, Clackamas County, Oregon being more
particularly described as follows:
Commencing at the southwest corner of said Section 19 being marked by a
brass disc; thence North 1 degree 149'54" East along the west line of said
Section 19 a distance of 2183.71 feet; thence South 88910106" East at 900
to said West line a distance of 20.00 feet to a point in the East
right-of-way line of Meridian Road (S.W. 65th Ave. or County Road #591) and
the Point of Beginning of the tract herein to be described, said point
being marked by a 5/811 Iron Rod set by Caswell (P.L.S. #737), said point
also marking the southwest corner of the Jess Roe property as recorded on
P.S. #22182 in Clackamas County Survey records; thence from said point of
beginnig South 87 degree 311'20" East along the south line of said Roe
property, 680.00 feet; thence South 2035,50-West, 434.16 feet; thence South
80000100" West 274.43 feet to a point of curve to the right having a radius
of 368.00 feet; thence along said curve through a central angle of
25056'50' (said curve subtended by a chord which bears North 870011351 West
165.23 feet) an arc length of 166.65 feet; thence North 74003'10, West,
62.08 feet to a point of curve to the right having a radius of 5.00 feet;
thence along said curve through a central angle of 76047,50- (said curve
subtended by a chord which bears North 35039115' west, 6.21 foot), an arc
length of 6.70 feet to a point of reverse curve to the left having a radius
of 157.00 feet; thence along said curve through a central angle of
90054,471 (said curve subtended by a chord which bears North 42042143-
West, 223.79 feet), an arc length of 249.12 feet to a point of reverse
curve to the right having a radius of 5.00 feet; thence along said curve
through a central angle of 90000100' (said curve subtended by a chord which
bears North 43110'06' West, 7.07 feet), an arc length of 7.85 feet; thence
North 88010106" West, 14.39 feet to a point in the East right-of-way line
of said Meridian Road; thence along said right-of-way line North 10491541
East, 310.16 feet to the Point of Beginning.
TOGETHER WITH ingress and egress easement described as follows:
A strip of land for ingress and egress purposes which lies between and is
contiguous with an ingress-egress easement over and along Meridian Park
Hospital Access Road and a
<PAGE> 43
tract of land leased to the Assisted Living Community, said strip of land
being situated in the southwest one-quarter of Section 19, Township 2
South, Range 1 East of the W.M., Clackamas County, Oregon, being more
particularly described as follows:
Commencing at a brass disk marking the southwest corner of said Section
19; thence North 1(degree)49'54" East along the West line of said Section a
distance of 1709.37 feet; thence at right angles South 88(degrees)10'06"
East, 176.37 feet to a point of compound curve on said Access Road
easement; thence along said easement on a curve to the left having a radius
of 137.00 feet, through a central angle of 2(degrees)05'28" (said curve
subtended by a chord which bears North 1(degree)41'57" East, 5.00 feet) an
arc length of 5.00 feet to the point of beginning of the tract herein to be
described; thence from said point of beginning, continuing along said curve
to the left having a radius of 137.00 feet, through a central angle of
18(degrees)08'43" (said curve subtended by a chord which bears North
8(degrees)25'09" West, 43.21 feet) an arc length of 43.39 feet; thence
radially departing said Access Road easement North 72(degrees)30'29" East,
20.00 feet to a point in a curve on the perimeter of said Assisted Living
Community tract; thence along said curve to the right having a radius of
157.00 feet through a central angle of 18(degrees)08'43" (said curve
subtended by a chord which bears South 8(degrees)25'09" East, 49.51 feet)
an arc length of 49.72 feet; thence radially departing said Assisted Living
Community tract North 89(degrees)20'47" West, 20.00 feet to the point of
beginning.
ALSO TOGETHER WITH ingress and egress easement described as follows:
A strip of land for ingress-egress purposes over and along Meridian Park
Hospital Access Road situated in the southwest one-quarter of Section 19,
Township 2 South, Range 1 East of the W.M., being more particularly
described as follows:
Commencing at a brass disc marking the southwest corner of said Section
19; thence North 1(degree)49'54" East along the West line of said Section,
a distance of 1836.55 feet; thence South 88(degree)10'06" East, 20.00 feet
to the point of beginning of the tract herein to be described, said point
of beginning being at the intersection of the centerline of the Meridian
Park Hospital Access Road with the east right-of-way line of Meridian Road
(S.W. 65th Ave. or County Road #591); thence from said point of beginning
North 1(degree)49'54" East along said right-of-way 21.22 feet to point of
curve to the left having a radius of 25.00 feet; thence along said curve
through a central angle of
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<PAGE> 44
50(degrees)51'31" (said curve subtended by a chord which bears South 62
(degrees)44' 20" East 21.47 feet an arc length of 22.19 feet to a point of
reverse curve to the right having a radius of 137.00 feet; thence along said
curve through a central angle of 90(degrees)54'47" (said curve subtended by a
chord which bears South 42(degrees)42'43" East 195.28 feet) an arc length of
217.38 feet to a point of curve to the left having a radius of 25.00 feet;
thence along said curve through a central angle of 76(degrees)47'15" (said curve
subtended by a chord which bears South 35(degrees)39'15" East, 31.06 feet) an
arc length of 33.51 feet; thence South 74(degrees)03'10" East, 62.08 feet to a
point of curve to the left having a radius of 388.00 feet; thence along said
curve through a central angle of 19(degrees)16'27" (said curve subtended by a
chord which bears South 83(degrees)41'21" East, 129.91 feet) an arc length of
130.52 feet; thence along said radial line North 31(degrees)91'37", West, 20.00
feet to a point in the south line of tract of land leased to the Assisted Living
Community and a point on a curve to the left having a radius of 368.00 feet;
thence along said arc through a central angle of 6(degrees)40'23" (said curve
subtended by a chord which bears North 83(degrees)20'04" East, 42.84 feet) an
arc length of 42.86 feet; thence departing said lease line and crossing said
Access Road at right angles South 10(degrees)00'00" East, 44.00 feet to a point
of curve to the right having a radius of 412.00 feet; thence along said curve
through a central angle of 25(degrees)56'50" (said curve subtended by a chord
which bears North 87(degrees)1'35" West, 184.99 feet) an arc length of 186.58
feet; thence North 74(degrees)31'01" West, 61.22 feet to a point of curve to the
left having a radius of 25.00 feet (said curve subtended by a chord which bears
South 64(degrees)37'01" West, 33.02 feet) an arc length of 36.07 feet; thence
North 66(degrees)42'50" West, 24.00 feet; thence North 23(degrees)17'10" East,
16.44 feet to a point of curve to the left, having a radius of 113.00 feet;
thence along said curve through a central angle of 111(degrees)27'16" (said
curve subtended by a chord which bears North 32(degrees)26'28" West, 186.76
feet) an arc length of 219.81 feet to a point of compound curve to the left
having a radius of 25.00 feet; thence along said curve through a central angle
of 50(degrees)51'30" (said curve subtended by a chord which bears South
66(degrees)24'09" West, 21.47 feet) an arc length of 22.19 feet to a point in
the east right-of-way line of said Meridian Road; thence along said right-of-way
line North 1(degrees)49'54" East, 21.22 feet to the point of beginning.
-3-
<PAGE> 45
EXHIBIT B
TO OPERATING LEASE
Permitted Encumbrances
The permitted encumbrances are all of those as set forth on Schedule B,
Part 1 of that certain policy of title insurance issued to Oregon
Laborers-Employers Pension Trust Fund by Ticor Title Insurance Company of
California, dated May 31, 1988, Policy No. 186-845-A.
<PAGE> 46
EXHIBIT C
TO OPERATING LEASE
Ground Lease
Attached
<PAGE> 47
EXHIBIT B
MINIMUM RENT SCHEDULE
Period Monthly Minimum Rent
------ --------------------
01/01/91 - 12/31/91 $60,741.67
01/01/92 - 08/31/92 $68,377.08
09/01/92 - 02/28/93 $50,377.00
Minimum Rent for all months commencing March 1, 1993, shall be equal to the
fixed amount, specified below, for such month plus the amount payable by Lessor
during such month under (a) the Ground Lease, and (b) the obligation secured by
the Mortgage (which obligation increases annually each February and August):
Fixed Component of
Period Monthly Minimum Rent
------ ---------------------
03/01/93 - 02/28/94 $17,958.00
03/01/94 - 02/28/95 $18,420.00
03/01/95 - 02/28/96 $18,921.00
03/01/96 - 02/28/97 $19,456.00
03/01/97 - 02/28/98 $20,026.00
03/01/98 - 02/28/99 $20,644.00
03/01/99 - 02/28/00 $21,303.00
03/01/00 - through end of $22,008.00
Initial Term
<PAGE> 1
EXHIBIT 10.45
LEASE
THIS LEASE ("Lease"), dated as of the 10th day of January, 1996,
between CAPITAL CONSULTANTS, INC., an Oregon corporation, as agent for certain
participant lenders ("Lessor"), and CROSSINGS INTERNATIONAL CORPORATION, a
Washington corporation ("Lessee").
Recitals
A. Lessor is the owner of real property, more particularly described
on Exhibit A (the "Real Property"), and of the improvements located thereon,
including, without limitation, that certain congregate and assisted care
facility known as The Palms (the "Facility"). Lessee desires to lease the
Facility from Lessor and operate the Facility, and Lessor is willing to lease
the Facility to Lessee on the terms and subject to the conditions set forth in
this Lease.
B. The Real Property is subject to that certain Deed of Trust, dated
as of June 5, 1991 (the "Mortgage"), made by Lessee, as grantor, to GSL
Financial Corporation, as trustee, for the benefit of Guardian Savings and Loan
Association (predecessor-in-interest of Bank of America National Trust & Savings
Association, a national banking association, as Trustee under that certain
Pooling and Servicing Agreement, dated as of November 1, 1992, for RTC
Commercial Mortgage Pass-Through Certificates, Series 1992-CB), as beneficiary
(the "Mortgage Lender"), and recorded on June 13, 1991, in the real property
records of San Bernardino County, California, under File Number 91-223313, which
secures payment of that certain Promissory Note Secured by Deed of Trust, dated
June 5, 1991 (the "Note"), made by Lessee to Guardian Savings and Loan
Association, in the principal amount of $6,205,000.00.
C. The Mortgage Lender has consented to the conveyance of the Real
Property and the Facility by deed in lieu of foreclosure to Lessor subject to
the Mortgage, and the lease of the Facility by Lessee. Lessor has not assumed
liability for the Mortgage to the Mortgage Lender.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree:
Section 1. Lease, Term, Effect of Mortgage.
1.1 Leased Property; Term. Subject to the terms and conditions set
forth in this Lease, Lessor hereby leases to Lessee and Lessee hereby rents from
Lessor, all of Lessor's
1
<PAGE> 2
right, title and interest in and to the Real Property, the Facility and the
following described property (collectively referred to herein as the "Leased
Property"):
(a) all buildings, structures, Fixtures (as defined below) and other
improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Real Property (collectively, the "Leased
Improvements");
(b) all easements, rights, and appurtenances relating to the Real
Property and the Leased Improvements (collectively, the "Related Rights");
(c) all permanently affixed equipment, machinery, fixtures, and
other items of real and/or personal property, including, without limitation, all
components thereof, now and hereafter located in, on or used in connection with,
and permanently affixed to or incorporated into the Leased Improvements,
including, without limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, and built-in oxygen and vacuum systems, together with all
replacements, modifications, alternations and additions thereto (collectively,
the "Fixtures"); and
(d) all machinery, equipment, furniture, furnishings, plants,
fixtures or other personal property located on, at or used in conjunction with
operation of the Leased Property that is not Lessee's Property (defined at
Section 2.6 herein) (the "Personal Property").
1.2 Term. Lessee shall lease the Leased Property subject to the
permitted encumbrances set forth in Exhibit B attached hereto for a period of
thirty-six (36) months (the "Term") commencing on January 10, 1996 (the
"Commencement Date") and ending on the earlier of (a) November 30, 1998 at 12:00
midnight, or (b) ninety (90) days after the last day of the month in which
ninety-five percent (95%) or more of the Facility's total rentable residential
units have been leased at fair market rates and provided that if the Property is
sold pursuant to Section 1.3 below, the Term shall end at the time of the
conveyance of the Property.
1.3 Sale of the Property. During the 90 day period referred to in
1.2(b) above, Lessee shall be authorized to negotiate the sale of the Property,
provided, that, with respect
2
<PAGE> 3
to any such sale, the Net Purchase Price for the Property shall not be less
than the sum of (x) $2,000,000 plus (y) the cumulative sum of any shortfall in
the payments of Lessor's Equity Return referred to in Section 3.2(c) below
during the Term of this Lease (collectively, "Lessor's Equity"), and the sale
shall be made on other reasonable terms acceptable to Lessor, in its sole
discretion. Lessor agrees that it will cooperate with Lessee in taking all
action required to consummate any such sale of the Property. If the Property
is sold during the Term of this Lease, Lessor will be entitled to retain from
the Net Purchase Price an amount equal to (A) Lessor's Equity plus (B) 90% of
the Net Purchase Price less Lessor's Equity (the "Residual Amount"), and Lessee
shall be entitled to receive from Lessor 10% of the Residual Amount.
Notwithstanding the foregoing, after the expiration of the 90 day period
referred to in clause (ii) of Section 1.2 above, and in any case with Lessee's
consent, which may be withheld by Lessee in its sole discretion, Lessor may
sell the Property for an amount equal to or greater than the indebtedness
secured by the Property for which Lessee then remains liable.
Any sale of the Property shall be to a buyer with no relationship to the
Lessee and on arms length terms unless otherwise approved by Lessor in its sole
discretion.
1.4 Effect of Mortgage. Except as set forth herein, this Lease is
subject to the terms, covenants and conditions of the Mortgage. Except as
otherwise provided in this Section 1.4, to the extent any of the terms,
covenants and conditions of the Mortgage relate to the operation or management
of the Leased Property or to the specific obligations with respect to the
operation or management of the Leased Property undertaken by the Lessee in this
Lease, Lessee shall perform, observe and be bound by the terms, covenants,
acknowledgments and conditions by or to be performed on the part of Grantor
under the Note and Mortgage, from and after the date hereof and shall indemnify,
defend and hold Lessor harmless from and against any claims, damages, or
liabilities arising under or pursuant to the Mortgage by reason of Lessee's
failure to fully comply with any and all said duties, covenants and obligations,
or by reason of Lessee's conduct upon or management of the Leased Property.
Lessor covenants and agrees that it shall make all payments due under and with
respect to the Mortgage, including, without limitation and when due, all
principal and interest payments under the Note. Upon the maturity of the Note,
Lessor may refinance the Note and Mortgage and may grant a new deed of trust
over the Leased Property, provided, that, notwithstanding any such refinancing,
the rental payments under Section 3.1 shall not be altered by virtue of such
refinancing.
If Lessor fails to pay when due any sum or sums payable under the Note,
Lessee may, but shall not be obligated to, pay
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any and all such amounts, upon prior written notice to Lessor. If Lessee makes
any such payment or payments, the amount so paid shall be immediately due and
payable by Lessor to Lessee and shall bear interest at the Overdue Rate set
forth at Section 2.7 from the date of such expenditure by Lessee until repaid.
Such amount, plus the interest accrued thereon, shall, until discharged in
full, be offset and deducted from the next installment or installments of Rent
then due or coming due under this Lease.
Section 2. Definitions.
Capitalized terms used in this Lease shall have the meanings given them
in this Section 2 or at the Section or Recital where such word is first used.
2.1 Consolidated Financials means any fiscal year or other accounting
period for Lessee and its consolidated subsidiaries, audited statements of
earnings and retained earnings and of changes in financial positions for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, all in reasonable detail and setting
forth in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year, and prepared in accordance with generally accepted
accounting principles.
2.2 Facility Revenue means, for any period, all amounts whatsoever paid
to Lessee from any source, and produced or generated by Lessee's operation of
the Facility, computed on a cash basis and in accordance with generally accepted
accounting principles, consistently applied, and whether produced or generated
by virtue of Lessee's or any other person or party's activities or operations
thereon.
2.3 Impositions means, collectively, all taxes (including, without
limitation, all real, personal, county, state, business, gross receipts,
transaction privilege, rent or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed before the date hereof and whether or not to be completed
before the date or within the Initial or any Option Term of this Lease), water,
sewer or other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other government charges, in each case whether general or special, ordinary
or extraordinary, or foreseen or unforeseen, of every character in respect of
the Leased Property that at any time before, during or in respect of
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the Term may be assessed or imposed on or in respect of, or be a lien upon (a)
Lessor or Lessor's interest in the Leased Property, (b) the Leased Property or
any part thereof or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use of the Leased Property or any
part thereof.
2.4 Insurance Requirements means all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
2.5 Legal Requirements means all federal, state, county, municipal and
other governmental statues, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting either the Leased Property or the
construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any that may (i) require repairs, modifications or alterations
in or to the Leased Property or (ii) in any way adversely affect the use and
enjoyment of the Leased Property, and all permits, licenses and authorizations
and regulations relating to the Leased Property, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Lessee (other than encumbrances created by Lessor after the
Commencement Date without the consent of Lessee) affecting the Leased Property.
2.6 Lessee's Property means any items of personal property owned by
Lessee and located at the Facility but excluding Personal Property.
2.7 Lessor's Equity Return means 10% per annum on a nominal amount of
$2,000,000, or $16,667.00 per month.
2.8 Net Cash Flow means, for any period, all Facility Revenue, less the
sum of:
(a) the Base Rent for such period,
(b) all amounts held by Lessee in segregated accounts for
unearned rent or as security deposits that are refundable to tenants occupying
the Facility, and
(c) all Operating Expenses.
2.9 Net Purchase Price means the purchase price for the Property less all
closing costs and expenses, and repayment of all secured indebtedness.
2.10 Operating Expenses means, for any period, all expenses associated
with the ownership, operation, leasing, repair and maintenance of the Facility,
all Impositions, all other expenses specifically identified in this Lease as
Operating
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Expenses and all expenses for the creation of reserves for building repair and
maintenance, tax, insurance, and other reserves that would be maintained by a
prudent owner under similar circumstances. Operating Expenses specifically do
not include debt service on the Mortgage or any expenditure required by
generally accepted accounting principles to be capitalized to the extent such
capitalized expenditures are paid from reserves. To the extent that any
capital expenditures exceed the amount of the reserve for capital expenditures
then available, the excess shall constitute an Operating Expense.
2.11 Overdue Rate means, an any date, a rate equal to 2% above the Prime
Rate on such date, but in no event a rate greater than the maximum rate then
permitted under applicable law.
2.12 Payment Date means any due date for the payment of the
installments of Rent or any other sums payable under this Lease.
2.13 Prime Rate means the prime interest rate announced by Seattle First
National Bank, from time to time.
2.14 Rent means the payment from Lessee to Lessor calculated in accordance
with Sections 3.1 and 3.2, and Additional Charges payable pursuant to Section
3.3.
Section 3. Rent.
3.1 Monthly Base Rent. On the Commencement Date and on or before the
first day of each calendar month during the Term of this Lease commencing on
January 1, 1996, Lessee shall pay Lessor an amount (the "Monthly Base Rent")
equal to (i) $53,320 (the "Monthly Debt Payment"), plus (ii) 1/12 of the
estimated real estate and personal property ad valorem tax for the then current
calendar year (the "Monthly Tax Reserve"), plus (iii) $16.67 multiplied by the
number of residential units in the Facility (the "Monthly Replacement
Reserve"). In addition, on the date of the commencement of the Term of this
Lease, Lessee shall pay Lessor an amount equal to the Monthly Base Rent
multiplied by a fraction, the numerator of which is the number of days
remaining in the month of January, 1996, and the denominator of which is 31.
3.2 Management Fee; Annual Return; Participation. On or before the
twentieth (20th) day of each calendar month during the Term commencing after
the first full calendar month, the following amounts shall be paid to Lessor or
retained by Lessee, as the case may be, in the order specified below, from Net
Cash Flow for the preceding calendar month ("Monthly Net Cash Flow"), all in
lawful money of the United States of America:
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(a) First, from the Monthly Net Cash Flow, Lessee shall retain an
amount equal to two and one-half percent (2.5%) (the "Management Fee") of the
Facility Revenue for the preceding calendar month ("Monthly Facility Revenue");
(b) Second, from the Monthly Net Cash Flow remaining following payment
under Subsection 3.2(a), Lessor shall be paid an amount equal to SIXTEEN
THOUSAND SIX HUNDRED SIXTY SIX AND SIXTY-SEVEN/100THS ($16,666.67) (the
"Monthly Equity Return");
(c) Third, from the Monthly Net Cash Flow remaining following payment
under Subsections 3.1(a) and 3.1(b), Lessor shall be paid an amount equal to
eighty percent (80%) and Lessee shall retain an amount equal to twenty percent
(20%) of such remaining Monthly Net Cash Flow (each of the 80% and the 20%
payment being a "Participation Amount").
On or before March 31 of each year during the Term of the Lease,
Lessee will prepare and present to Lessor a schedule reflecting the calculation
of the Participation Amount for the preceding calendar year as a whole. To the
extent that the aggregate Participation Amount retained by Lessee for all twelve
months of the preceding year exceeded an amount equal to 20% of an amount equal
to (i) the Net Cash Flow for such year, less (ii) the aggregate Management Fees
retained by Lessee during such year, less (iii) $200,000 (representing the
Lessor's Equity Return for the year if all payments of the Monthly Equity Return
were made), Lessee shall be obligated to pay such excess to Lessor. Such excess
shall be paid by delivering to Lessor the Participation Amount which Lessee
would otherwise be entitled to retain in subsequent months until the excess has
been paid to Lessor in full.
To the extent that the Facility Revenue is not sufficient in any month
to pay the Monthly Base Rent and all Operating Expenses of the Facility, Lessee
will fund any deficiency from its own resources.
3.3 Additional Charges. In addition to the Rent, (i) Lessee shall
pay and discharge as and when due and payable all other amounts, liabilities,
obligations and impositions that Lessee assumes or agrees to pay under this
Lease, and (ii) in the event of any failure on the part of Lessee to pay any of
those items referred to in clause (i), Lessee shall promptly pay and discharge
every fine, penalty, interest and cost that may be added for nonpayment or late
payment of such items (the items referred to in clauses (i) and (ii) are
collectively called "Additional Charges".)
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3.4 Late Payment. Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of nonpayment of Rent.
3.4.1 If any installment of monthly Rent shall not be paid
within ten (10) days after its due date, Lessee will pay Lessor on demand, the
late fee as provided in Section 3.3 hereof and, at such time that such failure
constitutes an Event of Default pursuant to Section 16, a late charge (to the
extent permitted by law) computed at the Overdue Rate (or at the maximum rate
permitted by law, whichever is less) on the amount of such installment, from the
due date of such installment to the date of payment thereof.
3.4.2 If Lessee shall fail to pay any Additional Charges when due
and if, pursuant to this Lease, Lessor shall discharge same, then an amount
equal to such Additional Charges shall become immediately due and payable by
Lessee to Lessor, together with interest at the Overdue Rate accruing from the
date expended by Lessor until the same is repaid by extent that Lessee pays any
Additional Charges to any requirement of this Lease, Lessee shall be relieved
of its obligation to pay such Additional Charges to the entity to which they
would otherwise be due.
3.5 Late Fee. Lessee shall pay a late fee of five percent (5%) of
the monthly Rent for any payment thereof not received within ten (10) days of
its due date. Such late charge is intended to compensate Lessor for additional
expenses incurred by Lessor in processing such late payments. Nothing herein
is intended to violate any applicable law, code or regulation, and in case of
any such violation all impermissible charges shall automatically be reduced to
any maximum applicable legal rate or charge. The late fee pursuant to this
Section 3.5 shall be imposed monthly for each late payment. This late fee is
in addition to all other remedies available to Lessor and shall not be
considered as limiting other remedies Lessor may have under this Lease or under
law.
3.6 Additional Reserves. In addition to the Monthly Tax Reserve and
the Monthly Replacement Reserve, Lessee, with the approval of Lessor (which
approval shall not be unreasonably withheld) shall establish such additional
reserves as are typical and appropriate for independent and assisted living
facilities such as the Facility. All amounts placed in such reserves shall
constitute Operating Expenses. Lessee shall be permitted to expend funds from
time to time from such reserves to cover costs for which the respective reserves
have been established and which are identified in the Annual Budget (as defined
below) or which are otherwise approved by Lessor in writing in its reasonable
judgment. Lessor shall hold in a separate account the aggregate
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Monthly Tax Reserves and the aggregate Monthly Replacement Reserves, and all
other reserves shown on the Annual Budget.
3.7 Annual Budget. Not less than 30 days prior to the end of each
calendar year during the Term of the Lease, Lessee shall prepare and present an
annual budget to Lessor for the Facility covering, among other things, all
reserves proposed to be established by Lessee (including, without limitation, a
capital expenditure reserve), all marketing expenses pursuant to a marketing
plan, and all expenses for management personnel (the "Annual Budget"). Within
21 days of receipt of the proposed annual budget the Lessor's shall indicate any
specific items that it does not approve, and Lessor and Lessee shall negotiate
in good faith to resolve any disagreement. Lessee shall be authorized to use
Facility Revenue to pay all Operating Expenses arising in the ordinary course of
business and to pay for items covered by any approved reserves. Any other
expenses must be approved in advance by Lessor in its reasonable judgment. The
reserves itemized on the Annual Budget held by Lessor shall be released to
Lessee when the costs for which such reserves have been established become due
and payable by Lessee. All capital expenditures not in the Annual Budget or
otherwise approved by lessor shall be the responsibility of and paid for by
Lessee.
3.8 Security Deposit. On or prior to the Commencement Date, Lessee
shall deposit with Lessor a security deposit in the amount of $63,000.00 (the
"Security Deposit") which shall secure Lessee's performance of its obligations
hereunder. Upon the termination of this Lease, unless an Event of Default has
occurred and is continuing (or an event that, with the passage of time or the
giving of notice, would constitute an Event of Default, has occurred and is
continuing), Lessor shall return the security Deposit to Tenant. If at the end
termination of the Lease an Event of Default has occurred and is continuing (or
an event that, with the passage of time or the giving of notice, would
constitute an Event of Default, has occurred and is continuing), Lessor shall
withhold such portion of the security Deposit as would be required to cure such
Event of Default (or such other event), and return the balance of the Security
Deposit, if any, to Lessee.
Section 4. Taxes, Assessments and Other Impositions.
4.1 Payment of Impositions. Subject to the following sentence,
Lessee shall pay, or cause to be paid, all Impositions before any fine, penalty,
interest or cost is assessed or added for non-payment, such payments to be made
directly to the taxing authorities. Lessor shall make available to Lessee from
the aggregate Monthly Tax Reserves held by Lessor the amount necessary for
payment of taxes as and when they become due and upon receipt of written request
from Lessor regarding same. Lessee will promptly, upon request, furnish to
Lessor copies of
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official receipts or other satisfactory proof evidencing such payments. If any
such Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of
such imposition), Lessee may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and
in such event, shall pay such installments during the Term (subject to Lessee's
right of contest pursuant to the provisions of Section 12) as the same
respectively become due and before any fine, penalty, premium, further interest
or cost may be added thereto. Lessee shall, to the extent permitted by
applicable laws and regulations, prepare and file all tax returns and reports
in respect of any Imposition as may be required by governmental authorities.
Lessor or Lessee shall, upon request of the other, provide such data
as is maintained by the party to whom the request is made with respect to the
Leased Property as may be necessary to prepare any required returns and reports.
If governmental authorities classify any property covered by this Lease as
personal property, Lessee shall file all personal property tax returns. Lessor,
to the extent it possesses the same, will, upon request, provide Lessee with
cost and depreciation records necessary for filing returns for any property so
classified as personal property. If Lessor is legally required to file personal
property tax returns, Lessee will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Lessee
to file a protest. Lessee may, upon notice to Lessor and subject to the
provisions of Section 12 relating to permitted contests, as an Operating
Expense, protest, appeal, or institute such other proceedings as Lessee may deem
appropriate to effect a reduction of real estate or personal property
assessments and Lessor shall fully cooperate with Lessee in such protest, appeal
or other action. Billings for reimbursement by Lessee to Lessor of personal
property taxes shall be accompanied by copies of a bill therefor and payments
thereof which identify the personal property with respect to which such payments
are made.
4.2 Notice of Impositions. Lessor shall give prompt notice to Lessee
of all Impositions payable by Lessee hereunder of which Lessor at any time
acquires knowledge, but Lessor's failure to give any such notice shall in no way
diminish Lessees obligations hereunder to pay such Impositions; provided,
however, that if Lessor fails to give such notice to Lessee and Lessee was
otherwise without actual or constructive notice of any such Imposition, Lessor
shall be responsible for any fine, penalty, interest and costs added because of
late payment of such Imposition and Lessee shall not be deemed to be in default
hereunder for late payment thereof.
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4.3 Adjustment of Imposition. Impositions imposed in respect of the
tax or fiscal period during which the Term commences or terminates shall be
adjusted and prorated such that they shall constitute Operating Expenses during
the Term hereof and shall, if they relate to the period following the end of the
Term of this Lease, be the responsibility of Lessor.
4.4 Utility Charges. Lessee will pay or cause to be paid as
Operating Expenses all charges for electricity, power, gas, oil, water and other
utilities used in the Leased Property during the Term.
4.5 Insurance Premiums. Lessee will pay or cause to be paid as
Operating Expenses all premiums for the insurance coverage required to be
maintained pursuant to Section 13 during the Term.
Section 5. Rent Adjustments.
5.1 No Termination or Adjustment to Net Cash Flow. Except as
otherwise specifically provided in this Lease, Lessee, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
not seek nor be entitled to any adjustment to the allocation of Net Cash Flow
provided in Section 3, nor shall the respective obligations of Lessor and
Lessee be otherwise affected by reason of (a) any damage to, or destruction of,
any Leased Property or any portion thereof from whatever cause or any Taking of
the Leased Property or any portion thereof; (b) the lawful or unlawful
prohibition of, or restriction upon, Lessee's use of the Leased Property, or
any portion thereof, the interference with such use by any person, corporation,
partnership or other entity, or by reason of eviction by paramount title,
unless such prohibition, restriction or interference arises from Lessor's
failure to pay when due any sums required of Lessor to be paid under the Note;
(c) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor; or (d) any other cause whether similar or
dissimilar to any of the foregoing other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby waives all rights, arising
from any occurrence whatsoever, that may now or hereafter be conferred upon it
by law (i) to modify, surrender or terminate this Lease or (ii) that entitle
Lessee to any abatement, reduction, suspension or deferment of Rent or other
sums payable by Lessee hereunder, except as otherwise specifically provided in
this Lease. Notwithstanding the foregoing, if Lessor receives any condemnation
proceeds with respect to the Property, the Monthly Base Rent shall be reduced
by a fraction equal to the amount of the condemnation proceeds divided by the
amount of the Note as of the date of this Lease.
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Section 6. Ownership of Leased Property.
6.1 Limited Rights of Lessee. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
exclusive possession and use of the Leased Property upon the terms and
conditions of this Lease.
6.2 Personal Property. As an operating Expense and from reserves
maintained for the replacement of existing Personal Property, Lessee shall
procure and maintain during the entire Lease term all personal property
necessary in order to operate the Facility in compliance with all licensure and
certification requirements, in compliance with all applicable Legal Requirements
and Insurance Requirements and otherwise in accordance with customary practice
in the industry for the Primary Intended Use (as defined below) of the Facility.
6.3 Transfer of Personal Property to Lessor. Upon acquisition and
installation at the Facility all (a) fixtures acquired by Lessee and placed on
the Real Property or in the Facility after the effective date of this Lease, and
replacements therefor or thereto, (b) all replacements of the personal property
located on the Real Property or in the Facility on the effective date of this
Lease and (c) any other personal property acquired by Lessee from revenue
generated by the Leased Property after the effective date of this Lease, shall
become the property of Lessor, if not already owned by Lessor, and Lessee shall
execute all documents and take any actions reasonably necessary to evidence such
ownership. The term "Personal Property" shall include any such additional
personal property as may be transferred to Lessor pursuant to this Section 6.3.
Section 7. Condition and Use of Leased Property.
7.1 Condition of The Leased Property. Lessee has occupied and been
in possession of the Leased Property since June 5, 1991, and Lessee has examined
and otherwise has knowledge of the condition of the Leased Property and has
found the same to be in good order and repair and satisfactory for its purposes
hereunder. Lessee is leasing the Leased Property "AS IS," and Lessee waives any
claim or action against Lessor in respect of the condition of the Leased
Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR
USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS
TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT
LESSEE HAS INSPECTED THE LEASED PROPERTY AND THAT THE LEASED PROPERTY IS
SATISFACTORY TO LESSEE.
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7.2 Use of the Leased Property.
7.2.1 Lessee shall proceed with all due diligence and shall
exercise its reasonable best efforts to obtain and to maintain all approvals
needed to use and operate the Leased Property and the Facility under applicable
local, state and federal law, including but not limited to licensure of the
Leased Property where appropriate as a congregate and assisted care living
facility.
7.2.2 After the Commencement Date and during the Term, Lessee
shall continuously use or cause to be used the Leased Property and the
Improvements thereon as a congregate and assisted care living facility and for
such other uses as may be necessary or incidental to such use or that become
common uses of similar facilities by other operators in Lessee's industry (the
"Primary Intended Use"). Lessee shall not use the Leased Property or any
portion thereof for any other use without the prior written consent of Lessor.
No use shall be made or permitted to be made of the Leased Property, and no acts
shall be done, that will cause the cancellation of any insurance policy covering
the Leased Property or any part thereof, nor shall Lessee sell or otherwise
provide to residents therein, or permit to be kept, used or sold in or about the
Leased Property, any article that may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriters regulations. Lessee shall (a) comply
with all Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Property, whether
or not compliance therewith shall require structural changes in any of the
Leased Improvements or interfere with the use and enjoyment of the Leased
Property and (b) procure, maintain and comply with all licenses and other
authorizations required for any use of the Leased Property then being made, and
for the proper erection, installation, operation and maintenance of the Leased
Property or any part thereof.
7.2.3 Lessee shall not commit or suffer to be committed any waste
on the Leased Property, or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
7.2.4 Lessee shall neither suffer nor permit the Leased Property,
or any portion thereof, to be used in such manner as (i) might reasonably tend
to impair Lessor's title thereto or to any portion thereof, or (ii) may
reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
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7.2.5 Lessee shall not use or permit the Leased Property to be
used, in any manner that would (i) violate any certificate of occupancy
affecting the Leased Property, (ii) cause the value or usefulness of the Leased
Property or any part thereof materially to diminish, (iii) cause the loss of a
license, approval, permit or agreement required by Section 7.2.1 hereof, (iv)
violate any of the provisions of any encumbrance, mortgage or deed of trust
known to Lessee to which the Lease is subordinated or that encumbers the Leased
Property, including without limitation, the Mortgage or (v) violate any other
provision of this Lease.
7.2.6 Lessee shall inform Lessor immediately by telephone and by
letter, telefacsimile or telegraph of any action taken, commenced or instituted
by any state or federal authority having jurisdiction over the Leased Property
as an assisted care facility to terminate or revoke any license or certificate
of Lessee.
7.3 Management of Facility. At all times during the Term, Lessee
shall have and retain primary and direct responsibility for managing the
Facility; provided, that, with Lessor's consent, which may not be unreasonably
withheld, Lessee may contract with another operator to manage the Facility
pursuant to the terms and conditions set forth herein.
Section 8. Compliance with Mortgages and Restrictions.
8.1 Mortgage Compliance. Lessee, shall use its best efforts given
the available Facility Revenue to insure that it and the Leased Property and
business conducted thereon shall at all times comply with all of the terms,
conditions and provisions of any mortgage, deed of trust or other encumbrance
now or in the future known to it covering the Leased Property, including without
limitation, the Mortgage, except for the obligations thereunder to make payment
of principal and interest, which such obligations are the responsibility of
Lessor as provided in Section 3.1.
8.2 Encroachments, Restrictions. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Real Property, or shall violate the agreements or conditions contained in
any lawful restrictive covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor or, at the behest of any person affected by any such
encroachment, violation or impairment, Lessee shall, as an Operating Expense,
either (i) obtain valid and effective waivers or settlements of all claims,
liabilities and damages resulting from each such
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encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee or (ii) make such changes in the Leased Improvements, and take such
other actions, as Lessee in the good faith exercise of its judgment deems
reasonably practicable, to remove such encroachment, and to end such violation
or impairment, including, if necessary, the alteration of any of the Leased
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Improvements for the
Primary Intended Use substantially in the manner and to the extent the Leased
Improvements were operated before the assertion of such violation or
encroachment. Any such alteration shall be made in conformity with the
applicable requirement of Section 10. Lessee's obligations under this Section
9.2 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance and any
sums recovered by Lessor under any such policy of title or other insurance
shall be treated as revenue of the Leased Property for purposes of Section 3.
Section 9. Maintenance and Repair.
9.1 Lessee's Obligations.
9.1.1 Lessee, as an Operating Expense (or from reserves, if
appropriate), shall keep the Leased Property and all private roadways, sidewalks
and curbs appurtenant thereto and that are under Lessee's control in good order
and repair (whether or not the need for such repairs occurs as a result of
Lessee's use, any prior use, the elements or the age of the Leased Property, or
any portion thereof), and, except as otherwise provided in Section 14, with
reasonable promptness, make all necessary and appropriate repairs thereto of
every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing before the commencement of the Term of this Lease
(concealed or otherwise). All repairs shall, to the extent reasonably
achievable, be at least equivalent in quality to the original work. Lessee will
not take or omit to take any action the taking or omission of which might
materially impair the value or the usefulness of the Leased Property or any part
thereof for its Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to
build or rebuild any improvements in the Leased Property, or to make any
repairs, replacements, alterations restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to maintain
the Leased Property in any way.
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9.1.3 Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (i) constituting the consent or request of
Lessor, expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or services or the
furnishing of any materials or other property for the construction, alteration,
addition, repair or demolition of or to the Leased Property or any part thereof,
or (ii) giving Lessee any right, power or permission to contract for or permit
the performance of any labor or services or the furnishing of any materials or
other property in such fashion as would permit the making of any claim against
Lessor in respect thereof or to make any agreement that may create, or in any
way be the basis for, any right, title, interest, lien, claim or other
encumbrance upon the estate of Lessor in the Leased Property, or any portion
thereof, except as provided in Sections 11 and 12.
9.2 Lessor Repairs. If Lessor in its reasonable judgment deems that
any maintenance or repairs are required to be made by Lessee, Lessor may demand
that Lessee make them immediately, and if Lessee refuses or neglects to commence
such maintenance or repairs and to complete them with reasonable dispatch,
Lessor may make or cause such maintenance or repairs to be made. If Lessor makes
or causes maintenance or repairs to be made, Lessor shall not be responsible to
Lessee for any loss or damage that may accrue to Lessees property or business by
reason of the maintenance or repair work. Any expenses incurred by Lessor for
any such repairs shall constitute Operating Expenses, and shall be promptly paid
by Lessee.
Section 10. Alterations.
Lessee shall have the right to make additions, modifications or
improvements to the Leased Property from time to time as it, in its discretion,
may deem to be desirable for its uses and purposes, provided that Lessor has
given its prior written consent for such alteration. The cost of all permitted
alterations, modifications or improvements to the Leased Property shall be
Operating Expenses or shall be financed from any applicable reserves, and all
such alterations, modifications and improvements shall be included under the
terms of this Lease and upon expiration or earlier termination of this Lease
shall revert to and become the property of Lessor.
Lessee shall perform any alterations, modifications or improvements
with new materials, in a professional, workmanlike manner, and in accordance
with all applicable governmental restrictions, orders, regulations, laws and
ordinances and in compliance with any insurance policies or insurance
underwriting requirements.
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Section 11. Liens.
Subject to the provision of Section 12 relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will
promptly discharge as an Operating Expense any lien, encumbrance, attachment,
title retention agreement or claim upon the Leased Property or any part thereof,
or any attachment, levy, claim or encumbrance in respect of the Rent, not
including, however, (a) this Lease, (b) the matters, if any, set forth in
Exhibit B, (c) restrictions, liens and other encumbrances to which Lessor gives
its prior written consent, (d) liens for those taxes of Lessor that Lessee is
not required to pay hereunder, (e) liens for real property taxes not yet due,
(f) liens for impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are payable without the addition of any
fine or penalty or (ii) such liens are in the process of being contested as
permitted by Section 12 and (g) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due, provided that (i)
the payment of such sums shall not be postponed under any related contract for
more than sixty (60) days after the completion of the action giving rise to such
lien and such reserve or other appropriate provisions as shall be required by
law or generally accepted accounting principles shall have been made therefore
or (ii) any such liens are in the process of being contested as permitted by
Section 12.
Section 12. Permitted Contests.
Lessee, on its own or on Lessor's behalf (or in Lessor's name), as an
Operating Expense, may contest, by appropriate legal proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any Imposition or any Legal Requirements or Insurance Requirement
or any lien, attachment, levy, encumbrance, charge or claim not otherwise
permitted by Section 11, provided that (a) in the case of an unpaid Imposition,
lien, attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof against
Lessor and from the Leased Property, (b) neither the Leased Property nor any
part thereof or Interest therein would be in any immediate danger of being sold,
forfeited, attached or lost, (c) in the case of a Legal Requirement, Lessor
would not be in any immediate danger of civil or criminal liability for failure
to comply therewith pending the outcome of any proceedings, (d) such contest may
legally be maintained without the occurrence or imposition of any lien, charge
or liability against Lessor, the Leased Property or Lessee's interest in the
Leased Property, (e) in the case of an Insurance Requirement, the coverage
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required by Section 13 shall be maintained, and (f) if such contest be finally
resolved against Lessor or Lessee, Lessee shall, as an Operating Expense,
promptly pay the amount required to be paid, together with all interest and
penalties accrued thereon, to comply with the applicable Legal Requirement or
Insurance Requirement. Lessor, as an Operating Expense, shall execute and
deliver to Lessee such authorizations and other documents as may reasonably be
required in any such contest, and, if reasonably requested by Lessee or if
Lessor so desires, Lessor shall be joined as a party therein.
Section 13. Insurance.
13.1 General Insurance Requirements. During the term of this Lease,
Lessee shall at all times keep the Leased Property, and all property located in
or on the leased Property, including Lessee's Property, insured with the kinds
and amounts of insurance described in this Section 13. This insurance shall be
written by companies authorized to do insurance business in the state of
California. The policies must name Lessor and those other parties designated by
Lessor as an additional insured. Losses shall be payable to Lessor and/or
Lessee as provided in Section 14. In addition, the policies shall name as an
additional insured the holder of any mortgage, deed of trust or other security
agreement ("Facility Mortgagee") on the Leased Property and any other
encumbrance placed on the Leased Property in accordance with the provisions of
Section 32, by way of a standard form of mortgagee's loss payable endorsement.
Any loss adjustment shall require the written consent of Lessor, Lessee, and
each Facility Mortgagee. Evidence of insurance shall be deposited with Lessor,
and, if requested, with any Facility Mortgagee(s). If any provision of any
Facility Mortgage requires deposits in respect of insurance to be made with such
Facility Mortgagee, as an Operating Expense, Lessee shall either pay to Lessor
monthly the amounts required and Lessor shall transfer such amounts to each
Facility Mortgagee, or, pursuant to written direction by Lessor, Lessee shall
make such deposits directly with such Facility Mortgagee. The policies on
Lessee's Property and the Leased Property, including the Leased Improvements,
Fixtures and Personal Property, shall insure against the following risks:
13.1.1 Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as "All Risk", and all
physical loss perils including but not limited to sprinkler leakage in an amount
not less than one hundred percent (100%) of the then full replacement cost
thereof (as defined below in Section 13.2);
13.1.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter
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installed in the Facility, in such limits with respect to any one accident as
may be reasonably requested by Lessor from time to time;
13.1.3 Loss of rental under a rental value insurance policy covering
risk of loss during the first twelve (12) months of reconstruction necessitated
by the occurrence of any of the hazards described in Section 13.1.1 or 13.1.2 in
an amount sufficient to prevent Lessor from becoming a co-insurer.
13.1.4 Claims for personal injury or property damage under a policy
of comprehensive general public liability insurance with amounts not less than
Five Million Dollars ($5,000,000.00) per occurrence in respect of bodily injury
and death and Five Million Dollars ($5,000,000.00) for property damage.
13.1.5 Claims arising out of professional malpractice in an amount
not less than One Million Dollars ($1,000,000.00) for each person and for each
occurrence; and
13.1.6 Flood (when the Leased Property is located in whole or in
part within a designated flood plain area), earthquake and such other hazards
and in such amounts as may be customary for comparable properties in the areas
and is available from insurance companies authorized to do business in the State
at rates that are economically practicable in relation to the risks covered.
13.2 Replacement Cost. The term "full replacement cost" shall mean the
actual replacement cost of covered property from time to time including an
increased cast of construction endorsement, less exclusions provided in the
normal fire insurance policy. If either party believes that full replacement
cost (the then replacement cost less such exclusions) has increased or decreased
at any time during the Term, it shall have the right to have such full
replacement cost determined by the fire insurance company that is then carrying
the largest amount of fire insurance carried on the Leased Property, hereinafter
referred to as "impartial appraiser." The party desiring to have the full
replacement cost so redetermined shall forthwith, on receipt of such
determination by such impartial appraiser, give written notice thereof to the
other party. The determination of such impartial appraiser shall be final and
binding on the parties, and Lessee shall forthwith increase, or may decrease,
the amount of insurance carried pursuant to this Section, as the case may be, to
the amount so determined by the impartial appraiser, provided, that in no event
shall the full replacement cost ever be in an amount less than the indebtedness
encumbering the Leased Property. All of the fees, if any, of the impartial
appraiser and all fees and costs incurred by Lessor with regard
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to Lessor's participation pursuant to this Section shall be Operating Expenses.
13.3 Additional Insurance. In addition to the insurance coverage
described in Section 13.1, as an Operating Expense, Lessee shall maintain such
additional insurance as may be required from time to time by any Facility
Mortgagee and shall further maintain at all times adequate worker's compensation
insurance coverage for all persons employed by Lessee on the Leased Property.
Such worker's compensation insurance shall be in accordance with the
requirements of applicable local, state and federal law.
13.4 Waiver of Subrogation. All insurance policies carried by either
party covering the Leased Property, and/or Lessee's Personal Property, including
without limitation, policies covering contents and fire and casualty insurance,
shall expressly waive any right of subrogation on the part of the insurer
against the other party. The policies carried by each party will include such
waiver clause so long as the same is obtainable without extra cost, and in the
event of such an extra charge the other party, at its election, may pay the
same, but shall not be obligated to do so.
13.5 Form Satisfactory, etc. All of the policies of insurance referred
to in this Section shall be written in form satisfactory to Lessor and by
insurance companies satisfactory to Lessor. Lessor will not unreasonably
withhold its approval as to the form of the policies of insurance or as to the
insurance companies selected by Lessee. Lessee shall pay as an Operating
Expense all of the premiums therefor, and shall deliver such policies or
certificates thereof to Lessor before their effective date (and with respect to
any renewal policy, at least ten (10) days prior to the expiration of the
existing policy), and in the event of the failure of Lessee either to effect
such insurance in the names herein called for or to pay the premiums therefor,
or to deliver such policies or certificates thereof to Lessor at the times
required, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, which premiums shall be paid to Lessor
upon written demand therefor, and failure to pay the same shall constitute an
Event of Default within the meaning of Section 16.1(c). Each insurer mentioned
in this Section shall agree, by endorsement on the policy or policies issued by
it, or by independent instrument furnished to Lessor, that it will give to
Lessor thirty (30) days written notice before the policy or policies in question
shall be altered, allowed to expire or canceled.
13.6 Increase in Limits. If Lessor shall at any time deem the limits
of the personal injury or property damage or public liability insurance then
carried by Lessee to be either excessive or insufficient, the parties shall
endeavor to agree on
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the proper and reasonable limits for such insurance to be carried, and such
insurance shall thereafter be carried with the limits thus agreed on until
further change pursuant to the provisions of this Section. If the parties
shall be unable to agree thereon, the proper and reasonable limits for such
insurance to be carried shall be determined by an impartial third party
selected by the parties, the costs of which shall be paid as an Operating
Expense. Nothing herein shall permit the amount of insurance to be reduced
below the amount or amounts required by any Facility Mortgagee, which for
purposes of this Lease shall at all times be the minimum amount of insurance
coverage required.
13.7 Blanket Policy. Notwithstanding anything to the contrary contained
in this Section, Lessee's obligations to carry the insurance provided for herein
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee; provided, however, that the coverage
afforded Lessor will not be reduced or diminished or otherwise be different from
that which would exist under a separate policy meeting all other requirements of
this Lease by reason of the use of such blanket policy of insurance, and
provided further that the requirements of this Section 13 are otherwise
satisfied.
Section 14. Insurance Proceeds and Reconstruction Obligation.
14.1 Insurance Proceeds. All proceeds payable by reason of any loss or
damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Section 13 of this Lease, shall be paid to
Lessor and held by Lessor in trust (subject to the provisions of section 14.7)
and shall be made available for the reconstruction or repair, as the case may
be, of any damage to or destruction of the Leased Property, or any portion
thereof, and shall be paid out by Lessor from time to time for the costs of such
reconstruction or repair. Any excess proceeds of insurance remaining after the
completion of the restoration or reconstruction of the Leased Property shall
constitute revenue of the Leased Property and shall be distributed in accordance
with Section 3.1 above; provided, that, in the event in the event neither Lessor
nor Lessee is required or elects to repair and restore, all such insurance
proceeds shall be retained by Lessor.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
14.2.1 Except as provided in Section 14.7, if during the Term, the
Leased Property is totally or partially destroyed from a risk covered by the
insurance described in Section 13 and the Leased Property thereby is rendered
unsuitable
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for its Primary Intended Use, which shall be determined by Lessor exercising
good faith, then, unless Lessor and Lessee mutually agree not to restore the
Leased Property, to the extent of the insurance proceeds, Lessee shall arrange
for the restoration of the Leased Property to substantially the same condition
as existed immediately before the damage or destruction.
14.2.2 Except as provided in Section 14.7, if during the Term
the Leased Property is totally or partially destroyed from a risk covered by
the insurance described in Section 12, but the Leased Property is not thereby
rendered unsuitable for the Primary Intended Use, Lessee shall promptly arrange
for the restoration of the Leased Property to substantially the same condition
as existed immediately before the damage or destruction, and Lessor shall make
available to Lessee, pursuant to Section 14.1, insurance proceeds that may be
held as the result of such damage or destruction. Such damage or destruction
shall not terminate this Lease, which shall remain in full force and effect.
14.2.3 If the cost of the repair or restoration, required to be
arranged by Lessee pursuant to this Section 14.2 exceeds the amount of proceeds
received by Lessor from the insurance required to be carried under Section 13,
Lessor may at its option either advance any excess amounts needed to restore the
Leased Property or Lessor shall determine how to best utilize the insurance
proceeds available and direct Lessee to arrange for restoration of the premises
within the proceeds available. To the extent that Lessor advances the excess
amount needed to restore the Leased Property, Lessor shall be entitled to
reimbursement of such advances as Operating Expenses from the subsequent revenue
of the Leased Property until such advances have been satisfied in full. All
such advances shall bear interest at the prime rate announced publicly by
Seattle-First National Bank from time to time.
14.3 Reconstruction in the Event of Destruction Not Covered by
Insurance. If, during the Term the Leased Property is totally or materially
destroyed from a risk not covered by the insurance described in Section 12,
Lessor, at its option may either pay for the restoration of the Leased Property
or terminate this Lease. If, during the Term the Leased Property is totally or
materially destroyed from a risk for which Lessee is required to arrange for
insurance coverage and, due to Lessee's negligence such insurance coverage has
not been placed, Lessee at its own expense shall restore the Leased Property to
substantially the same condition as it was in immediately before the damage or
destruction and such damage or destruction shall not terminate this Lease.
14.4 Lessee's Property. All insurance proceeds payable by
reason of any loss of or damage to any of Lessee's
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Property shall be paid to Lessee and Lessee shall hold such insurance proceeds
in trust to pay the cost of repairing such loss or damage.
14.5 Restoration of Lessee's Property. If Lessee is required to arrange
for the restoration of the Leased Property as provided in Section 14.2 or 14.3,
Lessee shall also restore all alterations and improvements made by Lessee and
Lessee's Property.
14.6 Damage Near End of Term. Notwithstanding any provision of Section
14.2 appearing to the contrary, if damage to or destruction of the Leased
Property occurs during the last six (6) months of the Term and is covered by
insurance, and if such damage or destruction cannot be fully repaired and
restored within six (6) months immediately following the date of the appraised
loss, then Lessee shall have the right to terminate this Lease by giving notice
to Lessor within thirty (30) days after the date of damage or destruction and
all insurance proceeds shall be paid to Lessor and this Lease shall be
terminated effective an the date of such notice.
14.7 Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Leased Property.
14.8 Express Provision. The provisions of this Section shall be
considered an express agreement governing any case of damage or destruction of
the Leased Property by fire or other casualty, and no state statute providing
for such a contingency in the absence of an express agreement, and no other law
of like import, now or hereafter in force, shall have application in such case.
Section 15. Condemnation.
15.1 Definitions.
15.1.1 "Condemnation" means (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Lessor to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
15.1.2 "Date of Taking" means the date the Condemnor has the right
to possession of the property being condemned.
15.1.3 "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
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15.1.4 "Condemnor" means any public or quasi-public authority,
or private corporation or individual, having the power of condemnation.
15.2 Parties' Rights and Obligations. If during the Term
there is any taking of all or any part of the Leased Property or any interest
in this Lease by condemnation, the rights and obligations of the parties shall
be determined by this Section 15.
15.3 Partial Taking. If a portion of the Leased Property is
taken by condemnation, this Lease shall remain in effect if the Leased Property
is not thereby rendered unsuitable for its Primary Intended Use (which shall be
determined by Lessor exercising good faith), but if the Leased Property is
thereby rendered unsuitable for its Primary Intended Use, this Lease shall
terminate on the Date of Taking.
15.4 Award Distribution. Subject to the rights of the
Facility Mortgagees, the Award made in connection with the condemnation of all
or any part of the Leased Property shall belong to and be paid to Lessor,
provided, that, if the Award specifically includes a sum attributed to the
leasehold interest of Lessee, such portion shall be paid to Lessee. Lessee
shall be entitled to receive from the Award, if and to the extent such Award
specifically includes a sum attributable thereto, an amount for loss of or to
Lessee's Property and for reasonable removal and relocation costs.
15.5 Temporary Taking. The taking of the Leased Property, or
any part thereof, by military or other public authority shall constitute a
taking by Condemnation only when the use and occupancy by the taking authority
has continued for longer than six (6) months. During any such six (6) month
period all the provisions of this Lease shall remain in full force and effect.
Section 16. Events of Default.
16.1 Events of Default. Any one or more of the following
events shall constitute an Event of Default:
(a) if Lessee shall fail to make payment of the Rent or
any other amount or sum payable by Lessee under this Lease when the same
becomes due and payable and such failure is not cured within a period of ten
(10) days of the written notice from Lessor of the Lessee's failure to timely
make the payment,
(b) if Lessee shall fail to observe or perform any
other term, covenant, or condition of this Lease and such
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failure is not cured within a period of thirty (30) days after receipt by
Lessee of written notice thereof from Lessor, unless such failure cannot, with
due diligence, be cured within a period of thirty (30) days, in which case such
failure shall not be deemed to continue if Lessee proceeds promptly and with
due diligence to cure the failure and diligently completes the curing thereof,
but in no event shall the period to cure exceed 90 days,
(c) If Lessee shall:
(i) admit in writing its inability to pay its debts
generally as they become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself
or of the whole or any subbstantial part of its property,
(v) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any
State thereof,
(d) if Lessee shall, on a petition in bankruptcy filed against
it, be adjudicated a bankrupt or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of the Lessee a receiver of
Lessee or of the whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or arrangement of the Lessee
under the Federal bankruptcy laws or any other applicable law or statute of the
United States of America or any State thereof, and such judgment, order or
decree shall not be vacated or set aside or stayed within sixty (60) days of
the date of the entry thereof,
(e) if Lesee shall be liquidated or dissolved, or shall begin
preceedings toward such liquidation or dissolution, or shall, in any manner,
permit the sale or divestiture of substantially all of its assets other than
in connection with a merger or consolidation of Lessee into, or a sale of
substantially all of Lessee's assets to, another corporation provided that the
survivor of such merger or the purchaser of such assets shall assume all of
Lessee's obligations under this Lease by a written instrument, in form and
substance reasonably satisfactory to Lessor accompanied by an opinion of
counsel, reasonably satisfactory to Lessor and addressed to Lessor stating that
such instrument of assumption is valid,
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binding and enforceable against the parties thereto in accordance with its
terms (subject to usual bankruptcy and other creditors, rights exceptions), and
provided further that immediately after giving effect to any such merger,
consolidation or sale, the Lessee or other corporation (if not the Lessee)
surviving the same shall possess a consolidated net worth at least equal to the
consolidated net worth of Lessee as of the date hereof, all as to be set forth
in an officer's certificate and delivered to Lessor within a reasonable period
of time after such merger, consolidation or sale,
(f) if the estate or interest of Lessee in the Leased Property or any
part thereof shall be levied upon or attached in any proceeding and the same
shall not be vacated or discharged within the later of ninety (90) days after
commencement thereof or thirty (30) days after receipt by Lessee of notice
thereof from Lessor, (unless Lessee shall be contesting such lien or attachment
in good faith in accordance with Section 12), or
(g) if, except as a result of damage, destruction or a partial or
complete condemnation, Lessee voluntarily ceases operations on the Leased
Property for a period in excess of two (2) days.
If an Event of Default occurs, Lessor may terminate this Lease by giving Lessee
not less than ten (10) days notice of such termination and, upon the expiration
of the time fixed in such notice, the Term, as the case may be, shall terminate
and all rights of Lessee under this Lease shall cease. Notwithstanding any
termination of this Lease by Lessor, Lessor shall remain responsible to make
all principal and interest payments when due under the Note.
16.2 Certain Remedies. If an Event of Default shall have occurred (and
the event giving rise to such Event of Default has not been cured within the
curative period relating thereto as set forth in Section 16.1 above) and be
continuing, whether or not this Lease has been terminated pursuant to Section
16.1, Lessee shall, to the extent permitted by law, if required by Lessor so to
do, immediately surrender to Lessor the Leased Property and quit the same, and
Lessor may enter upon and repossess the Leased Property by reasonable force,
summary proceeding, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal property from the Leased Property subject to
rights of any residents and to any requirement of law.
16.3 Past Due Payments. In the event of a termination of this Lease,
Lessee shall forthwith pay to Lessor all Rent and other amounts at the time of
termination due and payable with
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respect to the Leased Property and otherwise due under this Lease, to and
including the date of such termination.
16.4 Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessee waives, to the extent permitted by applicable law, (a) any right of
redemption, re-entry or repossession, (b) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Section
16, and (c) the benefit of any laws now or hereafter in force exempting property
from liability for rent or for debt.
Section 17. Lessor's Right to Cure Lessee's Default.
If Lessee shall fail to make any payment or to perform any act required
to be made or performed under this Lease, and to cure such failure within the
relevant time periods provided in Section 16.1, Lessor, after notice to and
demand upon Lessee, and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee
(unless such payment would constitute an Operating Expense), and may, to, the
extent permitted by law, enter upon the Leased Property for such purpose and
take all such action thereon as, in Lessor's opinion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of Lessee.
All sums so paid by Lessor and all costs and expenses (including, without
limitation, reasonable attorneys fees and expenses, in each case, to the extent
permitted by law) so incurred, together with a late charge thereon (to the
extent permitted by law) at the Overdue Rate from the date on which such sums
or expenses are paid or incurred by Lessor, shall, if constituting an Operating
Expense, be paid to Lessor by Lessee prior to the next distribution of any
subsequent Monthly Net Cash Flow pursuant to Section 3.1 above, and if
the responsibility of Lessee, be immediately paid by Lessee to Lessor from
Lessee's own funds.
Section 18. Obligations at Expiration or Termination.
18.1 End of Term. Upon the expiration or earlier termination of the
Term, Lessee shall quit and surrender to Lessor the Premises, broom clean, in
good order and condition, ordinary wear and tear excepted, and Lessee shall
remove all its property. If the last day of the term of this Lease falls on
Sunday, this Lease shall expire at noon on the preceding Saturday unless it be a
legal holiday in which case it shall expire at noon on the preceding business
day.
19.2 Fixtures. All fixtures, equipment, structural components and like
installations installed in the Leased Property at any time by Lessee shall, upon
installation, become
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the property of Lessor and shall remain upon and be surrendered with the Leased
Property. Except as otherwise provided in this Lease, nothing shall prevent
Lessees removal of Lessee's Property, but upon any such removal, Lessee shall
immediately and at its expense repair and restore the Leased Property
(inclusive of property formerly owned by Lessee that became the property of
Lessor pursuant hereto) to the condition existing prior to such removal. All
property permitted to be removed by Lessee at the end of the term remaining in
the Leased Property after Lessee' removal shall be deemed abandoned and may, at
the election of Lessor, either be retained as Lessor's property or may be
removed from the Leased Property by Lessor.
Section 19. Financial and Other Statements.
19.1 Statements, Reports. Lessee shall forward to Lessor copies of all
reports and documents relating to the Leased Property received from any state or
federal licensing or certification authorities having jurisdiction over the
Leased Property as an assisted care facility. Such copies shall be so forwarded
forthwith upon receipt of such reports and documents by Lessee.
19.2 Operating Statement. Lessee shall annually, on or before April 1 of
each year, commencing April 1, 1996, and on or before the 20th day of each month
provide Lessor with an operating statement and balance sheet for the Leased
Property for the preceding calendar year, in form and content satisfactory to
Lessor in its reasonable judgement. The cost of preparing such operating
statement shall constitute an Operating Expense.
19.3 Financial Statements. Lessee shall, within ninety (90) days after
the end of Lessee's fiscal year, provide Lessor with (i) copies of Lessee's
current Consolidated Financials, certified by an independent public accountant
acceptable to Lessor in its reasonable judgment and (ii) with respect to the
Facility, copies of statements of earnings and of changes in financial position
for such fiscal year and the related balance sheet as of the end of such fiscal
year, all in reasonable detail and setting forth in comparative form the
corresponding figures for the preceding fiscal year, prepared in accordance with
generally accepted accounting principals and either internally prepared by
Lessee or, to the extent Lessor deems appropriate in its sole discretion, either
audited or reviewed by an independent public account acceptable to Lessor in its
reasonable judgment; provided, that, Lessee shall be responsible for only
$10,000 in fees and expenses for any audited or reviewed Facility financial
statements, and Lessor shall be responsible for the excess.
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19.4 Lessor's Right to Perform Operational Audit. Lessor may, through
its employees or independent contractors, inspect and audit the operations at
the Leased Property (which audit may include, but which shall not be limited to,
a review and audit of Lessee's books and records pertaining to the Leased
Property) (a) up to one (1) time per calendar year, so long as no Event of
Default has occurred under the Lease, and (b) upon two (2) days' notice to
Lessee if an Event of Default has occurred under the Lease. Any audit conducted
by Lessor pursuant to this Section 19.4 shall be at Lessee's cost and expense
(except to the extent the cost and expense of any audit exceeds $5,000, in which
case such excess shall be Lessor's responsibility). Lessee shall reimburse
Lessor upon demand for Lessee's portion of any amounts expended by Lessor
pursuant to the previous sentence. At Lessor's election, Lessor shall be
entitled, in connection with any such audit, to speak with any officer or
employee, independent contractor, or other agent of Lessee, with tenants of the
Leased Property, and with anyone supplying goods or services to Lessee for the
Leased Property. Notwithstanding Lessor's rights pursuant to this Section 19.4,
Lessor does not undertake or assume any responsibility or duty to Lessee to
select, review, inspect, supervise, pass judgment upon, or inform Lessee of any
matter in connection with the Leased Property or its operations thereon. Lessee
shall rely entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment, or supply of information
undertaken or assumed by Lessor in connection with such matters is solely for
the protection of Lessor, and neither Lessee nor any other person or entity is
entitled to rely thereon.
Section 20. Indemnification.
Notwithstanding the existence of any insurance provided for in Section 13,
and without regard to the policy limits of any such insurance, Lessee will
protect, indemnify, save harmless and defend Lessor from and against all
liabilities, obligations, claims, damages, penalties, and causes of action,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Lessor and its agents, Lessor's partners, participants and
lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Leased Property by Lessee, the conduct of Lessee's business
with respect to the Leased Property, any act, omission or neglect of Lessee, its
agents, contractors, employees or invitees, and out of any event of default or
breach by Lessee in the performance in a timely manner of any obligation on
Lessee's part to be performed under this Lease. The foregoing shall include,
but not be limited to, the defense or pursuit of
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any claim or any action or proceeding involved therein, and whether or not (in
the case of claims made against Lessor) litigated and/or reduced to judgment,
and whether well founded or not. In case any action or proceeding be brought
against Lessor by reason of any of the foregoing matters, Lessee upon notice
from Lessor shall defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
Lessor need not have first paid any such claim in order to be so indemnified.
Lessee's liability for a breach of this Section 20 arising during the Term
hereof shall survive any termination of this Lease.
20.1 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damages to the person or goods, wares, merchandise or other property
of Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Leased Property, whether such damage or injury whether
the injury or damage results from conditions arising upon the Leased Property,
or from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not.
Notwithstanding Lessor's negligence or breach of this Lease, unless Lessor
intentionally interrupts Lessee's quiet enjoyment of the property, Lessor shall
under no circumstances be liable for injury to Lessee's business or for any loss
of income or profit therefrom.
Section 21. Subletting and Assignment; Attornment.
21.1 Subletting and Assignment. Lessee shall not, without the express
written consent of Lessor, which may be withheld in Lessor's sole discretion,
assign this Lease or sublet all or any part of the Leased Property to any other
party or entity, except to residents of the retirement center facility or to
parties providing certain services to the residents, such as the operator of a
beauty shop, barber shop or other similar services.
21.2 Attornment. If Lessor consents to a sublease of the Leased
Property, Lessee shall insert in each sublease permitted herein, provisions to
the effect that (a) such sublease is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Lessor hereunder, (b) in the
event this Lease shall terminate before the expiration of such sublease, the
sublessee thereunder will, at Lessor's option, attorn to lessor and waive any
right the sublessee may have to terminate the sublease or to surrender
possession thereunder, as a result of the termination of this Lease, and (c) in
the event the sublessee receives a written notice from Lessor or Lessor's
assignees, if any, stating that Lessee is in default under this Lease, the
sublessee shall thereafter be obligated to pay all
30
<PAGE> 31
rentals accruing under said sublease directly to the party giving such notice,
or as such party may direct.
Section 22. Lessor's Right to Inspect.
Lessee shall permit Lessor and its authorized representatives to inspect
the Leased Property during usual business hours, or at any time during an
emergency, subject to any security, health, safety or confidentiality
requirements of Lessee, or any governmental agency or insurance requirement
relating to the Leased Property.
Section 23. No Waiver.
No failure by Lessor to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy consequent upon a breach
thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the extent permitted by law, no waiver or any breach shall
affect or alter this Lease, which shall continue in full force and effect with
respect to any other then existing or subsequent breach.
Section 24. Remedies Cumulative.
To the extent permitted by law, each legal, equitable or contractual right,
power and remedy of Lessor or Lessee now or hereafter provided either in this
Lease or by statute or otherwise shall be cumulative and concurrent and shall be
in addition to every other right, power and remedy and the exercise or beginning
of the exercise by Lessor or Lessee of any one or more of such rights, powers
and remedies shall not preclude the simultaneous or subsequent exercise by
Lessor or Lessee of any or all of such other rights, powers and remedies.
Section 25. Acceptance of Surrender.
No surrender to Lessor of this Lease or of the Leased Property or any part
thereof, or of any interest therein, shall be valid or effective unless agreed
to and accepted in writing by Lessor and no act by Lessor or any representative
or agent of Lessor, other than such a written acceptance by Lessor, shall
constitute an acceptance of such surrender.
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<PAGE> 32
Section 26. No Merger of Title.
There shall be no merger of this Lease or of the leasehold estate created
hereby for reason of the fact that the same person, firm, corporation or other
entity may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
Section 27. Conveyance by Lessor.
If Lessor or any successor owner of the Leased Property shall convey the
Leased Property in accordance with the terms hereof other than as security for a
debt, and the grantee or transferee of the Leased Property shall expressly
assume all obligations of Lessor hereunder arising or accruing from and after
the date of such conveyance or transfer, and shall be reasonably capable of
performing the obligations of Lessor or such successor owner, as the case may
be, Lessor shall thereupon be released from all future liabilities and
obligations of the Lessor under this Lease arising or accruing from and after
the date of such conveyance or other transfer as to the Leased Property and all
such future liabilities and obligations shall there upon be binding upon the new
owner.
Section 28. Quiet Enjoyment.
So long as Lessee shall pay all Rent and other amounts due hereunder as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, and no Event of Default shall have
occurred and be continuing, Lessee shall peaceably and quietly have, hold and
enjoy the Leased Property for the term hereof, free of any claim or other action
by Lessor or anyone claiming by, through or under Lessor, but subject to all
liens and encumbrances of record as of the date hereof.
Section 29. Notices.
All notices, demands, requests, consents, approvals and other
communications hereunder shall be in writing and delivered, telecopied or mailed
(by registered or certified mail, return receipt requested and postage prepaid),
addressed to the respective parties, as follows:
If to Lessor: Capital Consultants, Inc., Agent
2300 S.W. First Avenue
Portland, OR 97201
Attn: Linda Folkested
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<PAGE> 33
With a copy to: Lane Powell Spears Lubersky
520 SW Yamhill Street, Suite 500
Portland, OR 97204
Attn: Bryan E. Powell
If to Lessee: Crossings International
Corporation
1201 Pacific Avenue
Suite 1800
Tacoma, WA 98402
Attn: President
With a copy to: Bruce L. Holland, Jr.
Bogle & Gates
Two Union Square, Suite 4700
601 Union Street
Seattle, WA 98101-2346
or to such other address as either party may hereafter designate, and shall be
effective upon receipt.
Section 30. Subordination.
This Lease is and shall be subordinate to any Deed of Trust or mortgage,
including without limitation, the Mortgage, of the Leased Property now of record
or recorded after the date hereof affecting the Leased Property. Such
subordination is effective without any further act of Lessee. Lessee shall from
time to time on request from Lessor execute and deliver any documents or
instruments that may be reasonably required to effectuate any such
subordination.
Section 31. Estoppel Certificates.
Lessee shall, at any time and from time to time upon not less than ten (10)
days prior written request from Lessor execute, acknowledge and deliver to
Lessor, in form satisfactory to Lessor or Lessor's Mortgagee, a written
statement certifying (if true) that this Lease is unmodified and in full force
and effect (or, if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), that Lessee is not in
default hereunder, the date to which the rental and other charges have been paid
in advance, if any, and such other accurate certifications as may reasonably be
required by Lessor. It is intended that any such statement delivered pursuant
to this subsection may be relied upon by any prospective purchaser or mortgagee
of the Leased Property, and their respective successors and assigns.
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<PAGE> 34
Section 32. Lessor May Assign Lease or Grant Liens.
Without the consent of Lessee, Lessor may assign its interest under this
Lease and may, from time to time, directly or indirectly, create or otherwise
cause to exist any lien, encumbrance or title retention agreement upon the
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing; provided, that, no
such assignment or other lien, encumbrance or title retention agreement shall
affect or limit in any respect the division of Net Cash Flow under Section 3
above, and Lessor shall make all payments of all obligations secured thereby.
Section 33. Miscellaneous.
33.1 All claims against, and liabilities of, the Lessee or Lessor arising
prior to any date of termination of this Lease shall survive such termination.
If any term or provision of this Lease or any application thereof shall be
invalid or unenforceable, the remainder of this Lease and any other application
of such term or provision shall not be affected thereby. If any late charges
provided for in any provision of this Lease are based upon a rate in excess of
the maximum rate permitted by an applicable law, such charges shall be fixed at
the maximum permissible rate. Neither this Lease nor any provision hereof may
be changed, waived, discharged or terminated except by an instrument in writing
and in recordable form signed by Lessor and Lessee. All the terms and
provisions of this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The headings in
this Lease are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof. This Lease shall be governed by and
construed in accordance with the laws of the State of California.
33.2 Upon the expiration or earlier termination of the term of this
Lease, Lessee shall use its best efforts to transfer to Lessor or Lessor's
nominee, or to cooperate with Lessor or Lessor's nominee in connection with the
processing by Lessor or Lessor's nominee of, any applications for all licenses,
operating permits and other governmental authorization and all contracts,
including contracts with governmental or quasi-governmental entities that may be
necessary for the operation of the Facility for its Prime Intended Use; provided
that the costs and expenses of any such transfer or the processing of any such
application shall be paid by Lessor or Lessor's nominee.
33.3 Time is the essence of each and every term and provision of this
Lease.
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<PAGE> 35
33.4 The relationship between Lessor and Lessee shall, during the term of
this Lease, be that of tenant and landlord. Nothing in this Lease shall be
construed as constituting Lessee as a legal representative or agent, partner,
employee of or joint venturer with Lessor, for any purpose whatsoever. Lessee
shall have no right or authority to assume or create, in writing or otherwise,
any obligation of any kind in the name of or on behalf of Lessor.
Section 34. Security.
34.1 Grant of Security Interest. Lessee, to secure its faithful
performance and observance of the terms, provisions and conditions of this Lease
and the payment of all amounts to be paid by Lessee hereunder, hereby grants to
Lessor a security interest in Lessee's Property.
34.2 Assignment of Leases and Rents re Leased Property. Lessee hereby
assigns to Lessor for security, Lessee's interest in all leases and rents,
income, accounts receivable, receipts, revenues, issues, proceeds and profits
resulting from the operation by Lessee of the Leased Property.
34.3 Cooperation for Perfection of Security Interest. Lessee agrees to
execute and file any and all documents deemed necessary by Lessor to create and
perfect the security interest of Lessor in the assets and rights of Lessee
described in this Section 34, including but not limited to such documents as
required by the Uniform Commercial Code as adopted in the State of California.
Further, Lessee hereby irrevocably appoints the President of Capital
Consultants, Inc. as its attorney-in-fact for the purpose of executing such
security agreements, financing statements or certificates, as Lessor deems
necessary to perfect its security interest as granted herein, if Lessee should
refuse to do so.
34.4 Transfer of Security. In the event of a sale or lease of the Leased
Property by Lessor or assignment of Lessor's interest under this Lease, Lessor
shall have the right to transfer the security granted pursuant to this Section
34 to the vendee, lessee or assignee and Lessor shall thereupon be released by
Lessee from all liability for the return of such security. Lessee shall look to
the new Lessor solely for the return of said security and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Lessor.
35.5 Further Covenant. Lessee shall not further assign or encumber or
attempt to assign or encumber the assets in which a security interest has been
granted to Lessor, and neither Lessor nor its successors or assigns shall be
found by any such
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<PAGE> 36
assignment, encumbrance, attempted assignment or attempted encumbrance.
35.6 Security Agreement. Lessee's grant of the security interest
provided in this Section 35 constitutes a security agreement within the meaning
of the Uniform Commercial Code as enacted in the State of California.
35.7 Attorneys' Fees. Should any litigation be commenced between the
parties concerning this Lease or the transactions contemplated hereby, the
prevailing party in such litigation shall be entitled, in addition to such other
relief as may be granted, to receive from the losing party a reasonable sum as
and for its attorneys' fees, at trial and on appeal or review, said amount to be
set by the court before which the matter is heard.
35.8 Exhibits. The following exhibits referred to in this Lease are
incorporated herein, as if set out in full, by the respective references to
them:
Exhibit A - Legal Description
Exhibit B - Permitted Encumbrances
Exhibit C - Guaranty
35.9 Guaranty. This Lease is subject to and conditional upon Lessee's
delivery to Lessor, concurrently with Lessee's execution and delivery of this
Lease, of a Guaranty in the form of and upon the terms contained in Exhibit C
attached hereto and incorporated herein by this reference, which shall be fully
executed by New Crossings International Corporation, a Nevada corporation
("Guarantor"). It shall constitute a default of the Lessee under this Lease if
Guarantor fails or refuses, upon reasonable request by Lessor to give written
confirmation that the guaranty is still in effect within ten (10) days after
written request to Guarantor.
IN WITNESS WHEREOF, the parties have cause this Lease to be executed by their
respective officers thereunder duly authorized.
LESSOR: CAPITAL CONSULTANTS, INC., agent
for certain participant lenders
By /s/
-----------------------------
Title: Senior Vice President
36
<PAGE> 37
LESSEE: CROSSINGS INTERNATIONAL CORPORATION
By /s/
-------------------------------
Title: Vice President
State of Washington
County of Pierce
On January 11, 1996 before me, the undersigned, a Notary Public in and for said
State, personally appeared David M. Boitano, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Jeanne Otor
Name Jeanne L. Otor (SEAL)
-------------------------------
(typed or printed)
(California form acknowledgment)
State of Oregon
County of Multnomah
On January 12, 1996 before me, the undersigned, a Notary Public in and for said
State, personally appeared William D. Schaub, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Kim R. Andrew
Name Kim R. Andrew (SEAL)
-------------------------------
(typed or printed)
37
<PAGE> 38
EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
Parcel No. 1, Parcel Map No. 7277, in the County of San Bernardino, State of
California, as per Map Recorded in Book 83 of Parcel Maps, Page(s) 24, in the
Office of the County Recorder of said County.
38
<PAGE> 39
EXHIBIT B
3406788
Page 4
Permitted Encumbrances
At the date hereof Exceptions to coverage in addition to the printed exceptions
and exclusions in said policy form would be as follows:
A. General and special taxes and assessments collected with taxes for the
fiscal year 1995-1996.
Total: $90,855.16
First Installment: 45,427.60 Paid
Second Installment: 45,427.56 Unpaid, Not Yet Delinquent
Homeowner's Exemption: $NONE
Code: 13010
Parcel: 283-201-51
C. The lien of supplemental taxes, if any, assessed pursuant to the
provisions of Section 75, et seq. of the Revenue and Taxation Code of the State
of California.
1. Water rights, claims or title to water, whether or not shown by the
public records.
2. An easement for the purpose shown below and rights incidental thereto as
set forth in document.
Granted to: College of Medical Evangelists, a corporation
Purpose: pipelines
Recorded: October 16, 1937, in Book 1236, Page 235, Official Records
Affects: That portion of the North one-half of Lot 1, Block 75, 80
acre survey of the Rancho San Bernardino, according to the
plat thereof recorded in Book 7, Page 2 of Maps, Records of
said County, lying North of the Southern Pacific Railroad
Right of way as located through said lot.
<PAGE> 40
3406788
Page 5
A 10 foot right beginning at a point 33 feet South and 41.25
feet West, more or less, from the Northeast corner of said
lot, continuing West a distance of 500 feet, more or less,
thence in a Southwesterly direction distance of 990 feet,
more or less, to a point on the North line of the Southern
Pacific Railroad right of way 30 feet, more or less,
Easterly of the West line of said lot and the North line of
the Southern Pacific Railroad right of way. The above
described line is the North and the Southeasterly line of
said 10 foot right of way.
3. A document subject to all the terms, provisions and conditions therein
contained.
Entitled: Regulatory Agreement
Dated: July 1, 1985
Executed by: Lorna Linda Redevelopment Agency, Seattle-First National
Bank, Redlands Federal Savings and Loan Association, and
Villa Linda Partners
Recorded: July 1, 1985, as Instrument No. 85-158394,
Official Records
Reference is made to said documents for full particulars.
A document subject to all the terms, provisions and conditions therein
contained.
Entitled: Agreement Re Inapplicability of Regulatory Agreement
Dated: October 1, 1990
Executed by: Lorna Linda Redevelopment Agency, Seattle-First National
Bank, Redlands Federal Savings and Loan Association, and
Guardian Savings and Loan Association, a California
corporation
Recorded: November 28, 1990, as Instrument No. 90-470059,
Official Records
4. A document subject to all the terms, provisions and conditions therein
contained.
Entitled: A Declaration of Acknowledgement of Potential Flooding and
Covenant not to Sue and Hold Harmless Agreement
Dated: November 22, 1985
Executed by: Villa Linda Partnership
Recorded: October 20, 1986, as Instrument No. 86-308055,
Official Records
A document subject to all the terms, provisions and conditions therein
contained.
Entitled: Amended Declaration of Acknowledgement of Potential Flooding
and Covenant Not to Sue and Hold Harmless Agreement
Dated: September 30, 1986
Executed by: Villa Linda Partnership
Recorded: October 20, 1986, as Instrument No. 86-308055,
Official Records
Reference is made to said document for full particulars.
<PAGE> 41
3406788
Page 6
5. An easement for the purpose shown below and rights incidental thereto as
set forth in document.
Granted to: The City of Lorna Linda
Purpose: roadway and utility
Recorded: September 10, 1986, as Instrument No. 86-261463,
Official Records
Affects: The North 6.00 feet.
6. An easement for the purpose shown below and rights incidental thereto as
set forth in document
Granted to: Southern California Edison Company, a corporation
Purpose: public utilities
Recorded: September 10, 1987, as Instrument No. 87-317414,
Oficial Records
Affects: Two strips of land lying within a portion of Parcel No. 1 of
Parcel Map No. 7277, in the County of San Bernardino, State
of California, recorded in Book 83, Page 24 of Parcel Maps,
in the Office of the County Recorder of said County; the
centerlines described as follows:
Strip No. 1:
A 4-foot side strip of land, the centerline described as
follows:
Beginning at a point on the East line of said Parcel No. 1,
distant thereon 6 feet from the Northeast corner of said
Parcel No. 1; thence West parallel with the North line of
said Parcel No. 1, 60 feet; thence South parallel with the
East line of said Parcel No. 1, 238 feet; thence West
parallel with the North line of said Parcel No. 1, 165 feet
to a point hereinafter known as Point "A".
Strip No. 2:
A 10-foot wide strip of land, the centerline described as
follows:
Beginning at the hereinbefore mentioned Point "A"; thence
South Parallel with the East line of said Parcel No. 1, 10
feet.
The Grantor agrees for itself, its successors and assigns to erect, place or
maintain, nor to permit the erection, placement or maintenance of any building,
planter boxes, earth fill or other structures except walls and fences on the
above described real property. The Grantee, and it contractors, agents and
employees shall have the right to trim or cut tree roots as may endanger or
interfere with said systems and shall have free access to said systems and
every part thereof, at all times, for the purpose of exercising the rights
herein granted; provided, however, that in making any excavation on said
property of the
<PAGE> 42
3406788
Page 7
Grantor(s), the Grantee shall make the same in such a manner as will cause the
least injury to the surface of the ground around such excavation, and shall
replace the earth so removed by it and restore the surface of the ground to as
near the same condition as it was prior to such excavation as is practicable.
7. An easement for the purpose shown below and rights incidental thereto as
set forth in document.
Granted to: Harrison Thornburg
Purpose: ingress and egress
Recorded: November 19, 1987, as Instrument No. 87-411282, Official
Records
Affects: Beginning at the Northwest corner of Parcel No. 1:
Thence South 0 (degree) 20' 55" West, along the West line of
said Parcel No. 1, a distance of 152.50 feet to a Point "A";
thence continuing South 0 (degree) 20' 55" West along said
West line of Parcel No. 1 and its Southerly prolongation, a
distance of 13.50 feet to Point "B".
Thence South 89 (degree) 53' 00" East, a distance of 46.50
feet; thence North 0 (degree) 20' 55" East, a distance of
166.00 feet to an intersection with the South line of Van
Leuven Street; thence North 89 (degree) 53' 00" West to the
true point of beginning.
Together with ingress and egress through a gate lying between
Point "A" and Point "B".
8. An encroachment consisting of chain link fences and a storage area onto
said land, as disclosed by an instrument recorded November 19, 1987, as
Instrument No. 87-411282, Official Records.
9. A deed of trust to secure an indebtedness in the amount shown below:
Amount: $6,205,000.00
Dated: June 5, 1991
Trustor: Crossing International, Inc.
Trustee: GSL Financial Corporation, a California corporation
Beneficiary: Guardian Savings and Loan Association, a California state-
chartered savings and loan association
Recorded: June 13, 1991, as Instrument No. 91-223313, Official Records
The beneficial interest under said deed of trust was assigned of record to
Assignee: Bank of America National Trust and Savings Association, as
Trustee under that certain Pooling and Servicing Agreement
dated as of the
<PAGE> 43
3406788
Page 8
1st of November, 1992, for RTC Commercial Mortgage Pass-
Through Certificates, Series 1992-CB
Recorded: February 23, 1993, as Instrument No. 93-084563, Official
Records
10. An assignment of all monies due, or to become due as rental or otherwise
from said land, as well as the lessor's interests under the leases referred to
therein, to secure payment of an indebtedness shown below and upon the terms
and conditions therein.
Amount: $Not Shown
Assigned to: Crossings International Corporation
By: Guardian Savings and Loan Association
Recorded: June 13, 1991, as Instrument No. 91-223318, Official Records
11. A deed of trust to secure an indebtedness in the amount shown below:
Amount: $1,400,000.00
Dated: June 13, 1991
Trustor: Crossings International Corporation
Trustee: Commonwealth Land Title Company
Beneficiary: Capital Consultants, Inc.
Recorded: June 13, 1991, as Instrument No. 91-223314, Official Records
An agreement which states that this instrument was subordinated
To: Deed of Trust
Recorded: June 13, 1991
By agreement:
Executed by: Guardian Savings and Loan Association and
Capital Consultants, Inc.
Recorded: June 13, 1991, as Instrument No. 91-223317, Official Records
An amended and restated deed of trust and Security Agreement to secure an
indebtedness in the amount shown below:
Amount: $1,400,000.00
Dated: May 14, 1992
Trustor: Crossings International Corporation
Trustee: Commonwealth Land Title Company
Beneficiary: Capital Consultants Inc.
Recorded: June 18, 1992, as Instrument No. 92-256138, Official Records
12. An assignment of all monies due, or to become due as rental or otherwise
from said land, as well as the lessor's interests under the leases referred to
therein, to secure payment of an indebtedness shown below and upon the terms
and conditions therein.
<PAGE> 44
3406788
Page 9
Amount: $1,400,000.00
Assigned to: June 13, 1991
By: Crossings International Corporation, a Washington corporation
Recorded: June 13, 1991, as Instrument No. 91-223315, Official Records
13. A document subject to all the terms, provisions and conditions therein
contained.
Entitled: Hazardous Substances Indemnity
Dated: June 13, 1991
Executed by: Crossing International Corporation
Recorded: June 13, 1991, as Instrument No. 91-223316, Official Records
Reference is made to said document for full particulars.
14. A Financing Statement
Debtor: Crossings International Corporation
Secured Party: Capital Consultants, Inc., agent
Recorded: June 13, 1991, as Instrument No. 91-223319, Official Records
15. An interest of the person(s) shown below whose possible interest is
disclosed by reason of their being shown as assessed owner(s) of said land of
the County Secured Tax Rolls.
16. Rights of parties in possession of said land by reason of any unrecorded
leases.
<PAGE> 45
EXHIBIT C
GUARANTY OF LEASE
THIS GUARANTY OF LEASE (this "Guaranty") is executed as of January 10, 1996
by NEW CROSSINGS INTERNATIONAL CORPORATION, a Nevada corporation ("Guarantor"),
in favor of CAPITAL CONSULTANTS, INC., an Oregon corporation, as agent for
certain participating lenders ("Lessor").
R E C I T A L S
A. Lessor and Crossings International Corporation, a Washington
corporation ("Lessee"), have entered into a Lease of even date herewith (the
"Lease"), pursuant to which Lessor has agreed to lease to Lessee the "Leased
Property" (such term being used in this Guaranty as defined in the Lease).
B. Guarantor is the sole shareholder of Lessee and as the sole
shareholder will benefit from Lessor's agreement to lease the Leased Property to
Lessee.
C. It is a condition precedent to the obligations of Lessor under the
Lease that Guarantor shall have executed and delivered this Guaranty to Lessor.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
Guarantor agrees as follows:
1. Guaranty.
Guarantor hereby absolutely and unconditionally guarantees to Lessor as a
primary obligor and not as a surety the following (collectively, the "Guaranteed
Obligations"):
(a) payment in full by Lessee of all rent and other amounts due under the
Lease in the manner and at the time prescribed in the Lease;
(b) the full, complete and timely performance by Lessee of all covenants,
indemnities and other obligations under the Lease including, without
limitation, any indemnity
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or other obligations of Lessee which survive the expiration or earlier
termination of the Lease;
(c) the accuracy and truthfulness in all material respects of all of the
representations and warranties made by Lessee under the Lease; and
(d) all costs of collection or enforcement incurred by Lessor in
exercising any remedies provided for in the Lease at law or in equity with
respect to the matters set forth in clauses (a) through (c) inclusive,
above.
2. Performance by Guarantor.
If any rent or other amount due under the Lease shall not be paid, or any
obligation not performed as required by the Lease, then upon demand by Lessor,
Guarantor shall pay within ten (10) days of demand by Lessor such sums and
perform such obligations as required by the Lease without regard to:
(a) any defense, set-off, or counterclaim which Guarantor or Lessee
may have or rightfully assert, except any defense which Lessee has asserted
in writing;
(b) whether or not Lessor shall have instituted any suit, action or
proceeding or exhausted its remedies or taken any steps to enforce any
rights against Lessee or any other person to collect all or any part of
such sums, either pursuant to the provisions of the Lease or at law or in
equity (it being understood that this is a guaranty of payment and not
collection, and Guarantor's liability for such payment shall be primary);
or
(c) any other condition or contingency.
Guarantor waives any right of exoneration and any right to require Lessor
to make an election of remedies. Guarantor covenants and agrees that it shall
not cause any default under the Lease.
3. Guarantor's Representations and Warranties.
Guarantor hereby represents and warrants unto Lessor that:
(a) this Guaranty constitutes a legal, valid, and binding obligation
of Guarantor and is fully enforceable against Guarantor in accordance with
its terms;
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(b) Guarantor is the sole shareholder of Lessee;
(c) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and is duly authorized
and qualified to do all things required of it under this Guaranty; and
(d) this Guaranty is duly authorized, executed and delivered by and
binding upon Guarantor.
(e) Neither the execution not delivery of this Guaranty, nor
fulfillment of nor compliance with the terms and provisions hereof, will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under any agreement or instrument to which
Guarantor is now a party or by which Guarantor may be bound, nor will
result in the creation of any lien, charge or encumbrance upon any of
Guarantor's property or assets.
Any material breach by Guarantor of the representations and warranties set
forth herein shall be a default under this Guaranty.
4. Waiver.
Guarantor hereby knowingly, voluntarily and unequivocally waives:
(a) all notice of acceptance hereof, protest, demand and dishonor,
presentment and demands of any kind now or hereafter provided for by any
statute or rule of law;
(b) any and all requirements that Lessor institute any action or
proceeding, or exhaust any or all of Lessor's rights, remedies or recourse,
against Lessee or anyone else as a condition precedent to bringing an
action against Guarantor under this Guaranty, it being expressly agreed
that the liability of Guarantor hereunder shall be primary and not
secondary;
(c) any defense arising by reason of any disability, insolvency,
bankruptcy, lack of authority or power, death, insanity, minority,
dissolution or any other defense of Lessee, its successors and assigns
(except any defense of Lessee which has been rightfully asserted by Lessee
in writing), Guarantor or, if applicable, any other guarantor of the
Guaranteed Obligations (even though rendering same void, unenforceable or
otherwise uncollectible), it being agreed that Guarantor shall remain
liable hereon regardless
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of whether Lessee or any other such person be found not liable thereon for
any reason;
(d) any defense arising by reason of any change in the name, location,
composition, structure, identity or legal status of Lessee, its successors
and assigns, or Guarantor, or any other guarantor of the Guaranteed
Obligations;
(e) the benefits of any and all statutes, laws, rules or regulations
which may require the prior or concurrent joinder of any other party to any
action on this Guaranty or which may require the exhaustion of remedies
prior to a suit on this Guaranty, all as amended from time to time;
(f) any claim Guarantor might otherwise have against Lessor by virtue
of Lessor's invocation of any right, remedy or recourse permitted it
hereunder, under the Lease or otherwise available at law or equity;
(g) any failure, omission, delay or lack on the part of Lessor or
Lessee to enforce, assert or exercise any right, power or remedy conferred
on Lessor or Lessee in the Lease or this Guaranty or any action on the part
of Lessor granting a waiver, indulgence or extension to Lessee or any
Guarantor;
(h) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets of Lessee,
marshaling of assets or liabilities, receiverships, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar proceeding affecting
Lessee or any of its assets, or the disaffirmance of the Lease in any such
proceeding;
(i) any amendment or modification to the Lease which results in any
release or other reduction of the Guaranteed Obligations arising as a
result of the expansion, release, substitution or replacement (whether or
not in accordance with terms of the Lease) of the Premises or any portion
thereof;
(j) any duty on the part of Lessor to disclose to Guarantor any facts
Lessor may now or hereafter know about Lessee regardless of whether Lessor
has reason to believe that any such facts materially increase the risk
beyond that which Guarantor intends to assume or has reason to believe that
such facts are unknown to Guarantor or has a reasonable opportunity to
communicate such facts to Guarantor, it being understood and agreed that
Guarantor is
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fully responsible for being and keeping informed of the financial condition
of Lessee and of any and all circumstances bearing on the risk of
nonperformance of any obligation hereby guaranteed.
(k) any right or defense arising by reason of the absence impairment,
modification, limitation, destruction or cessation (in bankruptcy, by and
election of remedies, or otherwise) of the liability of Lessee, of the
subrogation rights of Guarantor or of the right of Guarantor to proceed
against Lessee for reimbursement.
This Guaranty shall apply notwithstanding any extension or renewal of the
Lease, or any holdover following the expiration or termination of the Term or
any renewal or extension of the Term.
5. Subsequent Acts.
Without notice to, consideration to, or the consent of, Guarantor:
(a) the Lease, and Lessee's rights or remedies thereunder, may be
modified, amended, renewed, terminated, assigned, sublet or assumed;
(b) any additional parties who are or may become liable for the
Guaranteed Obligations may hereafter be released from their liability
hereunder and thereon; and/or
(c) Lessor may take, or delay in taking or refuse to take, any and all
action with reference to the Lease (regardless of whether same might vary
the risk or alter the rights, remedies or recourse of any Guarantor),
including specifically the settlement or compromise of any amount allegedly
due thereunder.
No such acts shall in any way release, diminish, or affect the absolute
nature of Guarantor's obligations and liabilities hereunder. Guarantor's
obligations and liabilities under this Guaranty are primary, absolute and
unconditional under any and all circumstances and until the Guaranteed
Obligations are fully and finally satisfied, such obligations and liabilities
shall not be discharged or released, in whole or in part, by any act or
occurrence which might, but for this Section 6, be deemed a legal or equitable
discharge or release of a Guarantor. This is a continuing guaranty.
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6. Successors and Assigns.
This Guaranty may be enforced as to any one or more breaches either
separately or cumulatively, shall insure to the benefit of Lessor (and its
successors and assigns) and shall be binding upon Guarantor (and its successors
and assigns). All references herein to "Lessor" shall mean the above-named
Lessor and any subsequent owner of Lessor's interest in the Lease. No transfer
by Guarantor of its obligations hereunder shall operate to release Guarantor
from such obligations. This Guaranty may be assigned by Lessor voluntarily or
by operation of law.
7. Remedies Cumulative.
All rights, remedies and recourse afforded to Lessor by reason of this
Guaranty, or otherwise, are separate and cumulative and may be pursued
separately, successively or concurrently, as occasion therefor shall rise and
are nonexclusive and shall in no way limit or prejudice any other legal or
equitable right, remedy or recourse which Lessor may have.
8. Subordination; No Subrogation.
If for any reason whatsoever Lessee now or hereafter becomes indebted to
Guarantor or any Affiliate of Guarantor, such indebtedness and all interest
thereon shall at all times be subordinate in all respects to the Guaranteed
Obligations. Notwithstanding anything to the contrary contained in this
Guaranty or any payments made by Guarantor, Guarantor shall not have any right
of subrogation in or under the Lease or to participate in the rights and
benefits accruing to Lessor thereunder, all such rights of subrogation and
participation, together with all of the contractual statutory, or common law
rights which Guarantor may have to be reimbursed for any payments Guarantor may
make to, or performance by Guarantor of any of the Guaranteed Obligations for
the benefit of, Lessor pursuant to this Guaranty, being hereby expressly waived
and released.
9. Governing Law.
This Guaranty and all rights and duties of Guarantor and Lessor arising
from this Guaranty shall be governed by, construed and enforced in accordance
with the laws of the State of Oregon, without regard to the conflict of law
rules of such State.
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10. Severability.
If any provision of this Guaranty or the application thereof to any person
or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the remainder of this Guaranty nor the application of
such provision to any other persons or circumstances shall be affected thereby,
but rather the same shall be enforced to the greatest extent permitted by law.
11. Attorneys' Fees.
If Lessor of Guarantor brings any action to interpret or enforce this
Guaranty, or for damages for any alleged breach thereof, the prevailing party in
any such action shall be entitled to reasonable attorneys' fees and costs as
awarded by the court in addition to all other recovery, damages and costs.
12. Confirmation.
At any time, and at the request of Lessor, Guarantor shall execute and
deliver to Lessor a certificate ratifying and confirming all of Guarantor's
obligations and liabilities under this Guaranty.
13. Benefit to Guarantor.
Guarantor acknowledges that it will benefit from the execution and
continued existence of the Lease, and Guarantor further acknowledges that Lessor
will be relying upon Guarantor's guarantee, representations, warranties and
covenants contained herein.
14. Counterparts.
This Guaranty may be executed in multiple counterparts, each of which shall
be an original, but all of which shall constitute but one instrument. The
signature page of any counterpart may be detached therefrom and reattached to
any other counterpart to physically form a single document.
15. Notices.
All notices, requests and demands to be made hereunder to the parties
hereto shall be made in writing to the addresses set forth below and shall be
given by any of the following means:
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(a) personal service; (b) electronic communication, whether by telex, telegram
or telecopying; (c) certified or registered mail, postage prepaid, return
receipt requested; or (d) nationally recognized courier or delivery service.
Such addresses may be changed by notice to the other parties given in the same
manner as provided above. Any notice, demand or request sent pursuant to
either subsection (a), (b) or (d) hereof shall be deemed received upon the
actual delivery thereof, and, if sent pursuant to subsection (c) shall be
deemed received five (5) days following deposit in the mail. Refusal to accept
delivery of any notice, request or demand shall be deemed to be delivery
thereof. If any party is not an individual, notice may be made on any officer,
general partner or principal thereof. Notice to any one co-Guarantor shall be
deemed notice to all co-Guarantors. In the event Lessor notifies Guarantor of
the name and address of Lessor's lender, Guarantor shall cause a copy of all
notices delivered to Lessor by Guarantor to be concurrently therewith delivered
to such lender.
If to Guarantor: New Crossings International Corporation
1202 Pacific Avenue, Suites 1800
Tacoma, Washington 98402
Attention: President
Facsimile No.: (206) 383-9979
with a copy to: Bogle & Gates P.L.L.C.
4700 Two Union Square
Seattle, Washington 98101
Attention: Bryce L. Holland, Jr.
Facsimile No.: (206) 621-2660
If to Lessor: Capital Consultants, Inc.
2300 S.W. First Avenue
Portland, Oregon 97201
Attention: Carol Hardie
Vice President
Facsimile No.: (503) 241-0448
with a copy to: Lane Powell Spears Lubersky
520 S.W. Yamhill Street
Suite 800
Portland, Oregon 97204-1383
Attention: Bryan E. Powell
Facsimile No.: (503) 224-0388
16. Incorporation of Recitals.
The Recitals set forth above are hereby incorporated by this reference and
made a part of this Guaranty. Guarantor
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hereby represents and warrants that the Recitals are true and correct.
17. Entire Agreement. This Guaranty shall constitute the entire agreement
between Guarantor and the Lessor with respect to the subject matter thereof. No
provision of this Guaranty or right of Lessor hereunder may be waived nor may
any guarantor be released from any obligation hereunder except by a writing duly
executed by an authorized officer, director, or attorney in-fact of Lessor. If
more than one person signs this Guaranty, each such person shall be deemed a
guarantor and the obligation of all such guarantors shall be joint and several.
Time is strictly of the essence under this Guaranty and any amendment,
modification or revision hereof.
18. Corporation. If Guarantor is a corporation, each individual executing
this Guaranty on behalf of said corporation represents and warrants that he is
duly authorized to execute and deliver this Guaranty on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the bylaws of said
corporation, and that this Guaranty is binding upon said corporation in
accordance with its terms.
EXECUTED as of the date first set forth above.
"GUARANTOR"
NEW CROSSINGS INTERNATIONAL CORPORATION,
a Nevada corporation
By: /s/
--------------------------------
Title: /s/
-----------------------------
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EXHIBIT 10.46
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of the 13 day of June, 1991, by and between
CAPITAL CONSULTANTS, INC., Agent, an Oregon corporation ("Lender"), and
CROSSINGS INTERNATIONAL CORPORATION ("Borrower").
Recitals.
A. Borrower proposes to purchase certain improved real property
in the City of Loma Linda, San Bernardino County, California (the "Real
Property"), which is more particularly described in Exhibit A, and to operate
the housing facility located on the Real Property.
B. Pursuant to a commitment letter dated March 25, 1991, and
accepted by Borrower March 28, 1991 (the "Commitment") and subject to
satisfaction of the conditions therein stated, Lender has agreed to lend to
Borrower the sum of $1,400,000 for purposes of acquiring the Real Property, and
to accept, as security for the loan, a subordinated interest in the Real
Property, improvements and associated personal property, subject, however, to
receiving, in consideration therefor, an option to participate in the revenues
generated by the Real Property and in any profit earned on the sale thereof,
and subject to the further terms, conditions and provisions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties agree:
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Section 1. Definitions.
Terms with initial capitals used herein shall have the meanings given
them in this Section 1 or elsewhere where such term first appears in this Loan
Agreement:
1.1 Assignment of Leases shall mean that certain Assignment of
Leases and Rents of even date herewith, given by Borrower to Lender, and all
modifications and amendments thereof or thereto, or extensions thereof.
1.2 Closing shall mean the close of the escrow for the Loan, which
shall take place upon recordation of the Initial Deed of Trust. At the Closing,
the Loan funds will be advanced to or for the benefit of Borrower.
1.3 Collateral shall have the meaning given that term in the
Security Agreement.
1.4 Commitment shall have the meaning given that term at Recital B
hereof.
1.5 Deed of Trust shall mean the Initial Deed of Trust and the
Replacement Deed of Trust.
1.6 Event of Default shall have the meaning given it at Section
8.1.
1.7 Financial Statements of Borrower shall mean, for or as of the
end of the fiscal period specified therein, Borrower's (a) balance sheet, and
(b) statements of income, of changes in stockholders' equity and of changes in
financial position, in each case together with all notes and schedules thereto,
prepared in reasonable detail and in accordance with generally accepted
accounting principles applied consistently with past periods, and
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certified by an independent public accountant acceptable to Lender, as fairly
presenting the financial condition, results of operations and changes in
Borrower's financial position, such certification to contain no qualifications
concerning the scope of the audit and only such other qualifications as are
acceptable to Lender.
1.8 First Lien Lender shall mean Guardian Savings and Loan
Association.
1.9 First Loan shall mean a loan in the amount of not more than
$6,205,000.00, repayment of which is secured by a first priority deed of trust
encumbering the Real Property.
1.10 First Loan Note shall mean a promissory note or other evidence
of indebtedness given by Borrower to the First Lien Lender and evidencing the
First Loan, and all modifications, amendments and replacements thereof or
thereto, or extensions thereof.
1.11 Guarantee shall mean a guarantee of the obligations evidenced
by this Agreement and the other Loan Documents executed by Richard A. Boehlke
and delivered to Lender pursuant to Section 5.3(g).
1.12 Indemnity shall mean that certain Hazardous Substances
Indemnity of even date herewith, given by Borrower to Lender, and all
modifications or amendments thereof or thereto, or extensions thereof.
1.13 Initial Deed of Trust shall mean that certain Deed of Trust
and Security Agreement of even date herewith, given by Borrower to Lender, and
all modifications or amendments thereof or thereto, or extensions thereof.
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1.14 Initial Note shall mean that certain promissory note of even
date herewith, given by Borrower to Lender, and all modifications or amendments
thereof or thereto, or extensions thereof.
1.15 Loan shall mean the $1,400,000.00 advanced by Lender to
Borrower pursuant to this Loan Agreement.
1.16 Loan Agreement shall mean this Loan Agreement, and all
modifications or amendments hereto.
1.17 Loan Document(s) shall mean the Deed of Trust, the Note, this
Loan Agreement, the Assignment of Leases, the Indemnity, the Security Agreement
and all financing statements or other documents or instruments executed and/or
filed in connection therewith, related thereto or to the Loan.
1.18 Note shall mean the Initial Note and the Replacement Note.
1.19 Permitted Encumbrances shall have the meaning given that term
at Section 5.1 of the Deed of Trust.
1.20 Project shall mean a 140-unit assisted care housing facility
containing approximately 107,835 square feet, consisting of 48 studio units, 90
one-bedroom units and two two-bedroom units supported by common, social,
recreational and service areas.
1.21 Property shall have the meaning given that term in the Deed of
Trust.
1.22 Real Property shall have the meaning given that term at
Recital A hereof.
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1.23 Replacement Deed Of Trust shall mean a Deed of Trust
substantially in the form of Exhibit C, executed by Borrower and delivered to
Lender pursuant to Section 6.3.
1.24 Replacement Note shall mean a promissory note substantially in
the form of Exhibit B, executed by Borrower and delivered to Lender pursuant to
Section 6.3, and all replacements, substitutions, modifications, renewals and
extensions thereof or thereto.
1.25 Security Agreement shall mean a Security Agreement, Assignment
of Contract Rights and Receivables of even date herewith, given by Borrower to
Lender, and all modifications or amendments thereof or thereto, or extensions
thereof.
1.26 Subordination Agreement shall mean a Consent and Subordination
Agreement, substantially in the form of Exhibit D, executed by the First Lien
Lender.
Section 2. The Loan.
2.1 Amount and Terms of Loan. Upon and subject to the terms,
conditions and covenants contained herein and in the Loan Documents, which are
incorporated in this Agreement by this reference, Lender shall loan to Borrower
and Borrower shall borrow from and repay to Lender, with interest,
$1,400,000.00.
2.2 Application of Proceeds. The proceeds of the Loan will be
applied to pay:
(a) The purchase price for the Property and all closing
costs incident thereto; and
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(b) The Loan expenses described in Section 4.13
including, without limitation, Lender's Loan fee in the amount of $66,975.00.
Disbursement of the Loan funds shall be made in accordance with this Agreement.
Section 3. Borrower Representations and Warranties.
Borrower represents and warrants to and for the benefit of Lender,
which representations and warranties shall be deemed remade on and as of the
closing date and on and as of the date upon which Lender exercises the option
granted at Section 7:
3.1 Truth of Representations and Warranties in Deed of Trust.
Each of the representations and warranties made by Borrower at Section 5 of the
Deed of Trust, as grantor thereunder, is true and accurate, and is complete in
all material respects.
3.2 Qualification To Do Business. Borrower is registered or
qualified to do business in the jurisdiction where the Property or Collateral
is located, and is in good standing or in existence, as applicable, in such
jurisdiction.
3.3 Taxes. Borrower has filed all federal, state, and local income
tax returns required to have been filed by Borrower, and has paid all taxes
that have become due pursuant to such returns or pursuant to any assessments on
real or personal property received by Borrower, except only those local taxes
where any such failure to file or pay amounts due would not have a material
adverse effect on Borrower's business, finances or operations. Borrower does
not know of any basis for additional assessment with regard to any such tax.
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3. 4 Consents and Governmental Approvals. The execution, delivery
and performance by Borrower of the Loan Documents, and Lender's exercise of any
remedy available to it thereunder, do not and will not require any consent or
approval of any person or entity, other than the First Lien Lender, the Second
Lien Lender and the Third Lien Lender. No approval by, authorization of, or
filing with any federal, state or municipal or other governmental commission,
board or agency or other governmental authority is necessary in connection with
the authorization, execution and delivery of the Loan Documents.
3.5 Other Security Interests. There does not exist any pledge,
mortgage, lien, hypothecation or assignment for security affecting the Property
or the Collateral, whether now owned or hereafter acquired, except for any such
pledge, mortgage, lien, hypothecation or assignment for security constituting a
Permitted Encumbrance.
3.6 Truth of Other Statements, Representations and Warranties. No
written statement, financial or otherwise, made by Borrower to Lender in
connection with this Agreement, or in connection with the Commitment or other
Loan Documents, contains any untrue statement of a material fact or omits a
material fact necessary to make the statements made therein not misleading. All
financial statements given by Borrower to Lender in connection with this
Agreement, the Commitment or the other Loan Documents have been prepared in
accordance with generally accepted accounting principles applied consistently
with past periods and fairly present the financial condition of the parties or
entities covered
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by each such statement as of the date of such statement. Since the date
thereof, neither Borrower nor any such party or entity has experienced any
material adverse change in its finances, business, operations, affairs or
prospects. To the best knowledge of Borrower, there is no fact concerning
Borrower that Borrower has not disclosed to Lender in writing that materially
and adversely affects, nor, so far as Borrower can foresee, is reasonably
likely to prove to affect materially and adversely, the business, operations,
assets, prospects, profits or condition (financial or otherwise) of Borrower,
or the ability of Borrower to perform its obligations under the Loan Documents.
Section 4. Borrower's Covenants.
Borrower covenants with and for the benefit of Lender that, unless
Lender otherwise consents in writing and so long as any amount remains
outstanding under the Note, or any other obligation under any Loan Document
remains to be performed:
4.1 Grant of Additional Security Interests. Borrower shall not
pledge, mortgage, lien, hypothecate or assign for security, or suffer the
creation or existence of any pledge, mortgage, lien, hypothecation or
assignment for security (together, a "Lien") of, the Property or the Collateral,
except that Borrower may create or suffer to be created or exist the Permitted
Encumbrances.
4.2 Misrepresentations. Borrower shall not make to Lender, and
Borrower shall not furnish to Lender any certificate or other document that
contains any untrue statement of a material fact, nor shall any such
certificate or other document omit a
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material fact necessary to make the statements made therein not misleading.
4.3 Financial Statements. On or before March 31 of each year,
commencing March 31, 1992, Borrower shall deliver to Lender its unaudited
Financial Statements pertaining to the Property for the preceding year ended
December 31.
4.4 Additional Information. Borrower shall promptly furnish to
Lender such other information and data with respect to Borrower as Lender from
time to time may reasonably request.
4.5 Preservation or Existence. Borrower shall preserve and
maintain its existence, licenses, rights, franchises and privileges in the
jurisdiction of its formation and where the Property or the Collateral is
located and all material authorizations, consents, approvals, orders, licenses,
permits, or exemptions from, or registrations with, any governmental agency that
are necessary for the transaction of its business, and qualify and remain
qualified to transact business where the Property or the Collateral is located.
4.6 Compliance With Laws. Borrower shall comply with the
requirements of all applicable laws, and orders of any governmental agency,
noncompliance with which could materially adversely affect the business,
operations or condition (financial or otherwise) of Borrower, except that
Borrower need not comply with a requirement then being contested by it in good
faith by appropriate proceedings so long as no interest of Lender would be
materially impaired thereby.
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4.7 Compliance With Agreements, Duties and Obligations. Borrower
shall promptly and fully comply with all its agreements, duties and obligations
under the Loan Documents, and promptly and fully comply with all material
duties and obligations under any other material agreements, indentures, leases
or instruments to which it is a party.
4.8 Payment of Taxes and Claims. Borrower shall pay, before they
become delinquent:
(a) All taxes, assessments and governmental charges or levies
imposed upon Borrower or upon the assets of Borrower; and
(b) All claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons that, if unpaid, might result in
the creation of a lien upon any assets of Borrower; provided, however, that
none of the foregoing need to be paid while being contested in good faith so
long as Borrower's title to, and its right to use, its assets is not materially
adversely affected thereby, and so long as adequate reserves are maintained for
such claims.
4.9 Inspection. Borrower shall permit Lender, upon notice to
Borrower, to examine or audit Borrower's books of account and records and to
copy and take extracts therefrom and to discuss Borrower's affairs, finances or
accounts, and to be advised as to the same by the officers of Borrower, in such
detail and through such agents and representatives as Lender may desire, all at
such reasonable times and as often as may be reasonably requested.
4.10 Notice of Default. Borrower shall promptly notify Lender if it
learns that an Event of Default has occurred, and
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shall specify with particularity the nature of such Event of Default, the
period of existence of such Event of Default, and the actions Borrower is
taking or proposes to take with respect thereto.
4.11 Disclosure of Material Litigation. Borrower shall promptly
notify Lender of any litigation or other action, suit or proceeding, before any
court or governmental agency, to which Borrower is a party if the amount at
risk in connection therewith that is not fully covered by insurance exceeds
$100,000.00, or if, in the reasonable opinion of Borrower, such litigation
otherwise is material. Thereafter, Borrower shall keep Lender apprised of the
status of such litigation or other such action, suit or proceeding in such
manner as Lender may request.
4.12 Maintenance of Properties; Insurance. Borrower shall maintain
or cause to be maintained in good repair, working order and condition (ordinary
wear and tear excepted) the Collateral or all assets used in the operations of
Borrower at the Property, and Borrower shall from time to time make or cause to
be made all appropriate repairs, renewals and replacements thereof. Borrower
shall maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to the Collateral against loss or damage of
the kinds customarily insured against by corporations of established reputation
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations.
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<PAGE> 12
4.13 Costs and Fees. Borrower shall pay or reimburse Lender, upon
demand, all of Lender's reasonable out-of-pocket costs and expenses, to the
extent incurred by Lender in connection with the negotiation, preparation,
review, carrying out, amendment, waiver, refinancing, restructuring,
reorganization and enforcement of, and collection pursuant to, this Agreement,
the other Loan Documents, the Closing, any advance or disbursement of Loan
proceeds, any substitution of security under this Agreement the Deed of Trust
or the Security Agreement and any amendment of any financing statement made or
given pursuant to this Agreement the Deed of Trust or the Security Agreement
including, without limitation, Lender's reasonable attorneys' fees; fees of
Lender's certified public accountants and other outside experts; credit
reports; appraisal fees; lien searches; escrow charges; recording or filing
fees; insurance premiums; inspection, due diligence and/or audit fees before
Loan closing and periodically during the term of the Loan; and any and all
other expenses or charges incurred in connection with the Loan.
4.14 Additional Acts. In addition to the acts that Borrower is
obligated to perform under this Agreement, or under any of the other Loan
Documents, Borrower shall from time to time perform, execute and deliver to
Lender any and all such further acts, additional documents, or further
assurances as may be necessary or proper to: (a) implement the intent of the
parties to this Agreement; (b) correct any errors in this Agreement, or any of
the other Loan Documents; (c) assure Lender of the validity and priority of the
liens it holds pursuant to the various documents
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<PAGE> 13
securing the Loan; (d) create, perfect, preserve, maintain and protect the
liens and security interests created or intended to be created by the Loan
Documents; or (e) provide the rights and remedies to Lender that are
contemplated by the Loan Documents.
4.15 Indemnification. Borrower shall indemnify and defend Lender
against, and hold Lender harmless of and from, any and all losses, liability,
claims, damages, costs and expenses (including, but not limited to, reasonable
attorneys' fees and court costs, whether incurred at the trial, appellate or
administrative levels) that Lender may suffer or incur, or to which Lender may
be subjected, by reason of, arising out of, or in connection with:
(a) any default, breach, alleged default, or alleged
breach by Borrower under any Loan Document, any untrue statement or allegedly
untrue statement contained in or made in connection with any Loan Document, or
the omission from the Loan Documents of any fact required, or allegedly
required, to be stated therein, or that is necessary (or allegedly necessary)
to make the statement therein not misleading; and
(b) any violation or breach by Borrower or any of its
agents, servants, employees or licensees of any of the terms and provisions of
this Agreement or any of the other Loan Documents.
Upon demand by Lender, Borrower shall defend any action or proceeding
brought against Lender in connection with any of the foregoing, or Lender may
elect to conduct its own defense at the reasonable expense of Borrower. In any
event, Borrower shall
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<PAGE> 14
reimburse Lender in full for all costs reasonably incurred investigating,
preparing or defending against any action or proceeding, commenced or
threatened, in connection with any of the foregoing matters, or incurred in
settlement of any such action or proceeding (whether commenced or threatened).
4.16 Maximum Debt. At no time shall the total principal
indebtedness outstanding under the Note plus the principal amount outstanding
under any other obligation secured by the Property including, without
limitation, the First Loan Note exceed $7,605,000.00.
4.17 Incorporation and Other Covenants. All of Borrower's covenants
contained in the other Loan Documents including, without limitation, the Deed
of Trust, and in the Commitment, are incorporated herein by reference. In the
event of any inconsistency between provisions of the Loan Documents and the
Commitment, the provisions contained in the Loan Documents shall govern.
Section 5. Conditions to Closing and Disbursements.
Lender's obligation to close the Loan, and to advance the Loan
proceeds pursuant to Section 6, is subject to satisfaction of all of the
following conditions, any one or more of which Lender may waive in writing:
5.1 Truth of Representations and Warranties. All of Borrower's
representations and warranties contained in this Agreement, in any Loan
Document and in any other certificate, instrument or document submitted by
Borrower to Lender in
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<PAGE> 15
connection with the making of the Loan shall be true and accurate in all
material respects.
5.2 Satisfaction of Conditions to Funding Set Forth in the
Commitment. Each of the Conditions to Lender's obligations to fund the Loan set
forth in the Commitment shall have been satisfied. Without limiting the
generation of the foregoing, Borrower shall have delivered to Lender all of the
preclosing documentation described in and required by the Commitment that is
not otherwise required to be delivered to Lender pursuant to this Agreement.
5.3 Loan Documents. Borrower shall have executed and delivered to
Lender, or caused to be executed and delivered to Lender by the party or
parties thereto, the following documents, each of which shall be in form and
substance satisfactory to Lender:
(a) This Loan Agreement.
(b) The Initial Note.
(c) The Initial Deed of Trust.
(d) The Assignment of Leases.
(e) The Indemnity.
(f) The Security Agreement.
(g) The Guarantee.
(h) The Subordination Agreement.
(i) UCC Financing Statements covering all leases,
fixtures, equipment, furnishings, and personal property used or to be used in
connection with the operation and use of the Property or Project.
15
<PAGE> 16
5.4 Date of Closing. The Closing shall have occurred on or before
the expiration date of the Commitment.
5.5 Deliveries. Borrower shall have delivered each of the
following to Lender, each of which shall be in form and substance satisfactory
to Lender:
(a) Title Insurance. A current mortgagee's policy of
title insurance, with extended coverage and such further endorsements as Lender
may request, in favor of Lender in the amount of $1,400,000.00, insuring that
the Deed of Trust is a first lien on the Property subject only to the Permitted
Encumbrances, including the terms and provisions of the Subordination Agreement
and of any instrument or document given priority over the Deed of Trust by the
Subordination Agreement.
(b) Insurance. Evidence that the insurance required by
the Deed of Trust is in full force and effect.
(c) Survey. Three copies of a current certified survey of
the Property, prepared by a surveyor licensed in the State of California,
containing a correct legal description and showing, as applicable, interior lot
lines, the location of easements, improvements, parking areas, utilities, and
adjoining streets, the distance to and name of the nearest intersecting
streets, compliance with applicable setback and other zoning regulations,
ingress and egress to streets and parking areas, and such other detail as
Lender may require.
(d) Affiliation Agreement. An Agreement between Borrower
and Loma Linda Community Hospital (or with such other medical association,
organization, or institution as may be
16
<PAGE> 17
acceptable to Lender) (the "Hospital"), whereby the Hospital and/or its
affiliated physicians (a) agree to make appropriate patient referrals to the
Project and (b) are granted an option, which option (i) may be exercised during
the period commencing an the fourth annual anniversary of the Closing date and
ending on the Fifth annual anniversary of the Closing date (the "Exercise
Term"), and (ii) entitles the Hospital to purchase the Project and Property for
a price determined by applying a capitalization rate of 10.75% to the revenues
of the Project during the year preceding the Exercise Term.
5.6 Interest and Principal Under First Loan Note. Borrower shall
have paid, to the date of Closing, all interest accrued under and all principal
due pursuant to the First Loan Note.
5.7 Condemnation and Casualties. There shall have been no claim,
suit or proceeding for condemnation or eminent domain filed or threatened
against all or any part of the Property and no casualty to all or any part of
the Property.
5.8 Acquisition of Real Property. Borrower shall have acquired the
Real Property concurrently with Closing of the Loan.
Section 6. Lender's Option.
6.1 Grant. In consideration of Lender's willingness to make the
Loan, and to subordinate its rights and interests created hereunder and under
the other Loan Documents, Borrower hereby grants to Lender the option to
require Borrower to replace and supersede the Initial Note and the Initial Deed
of Trust with the Replacement Note and Replacement Deed of Trust (the "Option).
17
<PAGE> 18
6.2 Option Term. Lender shall have the right to exercise the
Option at any time from the date of Closing through the date upon which the
principal balance and all outstanding interest under the Initial Note shall
have been paid in full. Without limiting the generality of the foregoing,
Lender shall be entitled to exercise the Option for sixty (60) days following
any notice of prepayment given by Borrower to Lender pursuant to Section 4.1 of
the Initial Note and, following any such exercise, the prepayment provisions of
the Replacement Note shall control any prepayment made by Borrower pursuant to
such notice.
6.3 Exercise. Lender may exercise the Option by delivering to
Borrower a written notice of exercise. No later than ten (10) business days
following Borrower's receipt of such written notice, Borrower shall execute and
deliver to Lender the Replacement Note and Replacement Deed of Trust and shall
(a) cause to be delivered to Lender a current mortgagee's
policy of title insurance, with extended coverage, in favor of Lender in an
amount equal to the original principal obligation of the Replacement Note,
insuring that the Replacement Deed of Trust is a first lien on the Property
subject only to the Permitted Encumbrances, including the terms and provisions
of the Subordination Agreement and of any instrument or document given priority
over the Replacement Deed of Trust by the Subordination Agreement; and
(b) pay or cause to be paid all of the costs described at
Section 4.13 accrued to the date such title insurance policy is issued.
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<PAGE> 19
Section 7. Closing.
At the Closing, and provided that all of the conditions to funding the
Loan set forth in this Agreement have been satisfied or waived, the Loan will
be funded by disbursement to or for the benefit of Borrower of $1,400,000.00.
Section 8. Default; Remedies on Default.
8.1 Events of Default. Unless waived in writing in the manner
described in Section 9, any of the following events shall be an Event of
Default:
(a) If Borrower shall apply the funds advanced under and
pursuant to the Note, or any portion thereof, to any purpose other than as
permitted by Section 2.2.
(b) If for any payment due under the Note or any other
Loan Document, the entire amount due (including principal, interest and any
applicable premiums and late charges) is not paid within five (5) days of the
date upon which notice of default in the making of such payment was given to
Borrower.
(c) If there occurs an Event of Default under any of the
Loan Documents as the term Event of Default is defined in any such Document.
(d) If the Replacement Note and Replacement Deed of Trust
have not been executed and delivered to Lender, and if the policy of title
insurance referred to at Section 7.3(a) has not been issued to Lender, within
ten (10) business days following the date upon which Borrower received Lender's
notice of exercise given pursuant to Section 7.3.
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<PAGE> 20
(e) If any representation made herein, under any Loan
Document or under any other document or instrument delivered by Borrower to
Lender in connection herewith or pursuant hereto, or in connection with any
advance under the Note, shall be false in any material respect when made, or
if any warranty made herein, under any Loan Document or under any other
document or instrument delivered by Borrower to Lender in connection herewith
or pursuant hereto, or in connection with any advance under the Note, shall be
breached in any material respect.
(f) If Borrower shall breach any covenant contained at
Sections 4.10 or 4.16.
(g) If a default shall occur under any document or
instrument given priority over the Deed of Trust including without limitation,
any document or instrument given to secure the First Loan.
(h) If any of the following should occur: (i) Borrower
becomes insolvent, makes a transfer in fraud to, or an assignment for the
benefit of, creditors, or admits in writing its inability, or is unable, to pay
debts as they become due; or (ii) a receiver, custodian, liquidator or trustee
is appointed for all or substantially all of the assets of Borrower or
Borrower's accounts receivable in any proceeding brought by Borrower, or any
such receiver or trustee is appointed in any proceeding brought against
Borrower or any portion of Borrower's accounts receivable and such appointment
is not promptly contested or is not dismissed or discharged within 120 days
after such appointment, or Borrower consents or acquiesces in such appointment;
or (iii) Borrower files
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<PAGE> 21
a petition for relief under the Federal Bankruptcy Code, as amended, or under
any similar law or statute of the United States or any state thereof; or (iv) a
petition against Borrower is filed commencing an involuntary case under any
present or future Federal or state bankruptcy or similar law and such petition
is not dismissed or discharged within 120 days after the filing thereof; or (v)
any composition, rearrangement, liquidation, extension, reorganization or other
relief of debtors now or hereafter existing is requested by Borrower; or (vi)
Borrower is dissolved or liquidated or all or substantially all of the assets
of Borrower are sold or otherwise transferred.
(i) If Borrower shall fail to perform any other
obligation under this Loan Agreement within thirty (30) days after notice from
Lender specifying the nature of the failure or default or, if the failure or
default cannot be cured within thirty (30) days, failure within such time to
commence and pursue with reasonable diligence curative action. No notice of
default and opportunity to cure shall be required or given if during the
preceding twelve (12) calendar months Lender has sent a notice to Borrower
concerning a default in performance of the same obligation.
8.2 Lender's Remedies on Default. Upon the occurrence of any Event
of Default, in addition to exercising any remedy available to Lender at law, in
equity or in any other Loan Document, and without impairing any of the Lender's
rights, powers or privilege under this Agreement or under any other Loan
Document, Lender may do all or any of the following:
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<PAGE> 22
(a) Accelerate the maturity of the Note and demand
payment of the principal sums due thereunder, with interest, late charges and
prepayment premiums, and, in default of said payment or any part thereof, bring
action on the Note and/or foreclose the Deed of Trust;
(b) Exercise the Option;
(c) Cancel this Agreement without notice to Borrower;
(d) Institute appropriate proceedings to specifically
enforce performance of this Agreement; and
(e) Withhold further disbursements, if any, under this
Agreement.
Lender may exercise its rights and remedies in any order or manner that
Lender may determine in its sole discretion. Regardless of how Lender may treat
payments for the purpose of its own accounting, for the purpose of computing
Borrower's obligations hereunder and under the Note, payments and proceeds of
collateral received following an acceleration of the amounts payable under the
Loan Documents shall be applied, first, to the costs and expenses of Lender,
second, to the payment of accrued and unpaid interest due under the Loan
Documents to and including the date of such application, third, to the payment
of all unpaid principal amounts due under the Loan Documents, and fourth, to the
payment of all other amounts (including fees) then owing to Lender under the
Loan Documents. No application of payments will cure any Event of Default, or
prevent acceleration, or continued acceleration, of amounts payable under the
Loan Documents, or prevent the exercise,
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<PAGE> 23
or continued exercise, of rights or remedies of Lender hereunder or thereunder
or at law or in equity.
Section 9. Integration.
This Loan Agreement constitutes the full agreement of the parties with
respect to the Loan and supersedes all prior written or oral negotiations,
letters of intent or agreements with respect thereto. Borrower acknowledges
that no loan officer or administrator of Lender shall have any authority to
make an oral modification, consent, waiver, extension or amendment of this
Agreement or of any Loan Document, or to agree orally to forebear from taking
some action pursuant thereto, and Borrower shall not be entitled to rely upon
any such oral consent, waiver, modification, agreement or statement, if made.
The Loan Documents and all instruments referred to therein or herein or
executed or delivered in connection herewith or therewith can be extended,
modified or amended, and a consent or waiver thereunder or thereto can be given
or made, only if in writing and only if signed by the President or a Vice
President of Lender.
Section 10. Attorneys' Fees.
Should any litigation be commenced between the parties concerning this
Loan Agreement or the transactions contemplated hereby, the prevailing party in
such litigation shall be entitled, in addition to such other relief as may be
granted, to receive from the losing party a reasonable sum as and for its
attorneys' fees, at trial and on appeal, said amount to be set by the court
before which the matter is heard.
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<PAGE> 24
Section 11. Notices.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be given in writing by delivering the same
in person to the intended addressee, by overnight courier service with
guaranteed next day delivery, by certified United States Mail, postage prepaid
and return receipt requested, or telegram sent to the intended addressee, each
addressed as follows, or by telecopy addressed to the intended addressee and
transmitted to the following number:
<TABLE>
<S> <C>
If to Borrower: Crossings International Corporation
4303 Ruston Way
Tacoma, Washington 98402
Telecopy: (206) 752-8025
Attn: Richard W. Boehlke, President
With a copy to: Appel & Glueck, P.C.
2500 Seattle Tower
1218 Third Avenue
Seattle, Washington 98101
Telecopy: (206) 625-1807
Attn: William N. Appel, Esq.
If to Lender: Capital Consultants, Inc., Agent
2300 S.W. First Avenue
Portland, Oregon 97201
Telecopy: (503) 241-0207
Attn: Jeffrey L. Grayson, President
With copy to: Lane Powell Spears Lubersky
520 S.W. Yamhlll, Suite 800
Portland, Oregon 97204
Telecopy: (503) 224-0388
Attn: Robin B. Parisi
</TABLE>
or to such other address or number as the intended addressee may have given to
the other party in writing in the manner set forth above. Such notices,
requests, demands and other communications shall be deemed given when actually
received or, if earlier, (a) in the case of delivery by courier service with
guaranteed next day
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<PAGE> 25
delivery, the next day or the day designated for delivery, (b) in the case of
certified United States mail, three days after deposit therein, or (c) in the
case of telecopy, the date upon which the transmitting party received
confirmation of receipt by telecopy, telephone or otherwise. No notice to or
demand on Borrower shall in any case, of itself, entitle Borrower to any other
or further notice or demand in similar or other circumstances.
Section 12. Governing Law.
Lender's principal place of business is in Oregon, this Loan Agreement
has been negotiated and signed in Oregon and shall be enforced and construed in
accordance with the laws of Oregon.
Section 13. Counterparts.
This Agreement may be signed by the parties in different counterparts
and the signature pages combined shall create a document binding on all
parties.
Section 14. Survival of Representations, Warranties and Covenants,
All of the representations, warranties and covenants contained herein
or in any statement, certificate or other instrument furnished (or to be
furnished) by Borrower pursuant to this Loan Agreement shall survive the
Closing and shall not be affected by any investigation, verification or
approval by Lender or by anyone on behalf of Lender.
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<PAGE> 26
Section 15. Time.
Time is of the essence of this Loan Agreement, it being understood
that each date set forth herein, particularly the Completion Date, and the
obligations of the parties to be satisfied by such date, have been the subject
of specific negotiation by the parties.
Section 16. Exhibits.
The Exhibits below listed and referred to in this Loan Agreement are
incorporated herein by the respective references to them as if set forth in
full at such points.
Exhibit A - Real Property Description
Exhibit B - Replacement Note
Exhibit C - Replacement Deed of Trust
Exhibit D - Subordination Agreement
IT WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
CAPITAL CONSULTANTS, INC., Agent
By /s/
------------------------------
Title Vice President
---------------------------
"Lender"
CROSSINGS INTERNATIONAL CORPORATION
By /s/
------------------------------
Title President
----------------------------
"Borrower"
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<PAGE> 27
EXHIBIT A
Real Property Description
Parcel No. 1, Parcel Map No. 7277, in the County of San Bernardino, State of
California, as per Map Recorded in Book 83 of Parcel Maps, Page(s) 24, in the
Office of the County Recorder of said County.
<PAGE> 28
Exhibit B
to Loan Agreement
PROMISSORY NOTE
$___________________ Portland, Oregon
[not less than $640,000.00] ___________, 19__
FOR VALUE RECEIVED, CROSSINGS INTERNATIONAL CORPORATION ("Borrower"),
promises to pay to the order of CAPITAL CONSULTANTS, INC., Agent ("Lender"),
the principal sum of [not less than $640,000.00], together with Minimum
Interest (defined at Section 1) and Additional Interest (defined at Section 1),
the same to be paid in lawful money of the United States of America. Principal,
interest, late charges and any other amount payable hereunder to Lender are
payable at the office of Capital Consultants, Inc., Capital Center, 2300 S.W.
First Avenue, Portland, Oregon 97201, or such other place as Lender may direct.
This Promissory Note ("Note") replaces and supersedes in its entirety
that certain promissory note given by Borrower to Lender, dated ______________,
1991, in the original principal amount of $1,400,000.00 and is made on the
following terms and conditions:
1. Definitions. As used herein, the following terms shall have
the following meanings:
1.1 "Acceleration" shall mean acceleration or other
prepayment in full of the obligations evidenced by this Note, whether pursuant
to Section 3.1 in the case of a prepayment, Section 5.1 in an Event of Default
or pursuant to other provisions
<PAGE> 29
of this Note the Deed of Trust or the Loan Agreement or by reason of destruction
or condemnation of the Property.
1.2 "Additional Interest" shall mean a monthly amount equal to a
percentage of the Gross Receipts of the Project during each calendar month as
specified at Section 2.2.1, adjusted as provided in
Section 2.2.1.
1.3 "Deed of Trust" shall mean that certain Deed of Trust and
Security Agreement of even date herewith, covering certain real and personal
property in San Bernardino County, California, given by Borrower, as grantor,
to Guardian Savings and Loan Association, as trustee, for the benefit of
Lender, to secure the obligations evidenced by this Note.
1.4 "Fair Market Value" of the Project shall mean the value of the
Project as of the applicable Maturity Date or Prepayment Date, and
(a) shall be agreed upon by Borrower and Lender, either
(i) on or before the date that is (A) five months
before the Maturity Date if the Maturity Date is defined by Section 1.11(a) or
(b), or by Section 1.11(c) under circumstances where Borrower has given Lender
not less than 180 days' prior written notice of its intention to prepay the
First Note, or (B) forty-five days before a Prepayment Date; or
(ii) as soon as practicable following the Maturity
Date if the Maturity Date is defined by Section 1.11(d) or by Section 1.11(c)
under circumstances where Borrower has not given
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<PAGE> 30
Lender at least 180 days' prior written notice of its intention to prepay the
First Note;
or, if Borrower and Lender cannot agree upon the Fair Market
Value of the Project within the time given for such agreement under this clause
(a), then the Fair Market Value of the Project
(b) shall be determined by a qualified MAI appraiser
experienced in the Loma Linda, California market area and selected as follows:
(i) Where Fair Market value is being determined in
connection with the Maturity Date, except in cases where the Maturity Date is
defined by Section 1.11(d) or by Section 1.11(c) under circumstances where
Borrower has not given Lender at least 180 days' prior written notice of its
intention to prepay the First Note, on or before five (5) months before such
Maturity Date each party shall appoint a qualified MAI appraiser experienced in
the Loma Linda, California market area and shall advise the other party of the
choice. On the failure of either party to appoint an appraiser on or before five
(5) months before such Maturity Date the person appointed as appraiser by the
other party may appoint a second appraiser to represent the party in default.
The two appraisers appointed in either manner shall at once proceed to determine
the fair market value of the Project, but if they cannot agree upon the fair
market value of the Project they shall, not later than two (2) months before
such Maturity Date, appoint a third appraiser and the three appraisers shall
proceed at once to determine the fair market value of the Project. The appraisal
3
<PAGE> 31
shall be conducted in California, and a determination signed by any two of the
three appraisers shall be binding and conclusive on each party. Borrower and
Lender shall each bear the costs and expenses of the appraiser representing
such party, and the costs and expenses of the third appraiser, if any, shall be
borne equally by Borrower and Lender.
(ii) In cases where Fair Market Value is being
determined in connection with the Maturity Date, and where the Maturity Date is
defined by Section 1.11(d) or by Section 1.11(c) under circumstances where
Borrower has not given Lender at least 180 days' prior written notice of its
intention to prepay the First Note, and in cases where Fair Market Value is
being determined in connection with a Prepayment Date, then Lender shall appoint
an appraiser experienced in the Loma Linda, California market area who shall at
once proceed to determine the fair market value of the Project. Such appraiser's
determination shall be binding and conclusive on both Borrower and Lender. The
costs and expenses of the appraiser shall be borne equally by Borrower and
Lender.
1.5 "First Note", shall mean that certain promissory note dated
1991, given by Borrower to Guardian Savings and Loan Association in the
original principal amount of $6,205,000.00.
1.6 "First Trust Deed" shall mean that certain Deed of Trust dated
_____________________ 1991, creating a lien on the Project, and given by
Borrower, as grantor, to Commonwealth Land Title Company, as trustee, for the
benefit of Guardian Savings and
4
<PAGE> 32
Loan Association, as beneficiary to secure Borrower's obligations under the
First Note
1.7 "Gross Receipts" shall mean all amounts whatsoever paid or
payable to Borrower from any source and produced or generated by the Project,
computed on an accrual basis and in accordance with generally accepted
accounting principles consistently applied, and whether produced or generated
by virtue of Borrower or any other person's activities or operations thereon,
but excluding therefrom:
(i) amounts held by Borrower, for unearned rent or as security
deposits, that are refundable to tenants occupying the Project;
(ii) and amount, if any, Borrower is required by applicable law to
collect from purchasers, in connection with Borrower's sale of goods and
services, as sales, excise or gross receipts taxes payable to the State of
Oregon.
1.8 "Interest" or "interest" (whether used in this Note or in
instruments securing the indebtedness evidenced by this Note) shall mean both
Minimum Interest and Additional Interest.
1.9 "Loan Agreement" means that certain Loan Agreement dated
_____________, 1991, between Borrower and Lender
1.10 "Loan Documents" shall mean this Note, the Deed of Trust, the
Loan Agreement, that certain Assignment of Leases and Rents dated 1991, given
by Borrower to Lender, that certain Environmental Indemnity dated ________,
1991, given by Borrower to Lender and that certain Security Agreement dated
___________, 1991, given by Borrower to Lender.
5
<PAGE> 33
1.11 "Maturity Date" shall mean the earliest of the following
dates:
(a) June 30, 2001;
(b) the date on which the obligation evidenced by the
First Note is, by its terms, due and payable in full, as such date may be
extended from time to time;
(c) the date on which the obligation evidenced by the
First Note is prepaid in full (whether occurring as the result of acceleration
or otherwise);
(d) the date on which the principal balance of this Note
becomes due and payable by Acceleration of such obligation;
(e) the date on which Borrower sells, transfer or conveys
all of Borrower's beneficial right, title and interest in the Project, whether
to Lender or to a third party. As used herein the terms sell, transfer or
convey shall include all of the meanings of the term "Transfer" set forth at
Section 7 of the Deed of Trust.
1.12 "Minimum Interest" shall mean interested at the rate of ten
percent (10%) per annum (based on a 360-day year composed of thirty-day months)
from the date of this Note (the "Funding Date"), computed on the unpaid
principal sum from time to time outstanding.
1.13 "Net Sales Price" shall mean the consideration paid or given
for the Project, including, without limitation, cash, the fair market value of
property exchanged and the amount of any debt assumed by the purchaser, reduced
by the amount of reasonable,
6
<PAGE> 34
ordinary and customary seller's expenses of sale actually paid by Borrower.
1.14 "Prepayment Date" shall mean the date specified by Borrower to
Lender in a notice of prepayment given pursuant to Section 3.1 as the day on
which Borrower shall make a prepayment of a portion of the principal balance
pursuant to Section 3.1 or 3.2.
1.15 "Project" shall mean that certain 140-unit assisted care
living facility, containing approximately 27,687 square feet, consisting of 48
studio units, 90 one-bedroom units and two two-bedroom units supported by
common, social, recreational and service areas, located on the Property.
1.16 "Property" shall mean the real property covered by the Deed of
Trust.
1.17 "Residual Value" of the Project shall mean an amount equal to
the remainder obtained by subtracting from the Fair Market Value of the Project
(in any case except where the Residual Value is being determined in connection
with a sale, transfer or conveyance of all or any portion of Borrower's
beneficial title in the Project) or from the Net Sales Price of the Project
(in the case where Residual Value is being determined in connection with a
sale, conveyance or transfer of all or any portion of Borrower's beneficial
title in the Project), the amount of the then, if any, unpaid principal sum
evidenced by (a) the First Note and (b) this Note. If Residual Value is being
determined under circumstances where a portion of the principal balance of the
First Note has been prepaid before the Maturity Date or Prepayment Date in
connection with which Residual Value is being determined, the amount of the
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<PAGE> 35
unpaid principal sum of the First Note to be subtracted from the Fair Market
Value of the Project hereunder shall be determined as if such indebtedness had
not been prepaid but had been reduced by payment, to, as applicable, the
Maturity Date or Prepayment Date, of the regular amortization payments as
provided in the First Note.
2. Interest Payments. Borrower shall pay to Lender Minimum
Interest and Additional Interest as follows:
2.1 Minimum Interest. Borrower shall pay Minimum
Interest, accruing from the date of this Note through the last day of the month
in which this Note is executed and delivered, on the first day of the first
full month following the date of this Note. Thereafter, Borrower shall pay
Minimum Interest on the first day of each month commencing on the first day of
the second full month following the date of this Note and continuing on the
first day of each month thereafter until the entire principal balance, and all
accrued interest thereon, shall have been paid in full.
2.2 Additional Interest. Borrower shall pay Additional
Interest, calculated using the percentages stated in Section 2.2.1, for the
period commencing the later of the 1st day of the first full month following
the date of this Note or May 1, 1992, and ending on the Maturity Date. Borrower
shall pay Additional Interest on the twentieth day of each month commencing, as
the case may be, on the later of the twentieth day of the second full month
following execution of this Note or on June 20, 1992. At the time of making
each payment of Additional Interest Borrower shall deliver to Lender a
statement which shall be acceptable to Lender in form and substance and which
shall show in reasonable
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<PAGE> 36
detail the Gross Receipts for the preceding calendar month, together with any
adjustments required thereto as provided herein, certified by an authorized
financial officer of Borrower. The monthly statement of Gross Receipts to be
furnished to Lender pursuant to this Section 2.2 shall be in the form attached
to this Note as Exhibit A, and provided that such form is used by Borrower,
Lender shall not object to and shall be deemed satisfied with the form of
statement submitted. If a default exists under this Note, the Deed of Trust or
the Loan Agreement, or if Lender is not satisfied with the statement submitted,
Lender may inspect and audit Borrower's books and records, upon ten (10) days
prior written notice, during ordinary business hours. If such audit shall show
a deficiency in any Additional Interest paid for the period covered, the amount
thereof shall be paid, together with interest at the default rate specified in
Section 5 and the late payment charge specified in Section 2.4, promptly by
Borrower. If such audit shall show any Additional Interest to have been
overpaid, the excess shall be applied, at Lender's discretion, on any amounts
due to Lender on any subsequent payment of Minimum Interest or Additional
Interest. Borrower shall pay the reasonable costs of any such audit.
2.2.1 The Additional Interest payable during any month
shall equal:
(a) the product obtained by multiplying (i) the Gross
Receipts for such month, by (ii) the following percentage applicable during
such month, as such percentage may be reduced pursuant to Section 2.3:
9
<PAGE> 37
<TABLE>
<CAPTION>
Annual Period Dates Percentage
------------- ----- ----------
<S> <C> <C>
#1 Period commencing May 1, 3.85%
1992 and ending April 30, 1993
#2 May 1, 1993 - April 30, 1994 4.6%
#3 May 1, 1994 - April 30, 1995 5.4%
#4 May 1, 1995 - April 30, 1996 6.1%
#5 May 1, 1996 or thereafter 6.7%
</TABLE>
(b) increased each month by an amount equal to
fifty percent (50%) of the Monthly Debt Service Reduction (defined below), or
decreased each month by an amount equal to the Monthly Debt Service increase
(defined below). As used in this Section 2.2.1, Monthly Debt Service Reduction
shall equal, for any month: (i) the monthly debt service that would be payable
by Borrower during such month on the First Note if the principal balance of the
First Note outstanding on and as of the date of this Note were amortized
pursuant to the terms applicable thereto in such instrument ("Original Monthly
Debt Service") minus (ii) the lesser of the Original Monthly Debt Service or
the monthly debt service actually payable by Borrower during such month on the
First Note (the "Actual Debt Service"). As used in this Section 2.2, Monthly
Debt Service Increase shall equal, for any month: (i) the Actual Debt Service
minus (ii) the lesser of the Actual Debt Service or the Original Debt Service.
2.3 Reduction of Additional Interest Payments. If
Borrower has made a permitted or mandatory partial prepayment of the principal
balance of this Note pursuant to Section 3.1 or 3.2 and, in connection
therewith, paid the prepayment premium due pursuant to Section 3.3, then, as of
the first day of the first
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<PAGE> 38
full month following such prepayment date the percentages specified at Section
2.2.1(a) shall be reduced to equal the percentage obtained by multiplying the
applicable percentage from Section 2.2.1(a) by a fraction, the numerator of
which is the aggregate amount prepaid and the denominator of which is
$1,400,000.00.
2.4 Addition of Interest to Principal. If any payment
received is less than the Interest due on the due date of such payment, or if
the Maturity Date of this Note is accelerated upon default or otherwise, the
holder of this Note shall have the right at its sole discretion to add all
accrued but unpaid Interest to principal.
2.5 Late Charge. Borrower shall pay holder, on demand, a
"late charge," in the amount of ten percent (10%) of each monthly payment that
is not paid within ten (10) days of the due date to cover the extra expense
involved in handling delinquent payments.
3. Prepayments.
3.1 Permitted Prepayments. Borrower may prepay the
entire principal balance of this Note at any time. Provided that (a) Borrower
has given Lender not less than 180 days advance written notice of prepayment,
specifying the proposed date and amount of any such prepayment, (b) Lender
consents in writing, within 14 days following Lender's receipt of such notice,
to the making of any such prepayment, and (c) Borrower pays Lender the
prepayment premium specified in Section 3.3, Borrower may prepay principal, in
an amount that reduces the principal balance of this Note to no less than
$640,000.00, at any time or from time to time
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<PAGE> 39
on or before April 30, 1996. Any prepayment of principal must be accompanied by
the payment described in Section 3.3 and by payment of all interest accrued to
the date of such prepayment. Borrower shall not have the right to make any
partial prepayment after April 30, 1996, that would reduce the principal
balance of this Note below $640,000.00 or under circumstances where Borrower
has not complied with the requirements of this Section 3.1.
3.2 Mandatory Prepayments. If Borrower shall pay all or
any portion of the principal balance of the First Note before the date on which
such payment comes due pursuant to the terms of the instrument or instruments
evidencing the First Note, Borrower shall, subject to the limitations on and
requirements applicable to partial prepayments stated at Section 3.1,
contemporaneously with such payment, pay Lender an amount equal to fifty
percent (50%) of the amount paid the holder or holders of the First Note. Any
amount paid Lender pursuant to this Section 3.2 shall be applied first to any
accrued but unpaid interest as of the date of such payment, second to the
prepayment premium due pursuant to Section 3.3 and the balance shall be applied
to principal.
3.3 Prepayment Premium. Any partial prepayment,of
principal required or permitted to be made pursuant to this Note shall be
accompanied by a prepayment premium equal to the Residual Value of the Project
on the applicable Prepayment Date multiplied by the product obtained by
multiplying .5 by a fraction, the numerator of which is the amount of such
prepayment and the denominator of which is $1,400,000.00.
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<PAGE> 40
3.4 Effect of repayment. Any amount prepaid by Borrower
shall not affect Borrower's obligation to continue to pay interest as described
in Section 2, but the amounts of such payments shall be adjusted based upon the
principal balance outstanding following any such prepayment.
4. Equity Participation Payment and Other Payments on Maturity Date.
4.1 Residual Value Determined On or Before Maturity Date.
If Net Sales Price is being used to calculate Residual Value, or if Fair Market
value is being used to calculate Residual Value and Fair Market value has been
agreed upon by the parties, or determined pursuant to Section 1.4(b), on or
before the Maturity Date, then on the Maturity Date Borrower shall immediately
pay Lender, without notice, (i) all accrued and unpaid Minimum Interest and
Additional Interest, (ii) the whole of the principal sum then remaining unpaid,
if any, (iii) any other payment required by any provision of this Note, and
(iv) an Equity Participation Payment equal to fifty percent (50%) (or such
lesser percentage determined pursuant to Section 4.4) of the Residual Value of
the Project.
4.2 Residual Value Determined After Maturity Date. If
Fair Market Value is being used to calculate Residual Value and Fair Market
Value has not been agreed upon by the parties or determined pursuant to Section
1.4(b) on or before the Maturity Date, then
4.2.1 On the Maturity Date Borrower shall
immediately pay to Lender, upon notice of the acceleration, if applicable, but
otherwise without notice, (i) the whole of the
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<PAGE> 41
principal sum then remaining unpaid, if any (ii) all accrued and unpaid Minimum
Interest and Additional Interest, (iii) any other payment required by any
provision of this Note, and
4.2.2 Immediately following the parties' agreement
an Fair Market Value, or no later than 10 days following the date on which
Lender gives Borrower notice of the Fair Market Value of the Project, as
determined pursuant to Section 1.3(b)(iii), Borrower shall pay Lender an Equity
Participation Payment equal to fifty percent (50%) (or such lesser percentage
determined pursuant to Section 4.4) of the Residual Value of the Project.
4.3 Installment Sale. Where the Maturity Date is
determined by a sale, transfer or conveyance of the Project and the Net Sales
Price is to be paid in installments, the Equity Participation Payment hereunder
shall bear interest at the same rate as applies to that portion of the Net
Sales Price payable in installments and the Equity Participation Payment shall
be made in installments payable at the time, and over the same period, as
installments of the Net Sales Price are due. Borrower shall pay Lender that
portion of each and every installment of the Net Sales Price equal to the total
Net Sales Price multiplied by a fraction, the numerator of which is the total
Equity Participation Payment and the denominator of which is the Net Sales
Price. All amounts paid by Borrower to Lender pursuant to this Section 4.3
shall be applied first to accrued interest, and the balance shall be applied to
principal. The entire principal amount of the Equity Participation Payment,
plus all interest accrued thereon, shall be
14
<PAGE> 42
due or payable an the date that the last payment in respect of the Net Sales
Price is due and payable. Borrower shall formally assign to Lender, by
documents and instruments in form and substance acceptable to Lender, any
security interest given to secure payment of such Net Sales Price and Borrower
shall instruct the purchaser in writing to make the portion of the Net Sales
Price installment payment payable to Lender hereunder directly to Lender.
4.4 Percentage Applicable in Determining Equity
Participation Payment. If Borrower has made a permitted or mandatory partial
prepayment of the principal balance of this Note pursuant to Section 3.1 or 3.2
and, in connection therewith, paid the prepayment premium due pursuant to
Section 3.3, the percentage of Residual Value used in calculating the Equity
Participation Payment due Lender pursuant to Section 4.1 or 4.2 shall equal
fifty percent (50%) multiplied by a fraction, the numerator of which is the
remainder obtained by subtracting the aggregate amount prepaid pursuant to
Sections 3.1 and 3.2 from $1,400,000.00, and the denominator of which is
$1,400,000.00.
5. Default.
5.1 Events of Default. Each of the following shall
constitute and Event of Default hereunder:
(a) If for any payment due hereunder the entire
amount due (including principal, interest any applicable premiums and late
charges or the Equity Participation Payment) is not paid within ten (10) days
of the date upon which notice of default in the making of such payment was
given to Borrower, or
15
<PAGE> 43
(b) If there occurs an Event of Default under the
Deed of Trust, the Loan Agreement or, any other of the Loan Documents (as the
term Event of Default is therein defined). Upon the occurrence of an Event of
Default, or at any time thereafter, at the option of the legal holder of this
Note, the whole of the principal sum then remaining unpaid, together with all
interest accrued thereon, shall become immediately due and payable without
notice, and the lien or liens given to secure its payment may be foreclosed.
Borrower understands and acknowledges that the terms of this Note and the Deed
of Trust provide, among other things, (1) that Lender may accelerate the
principal of this Note if, without first obtaining Lender's written consent and
complying with the other requirements set forth at Section 7 of the Deed of
Trust, the Grantor under the Deed of Trust makes certain Transfers (defined in
the Deed of Trust), (2) that on the occasion of an Acceleration Borrower shall
be and remain obligated hereunder to pay an Equity Participation Payment as
provided in Section 4 and (3) Lender may refuse tendered prepayments of the
principal balance not permitted by the terms of this Note. Failure to exercise
the acceleration or foreclosure option, or any other right the holder may, in
the event of default, be entitled to, shall not constitute a waiver of the
right to exercise either such option or any other right in the event of a
continuing or subsequent default.
5.2 Default Charges. At its option Lender may accept
delinquent payments. Following any default, due but unpaid interest shall
become a part of the principal and shall bear interest at the rate provided in
this Note. In addition, Borrower
16
<PAGE> 44
shall pay during the period of default additional interest on the unpaid
principal balance (including the amount of any unpaid interest added thereto)
at the rate of two percent (2%) per annum. Any such additional interest which
has accrued, and late charges, if any, shall be paid at the time of and as a
condition precedent to the curing of any default. Lender's acceptance of
delinquent payments, any late charge thereon as calculated pursuant to Section
2.5 and/or any additional interest thereon calculated pursuant to this Section
6 shall not constitute a waiver of Lender's right to declare the whole
principal sum and all interest accrued thereon immediately due and payable upon
or following the occurrence of any subsequent default.
5.3 Costs of Default. Borrower shall pay all costs of
collection when incurred by Lender, including, but not limited to, reasonable
attorneys' fees. Lender is authorized to consult with, employ and pay attorneys
upon Borrower's default or upon institution of legal proceedings by or against
Lender in connection with this Note or any Loan Document, and Borrower shall
reimburse Lender for all of Lender's legal fees and costs in such amount as the
court in any such proceeding and on any appeals from any judgment or decree
entered therein may adjudge reasonable. Borrower shall pay all other costs
incurred by Lender in collecting or attempting to collect any sums due under
this Note or protecting or enforcing any rights of Lender under this Note
and/or any Loan Document, including, without limitation, Lender's attorneys'
fees and costs in such amount as the court in any such proceeding and on any
appeals from any judgment or decree entered therein may adjudge
17
<PAGE> 45
reasonable. All such amounts paid by Lender shall have equal priority with, and
be secured by, the Deed of Trust and any other loan documents executed
concurrently therewith. All such amounts shall bear interest from the date of
expenditure until paid at the interest rate provided in this Note.
5.4 Waivers. Borrower and all endorsers and all persons
liable or to become liable on this Note waive demand, protest and notice of
demand, protest and nonpayment and hereby consent to: (i) any and all
extensions in the time for making payments under this Note as the Lender, in
its sole discretion, may grant from time to time, (ii) the release of all or
any part of the Security Property, and (iii) the release of any party liable
for payment of the obligations hereunder. Borrower and all endorsers and all
persons liable hereto further waive exhaustion of legal remedies and the right
to plead any and all statutes of limitation as a defense to any demand on this
Note, to any agreement to pay the same, or to any demands secured by the Loan
Documents. If the Borrower consists of two or more persons or entities, all of
the obligations herein contained shall be considered joint and several
obligations of them. All of the obligations herein contained shall be binding
upon Borrower and Borrower's distributees, personal representatives, successors
and assigns. All obligations of Borrower shall inure to the benefit of the
distributees, personal representatives, successors and assigns of Lender. In
any action or proceeding to recover any sums herein provided for, no defense of
adequacy of security or that resort must first be had to security or to any
other person shall be asserted.
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<PAGE> 46
6. Governing Law. This Note is made and delivered in Oregon and
shall be governed by the laws of the State of Oregon. Time is of the essence of
this Note and of each and every provision hereof.
CROSSINGS INTERNATIONAL CORPORATION
By
---------------------------------
Title
-------------------------------
"Borrower"
19
<PAGE> 47
EXHIBIT A
Real Property Description
Parcel No. 1, Parcel Map 7277, in the County of San Bernardino, State of
California, as per Map Recorded in Book 83 of Parcel Maps, Page(s) 24, in the
Office of the County Recorder of said County.
SUBJECT TO the following exceptions set forth in that certain title report
issued March 4, 1991, under order numbers 7671-001 and 506404-95 by
Commonwealth Land Title Company, San Bernardino, California:
NUMBERS 1 THROUGH 7
<PAGE> 48
Exhibit C
to Loan Agreement
DEED OF TRUST
AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT ("Trust Deed" or "Deed of Trust") is
made on the ____ day of _________________, 1991 by CROSSINGS INTERNATIONAL
CORPORATION, 4303 Ruston Way, Tacoma, Washington 98402 (the "Grantor"), to
COMMONWEALTH LAND TITLE COMPANY, 275 West Hospitality Lane, Suite 100, P. 0.
Box 5789, San Bernardino, California 92412 (the "Trustee"), for the benefit of
CAPITAL CONSULTANTS, INC., AGENT, whose address is 2300 S. W. First Avenue,
Portland, Oregon 97201 (the "Beneficiary").
GRANT IN TRUST.
Grantor hereby grants, bargains, sells and conveys to the Trustee, IN
TRUST, WITH POWER OF SALE and right of entry and possession, all of Grantor's
right, title and interest in and to the real property located in the County of
San Bernardino, State of California (the "Real Property"), described in EXHIBIT
A attached hereto and made a part of this Trust Deed by this reference;
TOGETHER WITH all rents, issues, profits, payments, royalties, income
and other benefits from the Real Property (collectively the "Rents");
TOGETHER WITH all leasehold estate, right, title and interest of
Grantor (as Lessor or Lessee) in and to all leases or subleases covering the
Real Property or any portion thereof now or hereafter existing or entered into
(the "Leases");
TOGETHER WITH all right, title and interest of Grantor in and to all
options, agreements and contracts for the purchase and sale of all or any part
or parts of the Real Property or interests therein;
TOGETHER WITH all easements, rights-of-way and rights used in
connection with the Real Property or as a means of access thereto, and all
tenements, hereditament and appurtenances thereof and thereto, and all water
and water rights (whether riparian, appropriative or otherwise and whether or
not appurtenant) and all water service contracts and licenses now or hereafter
relating to or used in connection therewith, all ditch rights, and all shares
of stock evidencing any such water or ditch rights;
TOGETHER WITH any and all buildings and improvements hereafter erected
on the Real Property (the "Improvements"), and all materials intended for
construction, reconstruction, alteration and repair of the Improvements, all of
which materials shall be
<PAGE> 49
deemed to be included within the Real Property immediately upon the delivery
thereof to the Real Property;
TOGETHER, WITH all the estate, interest, right, title or other claim
or demand, including claims or demands with respect to the proceeds of
insurance in effect with respect thereto, which Grantor now has or may
hereafter acquire in the Trust Property (as hereinafter defined), and any and
all awards made for the taking by eminent domain, or by any proceeding or
purchase in lieu thereof, of the whole or any part of the Trust Property,
including, without limitation, any awards resulting from a change of grade of
streets and awards for severance damages.
The foregoing property is herein referred to as the "Property."
FIXTURE FILING AND SECURITY AGREEMENT.
Grantor, as debtor, grants a security interest in the Personal
Property (defined below) to Beneficiary, as secured party, pursuant to the
Uniform Commercial Code as adopted in Oregon (the "UCC"), on the terms and
conditions contained herein except that where any provision hereof is in
conflict with the UCC, the UCC shall control. As used herein the term "Personal
Property" shall mean any of the following property in which Grantor has an
interest: (1) the Property to the extent the same is not encumbered by this
Deed of Trust as a first priority real estate lien, (2) all personal property
that is used or will be used in the construction of any buildings or
improvements on the Real Property; (3) all personal property that is or will be
placed on or in the Real Property or improvements; (4) all personal property
that is derived from or used in connection with the use, occupancy, or
enjoyment of the Real Property or Improvements; (5) all property defined in the
Uniform Commercial Code as accounts, equipment, general intangibles, and
specifications, contracts, subcontracts, and cost savings in connection with
the construction of any buildings or improvements on the Real Property; (6) all
bonds, permits, licenses, causes of action, claims, security deposits, advance
rental payments, utility deposits, refunds of fees or deposits paid to any
governmental authority, refunds of taxes, and refunds of insurance premiums;
and (7) all present and future attachments, accessions, amendments,
replacements, additions, products, and proceeds of the foregoing.
SCOPE OF GRANT AND OBLIGATION SECURED.
The entire estate, real and personal property and interests hereby
conveyed, transferred or assigned to Trustee may be referred to herein as the
"Trust Property". Until the occurrence of an event of default, Grantor may
remain in possession and control of and operate and manage the Trust Property
and
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<PAGE> 50
collect and enjoy the rents, revenues, income, issues and profits therefrom.
The foregoing grant in trust and grant of security interest is made
for the purpose of securing the following obligations, each of which Grantor
covenants to pay or perform promptly in accordance with its terms:
Section 1. Payment and Performance.
1.1 The Note and Other Obligations. Grantor shall pay to
Beneficiary promptly when due all indebtedness evidenced by and arising under
that certain promissory note given by Grantor to Beneficiary, dated ________,
1991 in the principal amount of ONE MILLION FOUR HUNDRED THOUSAND AND 00/100
DOLLARS ($1,400,000.00) with a maturity date of not later than June 30, 2001
(the "Note"), and all other amounts, payment of which is secured by this Trust
Deed including, without limitation, amounts payable by Grantor pursuant to the
terms hereof.
This Deed of Trust also secures the interest that accrues on the Note,
and late payment charges and prepayment premiums payable following default and
at the time of a judicial or nonjudicial foreclosure sale under the Note. Any
modifications, extensions, or renewals of the Note including, without
limitation, (i) modifications of the required principal and/or interest payment
dates, deferring or accelerating said payment dates in whole or in part, and/or
(ii) modifications, extensions, or renewals at a different rate of interest,
shall be secured by this Deed of Trust whether or not any such modification,
extension, or renewal is evidenced by a new or additional promissory note or
notes.
1.2 Other Obligations. Grantor shall perform each agreement of the
Grantor herein contained or contained in the Note, in that certain Loan
Agreement dated between Grantor and Beneficiary (the "Loan Agreement"), that
certain Assignment of Leases and Rents dated ________________ given by Grantor
to Beneficiary, that certain Environmental Indemnity dated _______________,
given by Grantor to Beneficiary, that certain Security Agreement dated
________________, given by Grantor to Beneficiary and/or any and all other
documents and instruments executed by the Grantor concurrently herewith or with
the Loan Agreement for purposes of evidencing or securing the repayment of the
Note in and performance hereunder or under the Loan Agreement, which documents
are incorporated herein by this reference (the "Loan Documents"), and Grantor
shall pay each fee, and all costs and expenses payable by Grantor as herein or
therein set forth.
1.3 Effect of Certain Loan Documents; Priority. The Note and this
Deed of Trust replace and supersede in their entirety that certain promissory
note and deed of trust (the "Superseded Deed of Trust"), each given by Grantor
to Beneficiary, and each dated __________________, 1991, and this Deed of
Trust, and Lender's rights
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<PAGE> 51
hereunder, are subject to (and subordinated as provided in) the Subordination
Agreement (defined in the Loan Agreement). This Deed of Trust shall be
construed to except any representation or warranty, and to excuse Grantor's
performance of any obligation, that is inconsistent with any document or
instrument given priority over this Deed of Trust by the Subordination
Agreement for so long as such document or instrument remains in effect.
Section 2. Maintenance and Preservation of the Property and Personal Property,
Grantor shall:
2.1 Keep the Property and the Personal Property in good condition
and repair;
2.2 Except as contemplated by the Loan Agreement, not remove or
demolish the Improvements or the Personal Property, provided, however, that
Grantor may replace Personal Property that is worn out if Grantor first obtains
Beneficiary's written consent to the replacement, which consent shall be given
if the replacement is of equal value and utility and Beneficiary receives a
first lien or perfected first security interest, as the case may be, in such
replacement Personal Property;
2.3 Complete, restore or replace (collectively the "Restoration")
promptly and in good and workmanlike manner, the Improvements or Personal
Property that may be damaged or destroyed, such Restoration to be made in
accordance with the provisions of Section 6.4;
2.4 Not commit or permit waste on or of the Property or Personal
Property;
2.5 Do all other acts that from the character or use of the
Property or the Personal Property may be reasonably necessary to maintain and
preserve its value; and
2.6 Perform all obligations required to be performed in the Loan
Documents and all other obligations of Grantor pertaining to the Property
and/or the Personal Property including, without limitation, any and all leases
or subleases under which Grantor is or becomes the lessor.
Section 3. Compliance with Governmental and Other Requirements
Grantor shall promptly comply with, and shall not suffer violations
of, any of the following to the extent that it affects or pertains to the
Property or the Personal Property, or acts committed or conditions existing
thereon: (a) all laws, ordinances, regulations and governmental standards; (b)
all covenants, conditions, restrictions and equitable servitudes,
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<PAGE> 52
whether public or private, of every kind and character, and (c) all
requirements of insurance companies and any bureau or agency that establishes
standards of insurability.
Section 4. Taxes and Liens.
4.1 Payment. Grantor shall pay when due all taxes, assessments
levies and charges levied against or imposed on account of the Property,
including without limitation any form of assessment, possessory interest tax,
commercial rental tax, business license fee, business license tax, levy,
charge, penalty, or similar imposition, imposed by any authority having the
direct power to tax, including any city, county, state, or federal government,
or any school, agricultural, lighting, drainage, or other improvement or
special assessment district thereof, as against any legal or equitable interest
of Grantor in the Property. Grantor shall pay when due all claims for work
done on or for services rendered or material furnished to the Property. Except
as permitted at Section 7.1, Grantor shall maintain the Property free of any
liens having priority over or equal to the interest of Beneficiary under this
Trust Deed, except for the lien of taxes and assessments not due and except as
otherwise provided in Section 4.2.
4.2 Right to Contest. Grantor may withhold payment of any tax,
assessment, levy, charge or claim in connection with a good faith dispute over
obligation to pay, so long as Beneficiary's interest in the Property is not
jeopardized. If, as the result of any such contest, the Property is subject to
a lien that is not discharged within fifteen (15) days from the date it
attached, Grantor shall deposit with Beneficiary cash, a sufficient corporate
surety bond or other security satisfactory to Beneficiary in an amount
sufficient to discharge the lien plus any interest, costs, attorneys' fees or
other charges that could accrue as a result of foreclosure or sale under the
lien. In any contested proceedings, Grantor will defend itself and Beneficiary
and will name Beneficiary as an additional obligee under any surety bond, and
Grantor shall satisfy any final adverse judgment promptly, but in any case
before enforcement against the Property.
4.3 Evidence of Payment. Grantor shall promptly furnish evidence
of payment of taxes, assessments, levies, charges and claims to Beneficiary on
Beneficiary's demand and shall authorize the appropriate county official to
deliver to Beneficiary at any time a written statement of the taxes and
assessments against the Property.
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Section 5. Representations, Warranties and Covenants of Grantor.
Grantor represents, warrants and covenants as follows:
5.1 Title. Grantor holds merchantable fee simple title to the
Property, free of all encumbrances other than those set forth in the attached
EXHIBIT A (the "Permitted Encumbrances").
5.2 Defense of Title. Subject to the exceptions noted in Section
5.1, Grantor will forever defend the title against the lawful claims of all
persons. If any action or proceeding is commenced that questions Grantor's
title or the interest of Beneficiary under this Trust Deed, Grantor shall
defend the action at its expense.
5.3 Hazardous Substances.
5.3.1 Grantor's Representations and Warranties. Except as
disclosed to Beneficiary in writing before the date of the Superseded Deed of
Trust: (a) to the best of Grantor's knowledge, no asbestos has ever been used
in the construction, repair or maintenance of any building, structure or
improvement now or heretofore located on the Property; and there is not now,
nor has there ever been, any underground storage tank or tanks located on the
Property; (b) no Hazardous Substance (defined below) is currently being
generated, processed, stored, transported, handled or disposed of on, under, in
or from the Property or the groundwater of the Property, (c) neither Grantor
nor any other person or entity has ever caused or permitted any Hazardous
Substance to be generated, processed, stored, transported, handled or disposed
of on, under, in or from the Property or the groundwater of the Property, (d)
Grantor has not received any notice of, nor is Grantor aware of, any actual or
alleged violation with respect to the Property or the groundwater of the
Property, of any federal, state or local statute, ordinance, rule, regulation,
or other law pertaining to Hazardous Substances, (e) there is no action or
proceeding pending or threatened before, or appealable from, any court,
quasi-judicial body or administrative agency relating to Hazardous Substances
affecting or, alleged to be affecting the Property or the groundwater of the
Property, (f) Grantor will not itself, and will not suffer or permit, the
generation, processing, storage, transportation, handling or disposal of, on,
under, in or from the Property or the groundwater of the Property of any
Hazardous Substance, and (g) Grantor will at all times take all necessary
action to insure that the Property and the groundwater of the Property comply
with all federal, state and local environmental laws and regulations
(including, without limitation, those pertaining to underground storage tanks
and to asbestos).
5.3.2 Notification. Grantor shall immediately notify
Beneficiary should Grantor (a) become aware of the existence of any Hazardous
Substance on the Property or in the groundwaters of the Property, (b) receive
any notice of, or become aware of, any
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actual or alleged violation with respect to the Property of any federal, state
or local statute, ordinance, rule, regulation, or other law pertaining to
Hazardous Substances, (c) become aware of any lien or action with respect to
any of the foregoing. Grantor shall deliver to Beneficiary, promptly upon
receipt,(i) copies of any documents received from the United States
Environmental Protection Agency ("EPA") and/or any state, county or municipal
environmental or health agency concerning Grantor's ownership, use or
operations upon or in connection with the Property; and (ii) copies of any
documents submitted by Grantor to the EPA and/or any state, county or municipal
environmental or health agency concerning the Property.
5.3.3 Inspection and Remedial Action. Beneficiary is hereby
authorized to enter the Property, including the interior of any structures, at
reasonable times, and after reasonable notice, for the purpose of inspecting
the Property, to ascertain the accuracy of all representations and warranties,
and the compliance with all covenants, made in this Section 5.3. Upon
Beneficiary's written request (a) Grantor, through professional engineers
approved by Beneficiary and at Grantor's cost, shall thoroughly investigate
suspected Hazardous Substances contamination of the Property or the ground
water of the Property, and (b) Grantor shall forthwith take such remedial
action as may be necessary to ensure that there is no Hazardous Substances
present on the Property or in the groundwater of the Property in quantities
that exceed amounts allowed by applicable law, and that the Property otherwise
complies with all federal, state and local environmental laws and regulation
(including, without limitation, those pertaining to underground storage tanks
and to asbestos), in either case whether or not Grantor was responsible for the
existence of the Hazardous Substances on or in the Property or the groundwater
of the Property or for such noncompliance. Grantor's obligations under this
Section 5.3 shall arise upon Beneficiary's demand as provided herein,
regardless off whether the EPA or any other federal, state or local agency or
governmental authority has taken or threatened any action in connection with
the presence of any Hazardous Substance on, or release of any Hazardous
Substance from, the Property or the groundwater of the Property. If Grantor
shall fail promptly to discharge its obligations under this Section 4,
Beneficiary may, at its election, but without the obligation to do so, cause
such investigation to be made or remedial action to be taken and/or take any
and all other actions that Beneficiary may deem necessary or advisable to
protect its security for the Loan or to avoid or minimize its liability for the
existence of Hazardous Substances on the Property, or in the groundwater of the
Property, or for a release thereof from the Property or the groundwater of the
Property. All amounts expended by Beneficiary under this Section 4 shall be
payable by Grantor to Beneficiary upon demand but shall otherwise be deemed
advanced under and pursuant to the terms of the Note, shall accrue interest at
the rate specified in the Note and shall be secured by this Deed of Trust and
the other Loan Documents.
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5.3.4 Definition of Hazardous Substance(s). The term
"Hazardous Substance" shall mean:
(a) "Hazardous substances", as defined by 40 CFR Part
302;
(b) "Extremely hazardous substance", as defined by 40 CFR
Part 355;
(c) "Toxic chemicals", as defined by 40 CFR Part 372;
(d) "Hazardous chemical" as defined by 29 CFR Section
1910.120, to the extent it is included in the employer's written Hazard
Communication Program or in Material Safety Data Sheets that are located on
site;
(e) "Hazardous Waste" as defined by Oregon Administrative
Rules Chapter 340, Division 101;
(f) Petroleum, including crude oil and any fraction
thereof; and
(g) Any material that contains more than 1% of asbestos.
5.3.5 Grantor's Personal Liability; Indemnity. Beneficiary
has agreed to advance sums under and pursuant to the Note in reliance upon
Grantor's representations, warranties and covenants set forth in this Section
5.3. Notwithstanding any other provision of this Deed of Trust, the Loan
Documents or applicable law to the contrary, including any such provision
purporting to limit Grantor's personal liability to Beneficiary to Grantor's
interest in the Property, Grantor shall be personally liable for, and shall
defend, indemnify and hold Beneficiary harmless from and against, any and all
claims, demands, penalties, fees, liens, damages, losses, expenses or
liabilities (including, without limitation, all reasonable attorney's and
expert fees and costs incurred by Beneficiary in connection with any of the
foregoing, whether incurred before any action is filed, at trial, or on any
appeal or petition for review therefrom) (a) resulting from any breach of the
representations, warranties or covenants contained in this Section 5.3, or (b)
incurred or payable by Beneficiary in connection with the removal of or
remedial action concerning any Hazardous Substances on the Property or in the
groundwater or the Property, or the release thereof from the Property or the
groundwater of the Property (including any such removal or remedial action
performed by any governmental authority). Without limiting the generality of
the foregoing, the provisions of this Section 5.3.5 shall apply to any such
claim, demand, penalty, fee, lien, damage, loss, expense or liability incurred
in connection with or arising from (a) the existence of any Hazardous Substance
on the Property, and (b) the existence on any other property and any Hazardous
Substance attributable to activities or contamination on
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the Property. Grantor's obligations and liability under this Section 5.3 shall
survive repayment of this Note and shall extend to sums in excess of the amount
advanced pursuant to the Note.
5.3.6. Survival. Grantor's representations, warranties and
covenants set forth at this Section 5.3 shall survive any foreclosure or trust
deed sale, the repayment of the Note and/or the release of the lien of this Deed
of Trust from the Property and the Grantor's transfer of any or all right, title
and interest in and to the Property to any party.
5.4 Due Organization, Authority. Grantor is duly organized, validly
existing and in good standing under the laws of Washington, is qualified to do
business in California and has power adequate to carry on its business as
currently conducted, to own the Property, to make and enter into the Loan
Documents and to carry out the transactions contemplated therein.
5.5 Execution, Delivery and Effect of Loan Documents. The Loan
Documents have each been duly authorized, executed and delivered by Grantor,
and each is a legal, valid and binding obligation of Grantor, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and subject to the exercise of judicial discretion
in accordance with general principles of equity.
5.6 Other Obligations. Grantor is not in material violation of or
in default under any material instruments or obligations relating to Grantor's
business, Grantor's assets or the Property. No party has asserted any material
claim or default relating to any of Grantor's assets or the Property. The
execution and performance of the Loan Documents and the consummation of the
transactions contemplated thereby will not result in any material breach of or
constitute a material default under, any contract, agreement, document or other
instrument to which Grantor is a party or by which Grantor may be bound or
affected, and do not and will not violate or contravene any laws to which
Grantor is subject; nor do any such instruments impose or contemplate any
obligations that are or will be materially inconsistent with the Loan
Documents. Grantor has filed all federal, state, county and municipal income
tax returns required to have been filed by Grantor and has paid all taxes which
have become due pursuant to such returns or pursuant to any assessments
received by Grantor. Grantor does not know of any basis for additional
assessment with regard to any such tax. No approval by, authorization of, or
filing with any federal, state or municipal or other governmental commission,
board or agency or other governmental authority is necessary in connection with
the authorization, execution and delivery of the Loan Documents.
5.7 Legal Actions. There are no material actions, suits or
proceedings including, without limitation, any condemnation, insolvency or
bankruptcy proceedings, pending or, to the best of Grantor's knowledge and
belief, threatened, against or affecting
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Grantor, its business or the Property; or investigations, at law or in equity,
before or by any court or governmental authority, pending or, to the best of
Grantor's knowledge and belief, threatened against or affecting Grantor,
Grantor's business or the Property, except actions, suits and proceedings fully
covered by insurance and heretofore fully disclosed in writing to Beneficiary
or that resolved adversely to Grantor would not have a material, adverse effect
on Grantor or the Property. Grantor is not in default with respect to any
order, writ, injunction, decree or demand of any court or any governmental
authority affecting Grantor or the Property. Furthermore, to the best knowledge
and belief of Grantor, there is no basis for any unfavorable decision, ruling
or finding by any court or governmental authority which would in any material
respect adversely affect the validity or enforceability of the Loan Documents,
or the condition (financial or otherwise) or ability of Grantor to meet
Grantor's obligations under the Loan Documents.
5.8 Financial Statements. All statements, financial or otherwise,
submitted to Beneficiary in connection with the making of the loan evidenced by
the Note are true, correct and complete in all material respects, and all such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied (or other basis of accounting
practices permitted by Beneficiary) and fairly present the financial condition
of the parties or entities covered by such statements as of the date thereof.
Since the date thereof, neither Grantor nor any such party or entity has
experienced any material, adverse change in its finances, business, operations,
affairs or prospects.
5.9 Adverse Change to Property. No event or series of events has
or have intervened or occurred since the date of Grantor's submission of its
application for the loan evidenced by the Note that would, either individually
or collectively, materially, adversely affect the Property.
5.10 Compliance With Laws and Private Covenants. The Property
complies in all material respects with all applicable laws. Grantor has
examined and is familiar with the Permitted Encumbrances and there now exists
no material violation thereof. Grantor has no notice that any of the
improvements are inconsistent with any easement over the Real Property or
encroach upon adjacent property.
5.11 Independence of the Property. The Real Property is a separate
and distinct parcel for tax purposes and is not subject to property taxes and a
similar charge against any other land. Grantor has not by act or omission
permitted any building or other improvements on property not covered by this
Deed of Trust to rely on the property or any part thereof or any interest
therein to fulfill any municipal or governmental requirement for the existence
of such property, building or improvement; and no improvement on the property
relies on any property not covered by this Deed of
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Trust or any interest therein to fulfill any governmental or municipal
requirement. Grantor has not by act or omission impaired the integrity of the
property as a single, separate, subdivided zoning lot separate and apart from
all other property.
5.12 Construction and Completion of Improvements. The Improvements
are served by electricity, gas, sewer, water, telephone and other utilities
required for the present and contemplated uses and operation thereof. Any and
all streets, utility lines and off-site improvements, which provide access to
the property or are necessary for its present and contemplated uses, have been
completed, are serviceable and have been accepted or approved by appropriate
governmental bodies.
5.13 Solvency of Tenants. To the best of Grantor's knowledge and
belief, no tenant under any lease of all or any portion of the Property has
suffered or incurred any material, adverse change in its finances, business
operations, affairs or prospects within the last 180 days.
5.14 The Leases. The copies of the Leases provided by Grantor to
Beneficiary before execution hereof are true, correct and complete and contain
all riders, exhibits and amendments thereto. All information Grantor has
furnished to Beneficiary concerning each of the Leases and the lessees and
sublessees thereunder, including, without limitation, the amount of rent
payable thereunder, the amount held by Grantor thereunder as prepaid rent or
deposits, and the expiration date thereof, is true, correct and complete in all
material respects. The Leases, in the form(s) provided to Beneficiary, are in
full force and effect, and unmodified, and are enforceable by Grantor and any
successor of Grantor in accordance with their terms against the lessees
thereunder. Grantor is not in default under any provision of any of the Leases,
nor does there exist any state of facts that with notice, the passage of time,
or both, could ripen into a default on the part of Grantor. No lessee under
any of the Leases has any claim under any such Lease, including claim of
offset, against Grantor, nor any defense to the enforcement thereof in
accordance with its terms by Grantor or any successor of Grantor. Grantor has
not assigned, hypothecated or pledged the Leases or rents accruing thereunder
other than pursuant to the Deed of Trust.
Section 6. Insurance. Condemnation.
6.1 Maintenance of Insurance. Unless otherwise stated in this
Section 6, no later than the date funds are advanced under the Note, Grantor
shall procure and maintain policies of insurance in form and substance
satisfactory to Beneficiary as follows:
(a) casualty insurance insuring against loss by fire,
hazards included within the term "extended coverage," rent loss and such other
hazards and casualties as Beneficiary may reasonably consider necessary, on a
replacement cost basis,
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covering all improvement now or hereafter comprising part of the Trust Property
in an amount sufficient to avoid application of any coinsurance clause and with
loss payable to Beneficiary; and
(b) comprehensive broad form general liability insurance,
including liability assumed under contract, with coverage satisfactory to
Beneficiary, and with aggregate limits for personal injury and property damage
of not less than $3,000,000. Such insurance shall cover all risks arising
directly or indirectly out of Grantor's activities on, or any condition of, the
Property, shall name Beneficiary as a coinsured and shall protect Grantor and
Beneficiary against claims of third persons.
6.2 Insurance Forms and Terms. All policies shall be written in
amounts, in form, on terms and with companies satisfactory to Beneficiary. No
later than the date Funds are advanced under the Note, Grantor shall deliver to
Beneficiary the insurance policies from each insurer or certificates of
coverage and certified copies of the policies, if approved by Beneficiary. Each
policy shall contain a stipulation that coverage will not be canceled,
diminished or substantially altered without a minimum of 30 days' written
notice to Beneficiary. At least 30 days before the expiration date of a policy,
Grantor shall deliver to Beneficiary a renewal policy in form satisfactory to
Beneficiary.
6.3 Grantor's Report on Insurance. Within 60 days after the close
of its fiscal year, Grantor shall furnish to Beneficiary a report on each
existing policy of insurance showing:
(a) The name of the insurer;
(b) The risks insured;
(c) The amount of the policy;
(d) The property insured, the then current replacement
cost of the property (if applicable), and the manner of determining that cost;
and
(e) The expiration date of the policy. Upon request, Grantor
shall have the appraiser of the insurance company determine the replacement
cost of the Trust Property.
6.4 Application of Proceeds. Grantor shall promptly notify
Beneficiary of any loss or damage to the Trust Property. Beneficiary may make
proof of loss if Grantor fails to do so within 15 days of the casualty. All
proceeds of any insurance on the Trust Property shall be paid directly to
Beneficiary. Beneficiary shall release such proceeds to Grantor for the repair
or replacement of the damaged Trust Property in the manner in which the
proceeds of a construction loan are customarily disbursed. Grantor shall repair
or replace the damaged or destroyed improvements in a manner satisfactory to
Beneficiary. Upon satisfactory proof of expenditure, Beneficiary will pay or
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reimburse Grantor from the net insurance proceeds for the reasonable cost of
repair or restoration. Any proceeds that have not been paid out within 180 days
after their receipt and that have not been committed to the repair or
restoration of the Trust Property may, at Beneficiary's election, be applied to
the Indebtedness. Unless Grantor and Beneficiary otherwise agree in writing,
any application of proceeds to principal shall not extend or postpone the due
date of installments due under the Note.
6.5 Condemnation.
6.5.1 Taking. Grantor shall promptly notify Beneficiary of
any action or proceeding relating to any condemnation or other taking of the
Trust Property or any part thereof or any interest therein. Beneficiary shall
be entitled, at its option, to commence, appear in, and prosecute in its own
name, any action or proceeding, or to make any compromise or settlement in
connection with, any eminent domain claim. Unless otherwise directed in writing
by Beneficiary, however, Grantor shall appear in and prosecute diligently any
such proceeding or action. All condemnation proceeds or damages paid in
connection with any condemnation or other taking with respect to the Trust
Property (or consideration paid for conveyances in lieu of condemnation) are
hereby assigned to Beneficiary.
6.5.2 Application of Condemnation Proceeds. If all or any
part of the Property is condemned, all net proceeds resulting from such
condemnation shall be paid to Beneficiary. Grantor shall execute such further
evidence of assignment of any awards, proceeds, damages or claims arising in
connection with such condemnation or taking as Beneficiary may require. The
term "net proceeds" shall mean the total amount available after payment of all
reasonable costs, expenses and attorneys' fees necessarily paid or incurred by
Grantor and Beneficiary in connection with the taking by condemnation. If the
entire Property is acquired by eminent domain the indebtedness secured hereby
shall be due and payable at the time of entry of the final judgment. All
proceeds from an eminent domain claim shall be applied by Beneficiary as
follows: first, to cure any monetary default by Grantor under the Loan
Documents; second, to reduce the indebtedness secured hereby to the extent
necessary so that the loan-to-value ratio existing immediately before the
taking shall be maintained; and third, the balance, if any, to Grantor.
Beneficiary is authorized, at the expense of Grantor, to retain and pay the
reasonable costs of professional engineers, appraisers, and other experts
(including attorneys) to determine the extent to which its security is impaired
following any taking. Beneficiary may pay the engineers, appraisers, and
experts from the monies resulting from the eminent domain claim. Sale of all or
any part of the Property to a purchaser with the power of eminent domain in the
face of a threat or the probability of the exercise of the power shall be
treated as a taking by condemnation to which this Section shall apply.
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Section 7. Transfer by Grantor.
Grantor shall not Transfer all or any portion of Grantor's right,
title and interest in the Trust Estate to a third party without Beneficiary's
prior written consent, which, except as otherwise provided in Section 7,
Beneficiary may give or withhold in its sole discretion. The term "Transfer"
includes (i) the sale, conveyance, or other transfer (excluding, where
applicable, transfers and changes in ownership by devise or descent) of the
Property or the Personal Property or any part thereof, or any interest therein,
including any leasehold or mortgagee's interest (provided, however, Grantor may
replace Collateral which is worn out if Grantor first obtains Beneficiary's
written consent to the replacement, which consent shall be given if the
replacement is of equal value and utility and Beneficiary receives a first lien
or perfected first security interest, as the case may be, in such replacement
Collateral), (ii) the divestiture of all or any part of Grantor's title to the
Property or Personal Property, or any interest therein, (iii) the sale,
conveyance, or other transfer of any stock in Grantor if Grantor is a
corporation, or of any partnership interest in Grantor if Grantor is a
partnership, (iv) any material change in the allocation of income, profits, or
losses between the partners of Grantor if Grantor is a partnership, (v) the
mortgage, pledge, or other hypothecation of any stock or partnership interest
in Grantor, (vi) the merger or consolidation of Grantor into another
corporation or the reorganization of Grantor if Grantor is a corporation, and
(vii) creation of any limited partnership interests in Grantor. Any Transfer
(whether to a person with respect to whom consent to Transfer is hereafter
given or otherwise) shall be subject to this Deed of Trust and, where
appropriate, any transferee shall, upon Beneficiary's request, assume, by a
recordable instrument delivered to and satisfactory to Beneficiary, all
obligations hereunder and agree to be bound by all provisions contained herein.
Such assumption shall not, however, release Grantor or any maker or guarantor
of the Note from any liability thereunder or hereunder.
7.1 Transfers of 49% or Less Interest. With the prior written
consent of Beneficiary, which will nor be unreasonably withheld, Grantor may
sell 49% or less of its right, title and interest in the Trust Estate, provided
that all of the following conditions occur or are satisfied: (i) the credit of
the transferee shall be satisfactory to Beneficiary, (ii) the transferee shall
assume full liability for the performance of the Note, this Deed of Trust and
the Security Agreement, (iii) all costs and expenses of Beneficiary, including
attorneys' fees, incurred in connection with such qualification and assumption
shall be paid by Grantor, and (iv) Richard W. Boehlke shall continue at
all times to be the chief executive officer of Crossings International
Corporation, which continue at all times to be the active manager of the
facility covered by this Deed of Trust. Consent to one such transfer shall not
be deemed a waiver of the right to require consent to future or successive
Transfers.
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7.2 Transfer by Certain Encumbrances. Grantor may encumber the
Trust Estate by a mortgage, deed of trust or otherwise with Beneficiary's
consent, or may increase the indebtedness secured by any encumbrance to which
Beneficiary has consented, provided that, in either such case, Grantor
immediately pays to Beneficiary so much of the obligations secured by this Deed
of Trust as are equal to fifty percent (50%) of the Excess Indebtedness
(defined below). Such payment to be made directly from the proceeds of such
funding. As used herein, in "Excess Indebtedness" means the amount by which
(a) such additional indebtedness, or the indebtedness secured by such
additional mortgage, deed of trust or other security instrument, together with
the indebtedness secured by this Deed of Trust and the First Trust Deed
(defined below), as of the date on which such additional indebtedness is
advanced or such additional mortgage, deed of trust or other security
instrument attaches, exceeds (b) the amount of the indebtedness secured by this
Deed of Trust and the First Trust Deed just prior to such attachment. As used
in this Deed of Trust the "First Trust Deed" shall mean any deed of trust or
other security instrument given by Grantor to the First Lien Lender (as defined
in the Loan Agreement) as security for the First Loan (as defined in the Loan
Agreement).
7.3 Transfer in Excess of 49% Interest. Grantor acknowledges that
the loan secured by this instrument is personal to Grantor and that in making
it Beneficiary has relied on Grantor's credit, development, leasing and
management capabilities, Grantor's interest in the Trust Property and financial
market conditions at the time this loan is made. If (a) a sale, conveyance,
transfer or assignment of greater than 49% of Grantor's right, title and
interest in the Trust Estate occurs, even with the prior consent of
Beneficiary, and whether to Beneficiary or to a third party, or (b) a sale,
conveyance, transfer or assignment of 49% or less of Grantor's right, title and
interest in the Trust Estate occurs under circumstances where Grantor has not
complied with or satisfied all of the terms and conditions set forth in Section
7.1, or (c) Grantor encumbers the Trust Estate, by a mortgage, deed of trust or
other security instrument, without Grantor's prior written consent, or (d)
Grantor engages in one of the Transfers described at clauses (iii) through
(vii) of Section 7 without Grantor's prior written consent, or (e) Grantor
encumbers the Trust Estate by a mortgage, deed of trust or other security
instrument but falls to prepay the indebtedness secured by the Note as required
by provisions of Section 7.2, then all of the indebtedness and obligations
secured by this Deed of Trust will become immediately due and payable,
including but not limited to the Equity Participation Payment (as such term is
defined in the Note).
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Section 8. Release on Full Performance.
Upon payment of all of the indebtedness due pursuant to the Note and
performance of all of the obligations imposed upon Grantor under this Trust
Deed, Beneficiary shall, if requested, execute and deliver to Trustee a
suitable Reconveyance of this Trust Deed and suitable statements of termination
of any financing statements on file. Upon written request of Beneficiary
stating that all sums secured hereby have been paid, surrender of this Trust
Deed and the Note to Trustee for cancellation and retention, and payment of its
fees, Trustee shall reconvey, without warranty, the Trust Property then held
hereunder. The recitals in any reconveyance executed under this Trust Deed of
any matters of fact shall be conclusive proof of the truthfulness thereof. The
grantee in such reconveyance may be described as "the person or persons legally
entitled thereto."
Section 9. Reports.
9.1 Default. Grantor will furnish to Beneficiary notice of any
default on Grantor's part under any agreement, license, permit, lease, or
contract affecting the Trust Property or any portion thereof, or under any loan
agreement between Grantor and any other person.
9.2 Certificates of Lessee(s). Upon request of Beneficiary, and
not more often than annually, Grantor will furnish to Beneficiary a certificate
from each lessee (if any) of any portion of the Trust Property stating, if
true, that the landlord (Grantor) is not in default under such lease, and that
rental is current and has not been paid more than thirty (30) days in advance.
9.3 Leases. Grantor will furnish to Beneficiary upon request,
copies of all leases and sale contracts covering or pertaining to any portion
of the Trust Property and entered into after the date hereof.
Section 10. Reserves.
If Grantor has failed promptly to perform its obligations under
Section 4 or Section 6 of this Trust Deed, Beneficiary may require Grantor to
maintain with Beneficiary reserves for payment of taxes, assessments and
insurance premiums. The reserve shall be created by monthly payments of a sum
estimated by Beneficiary to be sufficient to produce, at least fifteen (15)
days before due, an amount equal to the taxes, assessments and insurance
premiums. If fifteen (15) days before payment is due the reserve is
insufficient, Grantor shall pay any deficiency to Beneficiary upon demand. The
reserve shall be held by Beneficiary as a general deposit from Grantor and
shall constitute a non-interest-bearing debt from Beneficiary to Grantor which
Beneficiary may satisfy by
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payment of the taxes, assessments and/or insurance premiums. Beneficiary shall
not hold the reserve in trust for Grantor, and Beneficiary shall not be the
agent of Grantor for payment of the taxes, assessments and insurance payments
required to be paid by Grantor.
Section 11. Assignment of Leases, Rents, Issues and Profits.
As part of the consideration for the making of the loan hereby
secured, Grantor hereby assigns, transfers and sets over to Beneficiary all
leases of any part of the Trust Property, now in effect or hereafter made, and
hereby assigns and transfers to Beneficiary all the right of Grantor in and to
sale contracts to or affecting any part of or interest in the Property, whether
now in effect or hereafter made, and hereby further assigns to Beneficiary all
of Grantor's right to receive the rents, issues, profits and sale proceeds (the
"Income") reserved or provided by such leases or sale contracts, or paid or
payable to Grantor upon a sale, transfer, or other disposition of the Property,
or any portion thereof or interest therein; provided, however, that until
Grantor shall commit or permit some act of default under the Note, this Trust
Deed or any other instrument securing the Note, Grantor may receive, collect
and receipt for said Income, not exceeding, however, more than thirty (30) days
in advance, paying over to Beneficiary only so much thereof as is required to
comply with the obligations resting upon Grantor under and by the terms hereof
and of the Note, but in the event that Grantor shall commit or permit any act
of default hereunder, then and in that event, and from that time on, said
lessees and/or any other party to any such sale agreement are authorized,
required and directed to pay the Income thereafter falling due under and by the
terms of said agreements or instruments directly to Beneficiary, and
Beneficiary is authorized to demand, collect, receive and receipt for such
income and apply the moneys so collected, in its discretion, to any or all of
the following purposes:
(a) To the payment of any taxes assessed upon the Trust Property,
whether or not the same be delinquent;
(b) To the payment of any assessments or other governmental
charges assessed against the Trust Property, whether or not the same be
delinquent;
(c) To the payment of any insurance premiums paid or incurred by
the Beneficiary, or any expenditure which, in the judgment of the Beneficiary,
is proper for the care of the Trust Property;
(d) To the payment of any interest accrued on the Note secured by
this Trust Deed;
(e) To the payment, on account of the principal, of the Note
secured by this Trust Deed, whether or not there be any
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<PAGE> 65
payments on account of principal due at the time and whether or not the
Beneficiary has exercised the right secured by this Trust Deed to declare the
entire principal due by reason of any default hereunder; and
(f) To all other amounts or obligations secured by this
Deed of Trust;
and that upon notice and demand Grantor will further transfer and assign to
Beneficiary, in form satisfactory to Beneficiary, Grantor's interest in any
lease or sale agreement now or hereafter affecting the whole or any part of the
Property. Grantor will not assign the whole or any part of the rents, income or
profits arising from the Trust Property without the written consent of the
Beneficiary and any assignment thereof without such consent shall be void.
Section 12. Events of Default.
The following shall constitute events of Default:
12.1 Nonpayment. If for any payment due under the Note or any
amount due under this Deed of Trust, the entire amount due (including
principal, interest and any applicable premiums and late charges) is not paid
within ten (10) days of the date upon which notice of default in the making of
such payment was given to Grantor.
12.2 Other Events of Default. There occurs an Event of Default
under the Note or Loan Agreement.
12.3 Breach of Other Covenant. Grantor fails to perform any other
obligation contained in the Note, the Loan Agreement, this Trust Deed or any of
the Loan Documents within thirty (30) days after notice from Beneficiary (or
Beneficiary's representative) specifying the nature of the default or, if the
default cannot be cured within thirty (30) days, failure within such time to
commence and pursue with reasonable diligence curative action. No notice of
default and opportunity to cure shall be required or given if during the
preceding twelve (12) calendar months Beneficiary has already sent a notice to
Grantor concerning default in performance of the same obligation.
12.4 Misinformation. Falsity in any material respect of the
representations and warranties given in Section 5 or of any representation,
warranty or information furnished to Beneficiary in connection with the Note,
the Loan Agreement, this Trust Deed or any Loan Document.
12.5 Sale or Transfer of Title. The sale, conveyance, transfer,
assignment, encumbrance or alienation of the Trust Property or any interest
therein, or transfer of title thereof in any manner or way by Grantor except as
permitted by Section 7.
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<PAGE> 66
12.6 Bankruptcy. Immediately upon the occurrence of any of the
following without any action or notice by Beneficiary, (i) the Grantor, or, if
Grantor is a partnership, any general partner or joint venture (collectively
the "Parties in Interest") becomes insolvent, makes a transfer in fraud to, or
an assignment for the benefit of, creditors, or admits in writing its
inability, or is unable, to pay debts as they become due; or (ii) a receiver,
custodian, liquidator or trustee is appointed for all or substantially all of
the assets of a Party in Interest or for the Property in any proceeding brought
by a Part in Interest, or any such receiver or trustee is appointed in any
proceeding brought against a Party in Interest or the Property and such
appointment is not promptly contested or is not dismissed or discharged within
120 days after such appointment, or a Party in Interest consents or acquiesces
in such appointment; or (iii) a Party in Interest files a petition under the
Bankruptcy Code, as amended, or under any similar law or statute of the United
States or any state thereof; or (iv) a petition against a Party in Interest is
filed commencing an involuntary case under any present or future Federal or
state bankruptcy or similar law and such petition is not dismissed or
discharged within 120 days after the filing thereof; or (v) any composition,
rearrangement, liquidation, extension, reorganization or other relief of
debtors now or hereafter existing is requested by a Party in Interest.
12.7 Adverse Court Action. A court or competent jurisdiction enters
a stay order with respect to, assumes custody of or sequesters all or a
substantial part of, the Property, or the Property is taken on execution or by
other process of law, and such order, custody, sequestration, execution or
other process is not dismissed or discharged within 30 days after its
occurrence.
12.8 Certain Taxes. This subsection shall apply to the following
state taxes:
(a) A specific tax on mortgages, trust deeds, secured
indebtedness or any part of the indebtedness secured by this Deed of Trust.
(b) A specific tax on the Grantor of property subject to
a trust deed which the taxpayer is authorized or required to deduct from
payments on the trust deed.
(c) A tax on property chargeable against the beneficiary
or trustee under a trust deed or holder of the note secured thereby.
(d) A specific tax on all or any portion of the
indebtedness or on payments of principal and interest made by Grantor.
If any state tax to which this subsection applies is enacted
after the date of this Deed of Trust, an event of default shall occur when such
tax becomes due and payable unless Grantor
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lawfully pays the tax or charge imposed by the state tax on or before such date
without causing any resulting economic disadvantage or increase of tax to
Beneficiary or Trustee.
12.9 Default under Other Liens, Agreements, Leases. Default by
Grantor under any agreement, license, permit or lease affecting any portion of
the Trust Property or under any loan agreement or security instrument between
Grantor and, or given by Grantor to, another person and affecting any portion
of the Trust Property.
12.10 Management Change. Failure at any time and for any reason
other than the death or incapacity of Richard W. Boehlke, either of Richard W.
Boehlke or an entity controlled by Richard W. Boehlke to be the active manager
of the assisted living facility covered by this Deed of Trust.
12.11 Maximum Indebtedness. If at any time the total principal
obligation outstanding under the Note, plus the principal amount outstanding
under any other obligation secured by the Property, exceeds $7,605,000.00.
Section 13. Remedies in Case of Default.
If an event of default shall occur Beneficiary or Trustee, as the case
may be, may exercise any of the following rights and remedies, in addition to
any other remedies which may be available at law, in equity, or otherwise:
13.1 Acceleration. Beneficiary may declare the entire principal
amount of the Note together with all interest and prepayment penalties to be
immediately due and payable.
13.2 Books and Records. Beneficiary may examine all books, records
and contracts of Grantor pertaining to the Trust Property and make such
memoranda thereof as may be desired.
13.3 Receiver. Beneficiary may have a receiver of the Trust
Property appointed. Beneficiary (or a Trustee) shall be entitled to the
appointment of a receiver as a matter of right whether or not the apparent
value of the Trust Property exceeds the amount of the secured indebtedness. Any
receiver appointed may serve without bond. Employment by Trustee or Beneficiary
shall not disqualify a person from serving as receiver.
13.4 Possession. Beneficiary may, either through a receiver or as a
lender-in-possession, take possession of all or any part of the Trust Property,
and Grantor shall peaceably surrender the same.
13.5 Rents and Revenues. Beneficiary may revoke Grantor's right to
collect the income from the Trust Property, and may, either itself or through a
receiver, collect the same. To
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facilitate collection, Beneficiary may notify Grantor's tenants or the other
parties to any contract or instrument affecting the Trust Property to pay income
directly to it. Beneficiary shall not be deemed to be in possession of the
Trust Property solely by reason of exercise of the rights contained in this
Section 13.5. if income is collected by Beneficiary under this Section 13.5,
Grantor hereby irrevocably designates Beneficiary as Grantor's attorney-in-fact
to endorse instruments received in payment of income due, in respect of any
part of the Trust Property, in the name of Grantor and to negotiate such
instruments and collect the proceeds thereof.
13.6 Foreclosure. Beneficiary may foreclose Grantor's interest in
all or any part of the Trust Property by judicial procedure.
13.7 Fixtures and Personal Property. With respect to any fixtures
or personal property subject to a security interest in favor of Beneficiary,
Beneficiary may exercise any and all of the rights and remedies of a secured
party under the UCC.
13.8 Abandon Security. Beneficiary may abandon any security
afforded by this Trust Deed or any other Loan Document by notifying Grantor of
Beneficiary's election to do so.
13.9 Power of Sale. Beneficiary may direct Trustee to, and Trustee
shall be empowered to, foreclose the Trust Property by advertisement and
exercise of the power of sale under applicable law.
13.10 Sale of Personal Property; Bid at Public Sale. In exercising
its rights and remedies, Beneficiary shall be free to sell all or any part of
the Personal Property together or separately, or to sell certain portions of
the Personal Property and refrain from selling other portions. Beneficiary
shall be entitled to bid at any public sale of all or any portion of the
Personal Property.
13.11 Cumulative Remedies. Election to pursue one remedy shall not
exclude resort to any other remedy, and, unless the context otherwise requires,
all remedies under this Trust Deed are cumulative and not exclusive. In
addition to the specific remedies provided herein, Beneficiary shall have all
rights and remedies provided by the law of the State in which the Trust
Property is located. An election to cure under Section 16.7 shall neither
prejudice the right to declare a default nor constitute a waiver of the
breached term or of any of the remedies provided herein. No delay or omission
in exercising any right or remedy shall impair that or any other right or
remedy or shall be construed to be a waiver of the default.
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Section 14. Receiver or Trustee-in-Possession.
Upon taking possession of all or any part of the Trust Property, a
receiver or Trustee or Beneficiary or Beneficiary's representative may:
14.1 Management. Use, operate, manage, control and conduct business
on the Trust Property and make expenditures for such purposes and for
maintenance and improvements as in its judgment are necessary.
14.2 Rents and Revenues. Collect all rents, revenues, income,
issues and profits from the Trust Property and apply such sums to the expenses
of use, operation, management, maintenance and improvement.
14.3 Work in Progress or Construction. At its option, complete any
work in progress or construction in progress on the Trust Property, and in that
connection pay bills, borrow funds, employ contractors and make any changes in
scope, plans and specifications as it deems appropriate.
14.4 Additional Indebtedness. If the revenues produced by the Trust
Property are insufficient to pay expenses, including, without limitation, any
disbursements made by Beneficiary or Trustee pursuant to this Section 15.4, a
receiver may borrow, or Beneficiary or Trustee may advance, such sums upon such
terms as it deems necessary for the purposes stated in this section, and
repayment of such sums shall be secured by this Trust Deed. Amounts borrowed or
advanced shall bear interest at a rate equal to the lesser of fifteen percent
(15%) per year or the highest rate permitted by applicable law. Amounts
borrowed or advanced and interest thereon shall be payable by Grantor to
Beneficiary or Trustee on demand.
Section 15. Application of Proceeds.
All proceeds realized from the exercise of the rights and remedies
under Sections 13 and 14 shall be applied as follows:
15.1 Costs and Expenses. To pay the costs of exercising such rights
and remedies, including the costs of any sale, the costs and expenses of any
receiver or lender-in-possession, and the costs and expenses provided for in
Section 16.5.
15.2 Indebtedness. To pay all other amounts owed by Grantor,
payment of which is secured by this Trust Deed.
15.3 Surplus. The surplus, if any, shall be paid to Borrower in
accordance with applicable law.
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Section 16. General Provisions.
16.1 Substitute Trustee. In the event of dissolution or resignation
of the Trustee, Beneficiary may substitute a trustee(s) to execute the trust
hereby created, and the new trustee(s) shall succeed to all of the powers and
duties of prior trustee(s).
16.2 Trust Deed Binding on Successors and Assigns. This Trust Deed
shall be binding on and inure to the benefit of the successors and assigns of
Grantor, Trustee and Beneficiary. If ownership of Grantor's interest in the
Trust Property becomes vested in a person other than Grantor, Beneficiary,
without notice to Grantor, may deal with Grantor's successor with reference to
this Trust Deed and the Note by way of forbearance or extension without
releasing Grantor from the obligations of this Trust Deed or liability under
the Note.
16.3 Indemnity. Grantor shall hold Beneficiary and Trustee harmless
from any and all loss and expense, including but not limited to attorneys'
fees and court costs, in any suit, action or proceeding brought against Trustee
or Beneficiary by a third party resulting from or attributable to (a) Grantor's
ownership of the Trust Estate, (b) Grantor's failure to perform any obligation
hereunder, under the Note or under any other loan document, (c) Grantor's
breach of any representation, warranty or covenant contained herein or in the
Note or any Loan Document, (d) Beneficiary's ownership of the Note or (e)
Trustee's interest under this Trust Deed, except suits, actions and proceedings
based upon a claim that Beneficiary or Trustee improperly entered into the
Trust Deed or Note or loaned money thereunder.
16.4 Notice. Any notice under this Trust Deed shall be in writing.
Any notice to be given or document to be delivered under this Trust Deed shall
be effective when either delivered in person or deposited as registered or
certified mail, postage prepaid, addressed to the party at the address first
stated in this Trust Deed; provided that any notice pursuant to exercise of the
Trustee's power of sale in the event of default shall be sufficient if such
notice complies with all provisions of applicable law pertaining to exercise of
such powers of sale. Any party may by notice to the others designate a
different address.
16.5 Expenses and Attorneys' Fees. If Beneficiary or Trustee shall
take any action, judicial or otherwise, to enforce the Note or any provision of
this Trust Deed or if Beneficiary or Trustee shall be required to appear in any
proceeding to protect and maintain the priority of Trustee's title to the Trust
Property, Trustee or Beneficiary (or both) shall be entitled to recover from
Grantor all expenses which it or they may reasonably incur in taking such
action, including but not limited to costs incurred in searching records, the
cost of title reports and surveyors' reports, and attorneys' fees, whether
incurred in a suit or action or any appeals from a judgment or decree therein
or in connection with nonjudicial action. Grantor shall reimburse Beneficiary
or
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<PAGE> 71
Trustee (or both) for expenses so incurred on demand with interest, at a rate
equal to the lesser of fifteen percent (15%) per annum or the highest rate
permitted by applicable law, from the date of expenditure until repaid.
16.7 Beneficiary's Right to Cure. If Grantor fails to perform any
obligation required of it under this Trust Deed, Beneficiary may, without
notice, take any steps necessary to remedy such failure. Grantor shall
reimburse Beneficiary for all amounts expended in so doing on demand with
interest, at a rate equal to the lesser of fifteen percent (15%) per annum or
the highest rate permitted by applicable law, from the date of expenditure
until repaid. Such action by Beneficiary shall not constitute a waiver of the
default or any other right or remedy which Beneficiary may have on account of
Grantor's default.
16.8 Applicable Law. This Trust Deed shall be governed by the laws
of the State of California.
16.9 Financial Statements. Grantor will furnish to the Beneficiary
on or before ninety (90) days following the end of each fiscal year the
current annual fiscal year unaudited balance sheet and statements of income and
surplus of Grantor, each prepared by a certified public accountant in
accordance with generally accepted accounting principles consistently applied.
Grantor also will furnish to Beneficiary such interim financial statements as
Beneficiary may reasonably request.
16.10 Time of Essence. Time is of the essence of this Trust Deed.
16.11 Headings. The headings to the sections and paragraphs of this
Trust Deed are included only for the convenience of the parties and shall not
have the effect of defining, diminishing or enlarging the rights of the parties
or affecting the construction or interpretation of any portion of this Trust
Deed.
16.12 Severability. If any provision of this Trust Deed shall be
held to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Trust Deed, but
this Trust Deed shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
16.13 Entire Agreement. This Trust Deed, the Note and other Loan
Documents contain the entire agreement of the parties with respect to the
matters covered, and no other previous agreement, statement or promise made by
any party to this Trust Deed that is not contained in its terms or in the terms
of the Note shall be binding or valid.
16.14 Right of First Refusal. Should Grantor, during the existence
of this Deed of Trust, determine to sell, exchange, transfer or otherwise
convey the Trust Property, and should Grantor
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<PAGE> 72
receive a bona fide offer therefor from a prospective buyer who has no direct
or indirect relationship with Grantor, which offer is acceptable to Grantor,
then, before making any such sale or any agreement to sell Grantor shall give
Beneficiary notice in writing of Grantor's intention to sell to such third
party, together with a copy of the said offer, and Beneficiary shall have the
exclusive right for a period of twenty (20) days from the date of receiving
such written notice to elect to purchase said Property for the amount and upon
the terms and conditions set forth in the bona fide offer. If Beneficiary does
not elect in writing to purchase the Property in accordance with the foregoing
provisions within said twenty-day period, Beneficiary shall be deemed to have
consented to the proposed Transfer to such third party on the terms and
conditions stated in the bona fide offer, and Grantor may, within ninety (90)
days from the date on which said twenty-day period expired, sell the Trust
Property to the person making said bona fide offer for the amount and upon the
terms and conditions set forth in the offer. If such sale is not consummated
within said ninety-day period, then before the Trust Property can be sold or
again offered for sale the provisions of this Section 16.14 will apply and
Grantor will be required to offer the Trust Property to Beneficiary for the
amount and upon the terms and conditions of any further acceptable bona fide
offer. In any event, upon the sale of said Property to Beneficiary or to any
other person the indebtedness secured by this Deed of Trust will become
immediately due and payable as provided in the Note, in the amounts provided
in the Note, including but not limited to the Equity Participation Payment (as
defined at Sections 4.1 and 4.2 of the Note).
IN WITNESS WHEREOF, this Trust Deed has been duly executed by Grantor
the day and year first hereinabove written.
GRANTOR:
CROSSINGS INTERNATIONAL CORPORATION
By_________________________________
Title______________________________
STATE OF OREGON )
) ss.
County of Multnomah )
On this ___ day of ________________, 19_, before me personally
appeared ________________________ who, being duly sworn, did say that he is the
______________________________ of CROSSINGS INTERNATIONAL CORPORATION, and that
said instrument was signed on behalf of said corporation by authority of its
board of directors; and he acknowledged said instrument to be its voluntary act
and deed.
________________________________________
NOTARY PUBLIC FOR
-----------------------
My commission Expires:
------------------
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<PAGE> 73
REQUEST FOR FULL RECONVEYANCE
To be used only when obligations have been paid.
TO:__________________________________________________, Trustee
The undersigned is the legal owner and holder of all indebtedness
secured by the foregoing trust deed. All sums secured by said trust deed have
been fully paid and satisfied. You hereby are directed, on payment to you of
any sums owing to you under the terms of said trust deed or pursuant to
statute, to cancel all evidences of indebtedness secured by said trust deed
(which are delivered to you herewith together with said trust deed) and to
reconvey, without warranty, to the parties designated by the terms of said
trust deed the estate now held by you under the same. Mail reconveyance and
documents to
_________________________________________________________.
DATED:_____________________________, 19__.
_____________________________________________
Beneficiary
After recording, please return to:
Robin B. Parisi, Esq.
Lane Powell Spears Lubersky
800 Pacific Building
520 S.W. Yamhill Street
Portland, Oregon 97204-1383
Telephone (503) 226-6151
<PAGE> 74
Exhibit D
to Loan Agreement
CONSENT AND SUBORDINATION AGREEMENT
THIS AGREEMENT is made as of the ___ day ______________ of 1991,
between GUARDIAN SAVINGS AND LOAN ASSOCIATION (the "Lender") and CAPITAL
CONSULTANTS, INC., Agent ("Capital").
Recitals.
A. The Lender is beneficiary under that certain Deed of Trust of
even date herewith (the "Lender Deed of Trust") whereby a Crossings
International Corporation ("Crossings") grants to Lender a lien and security
interest in certain real and personal property and fixtures therein described,
such real property being located in San Bernardino County, California, and more
particularly described in Exhibit A (together with the personal property and
fixtures described in the Lender Deed of Trust, the "Property") to secure
payment of all indebtedness evidenced by and arising under that certain
Promissory Note of even date herewith given by Crossings to Lender in the
principal amount of $6,205,000.00 (the "Lender Note"). The obligations
evidenced by the Lender Deed of Trust and the Lender Note, and by the other
instruments and documents executed by Crossings and delivered to Lender in
connection therewith (together, the "Lender Loan Documents"), are herein
referred to as the "Lender Secured Obligations". Crossings has, as of the date
of this Agreement, acquired all right, title and interest in the Property,
subject, however, to the Secured Obligations.
<PAGE> 75
B. Capital is the beneficiary under that certain Deed of Trust
and Security Agreement of even date herewith (the "Capital Deed of Trust")
whereby Crossings grants to Capital a lien and security interest in the
Property, to secure payment of all indebtedness evidenced by and arising under
that certain Promissory Note of even date herewith given by Crossings to
Capital in the principal amount of $1,400,000.00 (the "Capital Note"). The
Capital Note is being given pursuant to that certain Loan Agreement of even
date herewith between Crossings and Capital (the "Capital Loan Agreement"). The
obligations evidenced by the Capital Loan Agreement, the Capital Deed of Trust
and the Capital Note, and such other instruments and documents executed and
delivered by Crossings to Capital in connection therewith (together, the
"Capital Loan Documents"), are herein referred to as the "Capital Secured
Obligations."
C. Capital is willing to give value for and to accept the Capital
Note notwithstanding that the Capital Secured Obligations shall be subordinate
to the Lender Secured Obligations, only if Lender is willing to accord Capital
certain rights including the right to cure any default by Crossings in the
payment or performance of the Lender Secured Obligations. Lender is willing to
grant Capital such right upon, and subject to, the terms and conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree:
2
<PAGE> 76
Agreement.
1. Consent and Subordination. Lender hereby consents to
Crossings' execution and delivery of the Capital Loan Documents. All of
Capital's right, title and interest in and to the Property shall be junior,
inferior and subordinate to Lender's lien on and security interest in the
Property created by Lender Loan Documents. Subject to the provisions of Section
3, Lender may exercise any and all remedies that it may have under the Lender
Loan Documents, whether at law or in equity with respect to the Property, free
of any interest of Capital. Without limiting the generality of the foregoing,
all of Capital's right, title and interest in and to the Property, whether
arising under the Capital Deed of Trust or otherwise, may be foreclosed by
Lender.
2. Agreement Controls Priorities. The priorities specified in
this Subordination Agreement are applicable, irrespective of the time or order
of acquiring title to, or of attachment, recording or perfection of, the liens
on and security interests in the Property, as evidenced by the Lender Loan
Documents, the Capital Loan Documents and any other document or instrument
creating an interest or lien in the Property. The priority specified in this
Subordination Agreement shall supersede any conflicting rules under the laws of
the State of Colorado.
3. Notice to Capital and Opportunity to Cure. Simultaneously with
sending a default notice to Crossings under the Lender Loan Documents, Lender
shall send a copy of such notice to Capital. From and after the giving of such
notice to Capital, Capital shall have the same period for remedying any default
under
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<PAGE> 77
the Lender Loan Documents, or for causing the same to be remedied, as is given
to Crossings. Lender shall accept performance by or at the instigation of
Capital as if the same had been made by Crossings.
4. Amendment to Lender Loan Documents. Lender shall not, at any
time, enter into any amendment, modification, extension, waiver or release of,
or affecting, the Lender Loan Documents until Lender shall have first obtained
Capital's prior written consent thereto, which consent shall not be
unreasonably withheld provided that any such amendment, modification,
extension, waiver or release does not materially adversely affect Capital's
interests under and pursuant to the Capital Loan Documents. If any amendment,
modification, extension, waiver or release of, or affecting, the Lender Loan
Documents is made without having first obtained Capital's written consent, then
such amendment, modification, extension, waiver or release shall be void.
5. Notice to Assignees. Each party shall notify its respective
transferees or assignees that this Subordination Agreement is in effect. Each
party shall notify the other in writing of any such assignment or transfer.
6. No Waiver. No failure, omission or delay on the part of Lender
in exercising any right hereunder, or in taking any action to enforce or
collect pursuant to the Lender Loan Documents, shall operate as a waiver of any
such right or in any manner prejudice the rights of Lender as they relate to
the rights of Capital that are subordinated hereby.
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<PAGE> 78
7. Agreement for Benefit Of Lender. This Subordination Agreement
is made for the sole benefit of Lender and its successors and assigns, and no
other person or entity is intended to or shall have any rights under this
Subordination Agreement, whether as a third party beneficiary, under operation
of law or otherwise. Neither Lender or Capital shall have any liability to
Crossings for any failure to comply with the terms of this Subordination
Agreement.
8. Costs and Expenses. The prevailing party shall be entitled to
recover from the other all reasonable attorneys' fees, costs and expenses
(whether incurred at trial, on any appeal therefrom or in connection with any
petition for review), incurred in the enforcement of this Agreement, said
amount or amounts to be set by the court before which the matter is heard.
9. Successors and Assigns. This Agreement shall be binding upon
the parties and their successors, assigns and other legal representatives, and
shall inure to the benefit of the parties and their successors, assigns and
other legal representatives.
10. Modifications. No provision of this Agreement shall be
modified or limited, except by a written agreement signed by the parties, nor
shall any provision be modified or limited by course of conduct or usage of
trade.
11. Notices. Any notice or demand upon Capital or the Bank shall
be deemed to be sufficiently given or served if it is in writing and personally
served, or in lieu of personal service,
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<PAGE> 79
mailed by first class, certified mail, postage prepaid, addressed to Capital or
Lender, as the case may be, at the following address:
If to Capital: Capital Consultants, Inc., Agent
2300 S.W. First Avenue
Portland, OR 97201
Attn: Jeffrey L. Grayson, President
With copy to: Lane Powell Spears Lubersky
520 S.W. Yamhill Street
Suite 800
Portland, OR 97204
Attn: Robin B. Parisi, Esq.
If to Lender: Guardian Savings and Loan Association
17811 Beach Blvd., 15th Floor
Huntington Beach, CA 92677
Attn: President
Any notice or demand so mailed shall be deemed received on the date of
actual receipt, or on the third business day following mailing, whichever first
occurs.
13. Counterparts. This Subordination Agreement may be signed in
one or more counterparts, all of which shall be considered one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
CAPITAL CONSULTANTS, INC., Agent
By
------------------------------------
Title
---------------------------------
"Capital"
6
<PAGE> 80
GUARDIAN SAVINGS AND LOAN ASSOCIATION
By
-------------------------------------
Title
----------------------------------
"Lender"
STATE OF OREGON )
) ss.
County of Multnomah )
On this ____ day of ____________________, 19__, before me personally
appeared _____________________________________________ who, being duly sworn,
did say that he/she is the _________________________ of CAPITAL CONSULTANTS,
INC., Agent, and that said instrument was signed on behalf of said corporation
by authority of its board of directors; and he/she acknowledged said instrument
to be its voluntary act and deed.
---------------------------------------
NOTARY PUBLIC FOR
---------------------
My commission Expires:
-----------------
STATE OF_______________________)
) ss.
County of______________________)
On this ___ day of ________________, 19__, before me personally
appeared ____________________________ who, being duly sworn, did say that
he/she is the ___________________________ of GUARDIAN SAVINGS AND LOAN
ASSOCIATION ASSOCIATION, and that said instrument was signed on behalf of said
financial institution by authority of its board of directors; and he/she
acknowledged said instrument to be its voluntary act and deed.
---------------------------------------
NOTARY PUBLIC FOR
----------------------
My Commission Expires:
-----------------
7
<PAGE> 81
EXHIBIT A
Real Property Description
Parcel No. 1, Parcel Map No. 7277, in the County of San Bernardino, State of
California, as per Map Recorded in Book 83 of Parcel Maps, Page(s) 24, in the
Office of the County Recorder of said County.
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EXHIBIT 10.47
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of
______________________, 1996 by and between L.J. CASE and R.W. CASE, II, as
tenants in common ("Seller"), and NEW CROSSINGS INTERNATIONAL CORPORATION, a
Nevada corporation ("Buyer").
For and in consideration of the agreements described herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Buyer agree as follows:
1. Purchase and Sale -- Property Description. Subject to the
terms and conditions of this Agreement, Seller agrees to sell to Buyer, and
Buyer agrees to purchase from Seller, approximately 4.0 acres, of real estate
located on the northwest corner of Vickers and Union Boulevard in Colorado
Springs, Colorado, which property is more particularly described and depicted
on Exhibit "A" (the "Land") attached hereto, together with:
(a) All plans, surveys, drawings, specifications,
renderings, development related estimates, engineering reports and
studies, hydrological and geological reports and studies, appraisals,
landscape plans and environmental statements, reports and surveys, if
any, that pertain, directly or indirectly to the Land and all studies,
statements or materials, if any, prepared for submission or submitted
to any governmental or quasi-governmental agency relating, directly or
indirectly, to the Land (collectively the "Development Documents");
(b) All warranties received or to be received by
Seller relating, directly or indirectly, to the Land or any of the
Development Documents (collectively the "Warranties");
(c) All of Seller's right, title and interest in and
to all licenses, government approvals and permits, if any, affecting
the Land (collectively the "Permits"); and
(d) All other rights, privileges, tangible or
intangible interests and appurtenances owned by Seller's in any way
related to the Land.
All of the foregoing shall be collectively referred to herein as the
"Property".
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2. Purchase Price -- Payment Terms.
(a) Earnest Money. Upon the execution and delivery of
this Agreement by both Buyer and Seller, Buyer shall deliver, to the Closing
Agent (identified and defined below) a promissory note in the principal amount
of FIVE THOUSAND AND 00/100 DOLLARS ($5,000.00) in the form attached hereto as
Exhibit "B" (the "Earnest Money Note"), together with evidence of Buyer's
authority to execute and deliver this Agreement and the Earnest Money Note.
The Earnest Money Note shall be due and payable upon the expiration of the Due
Diligence Period or as otherwise provided in Section 6 below, and paid to the
Closing Agent to hold in escrow. (The Earnest Money Note and the proceeds of
the Earnest Money Note when paid to the Closing Agent shall be referred to
herein as the "Earnest Money Deposit"). The proceeds received by the Closing
Agent on the Earnest Money Note shall be placed in a federally insured interest
bearing account acceptable to Buyer and disbursed in accordance with the terms
of this Agreement. Any interest earned on the proceeds paid on the Earnest
Money Note shall inure to the Benefit of Buyer, unless the Earnest Money
Deposit is distributed to Seller as liquidated damages pursuant to Section 10
below. Upon Closing, the entire Earnest Money Deposit shall be credited
against the Purchase Price. If the transaction which is the subject hereof
does not close because of the lack of satisfaction of any condition contained
herein, or for any other reason other than a default by Buyer, the Earnest
Money Deposit shall be returned to Buyer.
(b) Purchase Price. The total purchase price for the
Property, including the Earnest Money (the "Purchase Price"), is FOUR HUNDRED
TWENTY THOUSAND DOLLARS ($420,000.00) all cash at closing.
3. Title. At Closing, Seller, shall deliver to Buyer fee simple
title, free and clear of all liens and encumbrances, subject only to the
Permitted Exceptions (defined below). To the best of Seller's knowledge there
currently are no liens or encumbrances on the Property. Seller shall also
deliver or cause to be delivered a certificate of taxes due issued pursuant to
Section 39-10-115, C.R.S., covering the Property, prepared by the Treasurer of
El Paso County, Colorado, and dated no earlier than the date of this Agreement.
4. (a) Title Commitment. As soon as possible but in no event
more than fifteen (15) days from the date hereof, Seller shall cause to be
furnished to Buyer a current commitment for an ALTA owner's extended coverage
policy of title insurance, on form B-1970 or its equivalent (the "Title
Commitment"), together with such endorsements as Buyer may require, issued
through Chicago Title Insurance Company or other title company approved by
Buyer
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(the "Title Company"), describing the Land, listing Buyer as the prospective
named insured and showing as the policy amount the total purchase price for the
Property. When Seller causes the Title Commitment to be furnished to Buyer,
Seller also shall cause to be furnished to Buyer legible and true copies of all
instruments referred to in the Title Commitment as conditions or exceptions to
title.
(b) Survey. As soon as possible but in no event more
than twenty (20) days from the date hereof, Seller shall cause to be prepared
and furnished to Buyer and the Title Company an ALTA survey (the "Survey") of
the Land which has been prepared by a Licensed Public Surveyor. The Survey
shall: (i) be dated as of a date within six (6) months of the date hereof; (ii)
include a legal description of the Land; (iii) accurately show the location and
dimensions of all improvements, encroachments, uses (including the location of
all highways, streets, roads, easements, alleys and rights-of-way upon or
adjacent to the Land) and encumbrances which are visible on the ground or
listed on the Title Commitment (identifying each by recording if applicable);
(iv) recite the exact area of the Land; (v) show all building set-back lines;
and (vi) contain a certificate specifically addressed to Buyer, Seller and the
Title Company verifying that (A) the Survey was made on the ground of the Land,
(B) the Survey is correct, and (C) there are no improvements, encroachments or
visible uses except as shown on the Survey. The Survey must be satisfactory to
the Title Company so as to enable it to issue the extended coverage ALTA title
insurance with such endorsements as Buyer may require.
(c) Review of Title Commitment and Survey. Buyer shall
have fifteen (15) days after its receipt of the last to be received of the
Title Commitment and Survey (the "Review Period") in which to notify Seller of
any objections Buyer may have to any matters shown or referred to in the
Title Commitment or Survey. Any specific exceptions or title defects set forth
in the Title Commitment or Survey to which Buyer does not object within the
Review Period shall be deemed to be permitted exceptions (the "Permitted
Exceptions"). With regard to items to which Buyer does object within the
Review Period, Seller shall use its best efforts to cure such objections within
thirty (30) days of being notified of Buyer's objection. If Seller is unable in
spite of its best efforts to cure such objections within said thirty (30) days,
Buyer may, at Buyer's option, (i) waive the objections not cured or (ii)
terminate this Agreement by notice to Seller and obtain the immediate return of
the Earnest Money. Notwithstanding the above, all monetary liens or
encumbrances shall be paid, discharged and released by Seller on or before the
Closing Date and shall not be considered Permitted Exceptions.
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5. Delivery Items. As soon as possible but in no event more than
fifteen (15) days from the date hereof, Seller shall deliver to Buyer legible,
correct and complete copies or the following (the "Delivery Items"):
(i) all licenses, permits and other governmental
authorizations, including but not limited to all certificates of
occupancy, if any, relating to the Property;
(ii) all leases, contracts of employment, management,
maintenance, service, supply or rental agreements, if any, which affect
any portion of the Property or its operation;
(iii) all books and records relating to the Property,
including all rent rolls and financial statements and records, if any;
(iv) all existing environmental reports, surveys,
appraisals, market feasibility studies, surveys, plans or
specifications which relate, directly or indirectly, to the Property;
(v) information on all defects affecting any part of the
Property and of which Seller has knowledge;
(vi) the most recent ad valorem tax statements from all
taxing authorities having jurisdiction over the Property;
(vii) any and all instruments affecting Seller's title to
the Property or any part thereof other than documents referenced in the
Title Commitment and provided to Buyer by the Title Company.
Buyer, shall pay Seller their reasonable out-of-pocket costs associated
with providing the Delivery Items set forth above so long as said expenses have
been approved, in writing, by Buyer prior to their being incurred by Seller.
Seller agrees to cooperate with Buyer and to confirm, when requested by Buyer,
the accuracy of the information relied upon by Buyer. Buyer shall have until
the expiration of the Due Diligence Period provided for in Section 6 below in
which to accept or reject the Delivery Items and to copy the same at Buyer's
option. If Buyer rejects the Delivery Items, this Agreement shall terminate
and the Earnest Money Note or Earnest Money Deposit, as appropriate, shall be
promptly refunded to Buyer. If Buyer does not expressly accept the Delivery
Items within the time period provided, Buyer shall be deemed to have rejected
them.
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6. Feasibility Contingency. The condition of the Property shall
meet the approval of Buyer, in Buyer's sole discretion, upon on-site inspection
of the Property, review of the Delivery Items as set forth in Section 5, and
any other information as determined by Buyer, to be made by Buyer and approved
or rejected on or before May 31, 1996, (the "Due Diligence Period"). Buyer may,
at its sole option, extend the Due Diligence Period for two (2) additional
thirty (30) day periods ("Extended Due Diligence Period") by giving written
notice of such extension to Seller before the expiration of the Due Diligence
Period or any Extended Due Diligence Period. If Buyer elects to so extend the
Due Diligence Period, it shall pay to Closing Agent a nonrefundable extension
deposit of $5,000 for each extension, which sum shall be credited against the
Purchase Price at Closing. The Earnest Money Note shall be paid and the
proceeds delivered to the Closing Agent upon the expiration of the Due
Diligence Period.
During the Due Diligence Period or any Extended Due Diligence
Period, Buyer, its designated representatives, attorneys and auditors or agents
shall have the right to (i) examine the records and information in the
possession of Seller or any agent of Seller pertaining to the condition and
operation of the Property (the "Records"), and (ii) make copies of the Records,
at Buyer's own expense, during business hours and upon reasonable notice to
Seller. Buyer, its designated representatives or agents shall have the right
to enter the Property and, at Buyer's own expense, conduct environmental and
other audits or investigations of the Property. The investigation of the
Property shall not physically damage the Property. Buyer shall repair any
material damage caused to the Property as a result of said audits or
investigations. During the Due Diligence Period or any Extended Due Diligence
Period, Buyer shall also have the right to approach and interview all
governmental officials having jurisdiction over the Property, any and all
architects and engineers involved in the design of any Improvements made to the
Property, any contractors and others involved in constructing any Improvements
on the Property, and any other persons providing services to the Property.
Buyer shall indemnify, defend and hold Seller harmless against any and all
liabilities, losses, expenses, claims, damages and mechanic's liens resulting
from the exercise by Buyer or Buyers agents or contractors of the rights
granted hereunder. If Buyer concludes that the Property fails to meet Buyer's
standards in Buyer's sole discretion, Buyer may terminate this Agreement upon
written notice to Seller on or before the expiration of the Due Diligence
Period or any Extended Due Diligence Period. If no notice is given by Buyer to
Seller waiving or satisfying the condition in this Section prior to the end of
the Due Diligence Period or any Extended Due Diligence Period, Buyer will be
deemed to have
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terminated this Agreement. If Buyer so terminates this Agreement within the
Due Diligence Period or any Extended Due Diligence Period, the Earnest Money
Note or Earnest Money Deposit, as the case may be, shall immediately be
returned to Buyer and neither party shall have any further obligation to the
other hereunder.
7. Representations and Warranties of Seller. Seller hereby
represents and warrants as of the date hereof and as of the Closing Date that:
(a) Organization. Seller has full right, title,
authority and capacity to execute and perform this Agreement and to consummate
all of the transactions contemplated herein, and the individual(s) who on
Seller's behalf execute and deliver this Agreement and all documents to be
delivered to Buyer hereunder are and shall be duly authorized to do so.
(b) Condemnation. To the best of Seller's knowledge,
there is no pending condemnation or similar proceeding affecting the Property
or any portion thereof, and Sellers have not received any notice and have no
knowledge that any such proceeding is contemplated.
(c) Contracts. There are no contracts or other
obligations outstanding for the sale, exchange, lease or transfer of the
Property or any portion thereof.
(d) Violation of Laws. To the best of Seller's
knowledge, there are no violations of any federal, state, county or municipal
law, ordinance, order, regulation or requirement affecting any portion of the
Property, and no written notice of any such violation has been issued by any
governmental authority.
(e) No Hazardous Waste; Indemnity. Seller has not
received notification of any kind suggesting that the Property is or may be
contaminated or targeted for an environmental cleanup. Neither the Property
nor any portion thereof is or, to the best of Seller's knowledge, has been used
(i) for the storage, disposal or discharge of oil, solvents, fuel, chemicals or
any type of toxic or dangerous or hazardous waste or substance; or (ii) as a
landfill or waste disposal site. Except with respect to those items
specifically set forth in any Phase I Environmental Audit conducted by Buyer on
or after the execution of this Agreement and up to the Closing Date, Seller
shall indemnify, defend and hold Buyer and its successors and assigns harmless
from and against any and all loss, damage, claims, penalties, liability, suits,
costs and expenses (including, without limitation, reasonable attorneys' fees)
and also including without limitation, costs of remedial action or cleanup,
suffered or incurred by Buyer or any of Buyer's successors or assigns arising
out of or related to any such use
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of the Property, or portion thereof, which would constitute a misrepresentation
by Seller of one of the foregoing representations or a breach by Seller of one
of the foregoing warranties.
(f) No Special Assessments. There are no outstanding
assessments of special taxes due, and Seller has no knowledge of any pending
assessments affecting the Property to be sold and conveyed by Seller hereunder.
The Property is not subject to any deferred or rollback taxes on account of any
subdivision or change in zoning or land use classification of the Property, and
Buyer shall have no liability for any such taxes.
(g) Access; Utilities. To the best of Seller's
knowledge, no facts or conditions exist which would result in the termination
of the current access from the Property to any presently existing highways and
roads adjoining or situated on the Property, or to any existing sewer or other
utility facilities servicing, adjoining or situated on the Property.
(h) Development Commitments. Except as disclosed in
writing to Buyer as part of Buyers review of the Property, Seller has not made
and will not make any commitments or representations to the applicable
governmental authorities, or any adjoining or surrounding property owners,
which would in any manner be binding upon Buyer or interfere with Buyer's
ability to develop and improve the Property.
(i) Adverse Possession. There are no adverse parties in
possession of the Property or of any part thereof and no parties in possession
thereof except Seller, and no party has been granted any license, lease, or
other right relating to the use or possession of the Property.
(j) Creditors Claims. There are no attachments,
executions, assignments for the benefit of creditors, receiverships,
conservatorship or voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor relief laws contemplated or filed by Seller or
pending against Seller or the Property.
(k) Improvement Contracts. On the Closing Date there
will be no outstanding contracts made by Seller for any improvements to the
Property which have not been fully paid for and Seller shall have discharged
all mechanic's or materialmen's liens arising from any labor or materials
furnished to the Property prior to the Closing Date.
(l) Foreign Seller. No Seller is a "foreign person" as
that term is used in Section 1445(b)(2) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the related
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regulations. Seller shall execute and deliver to Buyer on the Closing Date a
valid certification of non-foreign person status ("Non-Foreign Affidavit"),
duly executed under penalty of perjury and in form and substance which complies
with the requirements of the Code and related regulations.
(m) Litigation. There are no legal actions, suits or
other legal or administrative proceedings, including condemnation cases,
pending or, to the best of Seller's knowledge, threatened against or affecting
the Property, and Seller is not aware of any facts which might result in any
such action, suit or other proceedings, and there are no outstanding judgments
against Seller or the Property.
(n) Disclosure of Adverse Facts. To the best of Seller's
knowledge, there is no significant adverse fact or condition relating to the
Property which has not been specifically disclosed in writing by Seller to
Buyers, and Seller knows of no fact or condition of any kind or character
whatsoever which has not been disclosed and which materially and adversely
affects the Property.
(o) Information. All statements made herein are true and
correct and the information provided and to be provided by Seller to Buyer
relating to this Agreement does not and will not contain any statement which,
at the time and in the light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact (which is known, or in the exercise of reasonable diligence by
Seller, should have been known) necessary in order to make any statement
contained therein not false or misleading in any material respect.
(p) Casualty. The Property has not been affected by any
fire, explosion, accident, governmental restriction, flood, drought, storm,
earthquake, Act of God or other casualty, whether or not insured, which has
materially and adversely affected the condition of the Property.
(q) Future Agreements. From and after the date hereof,
and except as otherwise provided in this subparagraph, Seller shall not,
without the prior written consent of Buyer enter into any agreement, contract,
commitment, lease or other transaction which affects the Property in any way or
sell, dispose of or encumber any portion of the Property.
If, during the period between execution of this Agreement and the
Closing Date, Seller has actual knowledge of,
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learns of, or have reason to believe that any of the above representations and
warranties may cease to be true, Seller hereby covenants to give immediately
written notice to Buyer of the change of circumstances. Upon the occurrence of
such a change in circumstances, or upon Seller's notifying Buyer of the change
in circumstances, Buyer may, at its sole option, terminate this Agreement and
the Earnest Money and any additional sums deposited into escrow or delivered to
Seller in connection herewith shall be immediately returned to Buyer. In the
event Buyer elects to terminate this Agreement, Seller and Buyer shall each pay
one-half of all escrow cancellation costs, if any. The representations and
warranties set forth above and all indemnification obligations set forth in
this Agreement shall survive Closing.
8. Conditions Precedent to Buyers' Obligation to Close. Buyer's
obligation to close is conditioned upon satisfaction of each of the following
conditions at or prior to the Closing Date (or such earlier date as is
specified below):
(a) Representations and Warranties. The representations
and warranties of Seller set forth in Section 7 above shall be true and correct
as of the Closing Date and Seller shall so represent in writing.
(b) Title and Survey. Buyer shall not have disapproved
the Title Commitment and Survey within the time period specified in Section
4(c) above and there shall have been no adverse change in the state of Seller's
title to the Property to be transferred, conveyed or sold to Buyer, as
previously approved by Buyer.
(c) Financing. Buyer shall have obtained a commitment
for financing for the Purchase Price on terms and conditions acceptable to
Buyer within ninety (90) days of the date hereof.
(d) Property Condition and Development Suitability.
Buyer shall be satisfied, in its sole good faith discretion, that the Property
is suitable for its planned development on or before the expiration of the Due
Diligence Period or any Extended Due Diligence Period.
(e) Land Use Approvals. Buyer shall have obtained all
zoning and other land use changes and clearances, which are necessary or
desirable in Buyer's judgement to develop the Property in accordance with
Buyer's development plans (the "Land Use Approvals"), with conditions and
restrictions acceptable to Buyer, and all appeal periods relating thereto shall
have expired. This contingency must be satisfied or waived on or before the
expiration of the Due Diligence Period or any
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Extended Due Diligence Period; provided, however, Buyer shall have the right to
extend the foregoing deadline an additional two (2) full calendar months upon
notice to Seller. Buyer will be solely responsible for obtaining all Land Use
Approvals and will exercise reasonable diligence in its efforts to obtain said
Land Use Approvals. Upon request, Buyer will advise Seller regarding the
status of its efforts to obtain said Land Use Approvals. Seller will have no
right to act as Buyer's agent or representative in connection with Buyer's
efforts to obtain the Land Use Approvals. Seller will cooperate in good faith
with Buyer in connection with Buyer's efforts to obtain the Land Use Approvals
and will execute and deliver any agency or other documents necessary to allow
Buyer to obtain the Land Use Approvals.
(f) Development Permits. Buyer shall have obtained all
clearing, grading, building and other permits and authorizations which are
necessary or desirable in Buyer's judgement to construct and develop the
Property in accordance with Buyer's development plans (the "Development
Permits"), with conditions and restrictions acceptable to Buyer, and all appeal
periods relating thereto shall have expired. This contingency must be
satisfied or waived on or before the expiration of the Due Diligence Period or
any Extended Due Diligence Period; provided, however, Buyer shall have the
right to extend the foregoing deadline an additional two (2) full calendar
months upon notice to Seller. Buyer will be solely responsible for obtaining
all Development Permits and will exercise reasonable diligence in its efforts
to obtain said Development Permits. Upon request, Buyer will advise Seller
regarding the status of its efforts to obtain said Development Permits. Seller
will have no right to act as Buyer's agent or representative in connection with
Buyer's efforts to obtain the Development Permits. Seller will cooperate in
good faith with Buyer in connection with Buyer's efforts to obtain the
Development Permits and will execute and deliver any agency or other documents
necessary to allow Buyer to obtain the Development Permits.
(g) Closing Documents. All of Seller's closing documents
shall have been received by the Closing Agent in a form acceptable to Buyer.
(h) Legal Lot Status. Within sixty (60) days of the date
hereof, Seller shall have established the Land as separate legal lot capable of
being conveyed to Buyer at Closing.
Any of the foregoing conditions precedent which are not satisfied on or
before the Closing Date may be waived in writing by the party or parties
intended to be benefited thereby. If all of the above conditions are not
satisfied at or prior to the Closing Date (or such earlier date as is specified
with respect
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to a particular condition), Buyer may terminate this Agreement by notice to
Seller, and Seller shall immediately cause Buyer's Earnest Money to be returned
to Buyer whereupon Buyer shall assign to Seller, without warranty, all of
Buyer's rights to any and all Permits and Development Documents acquired by
Buyer relating to the Land. Notwithstanding the above, in the event Buyer
fails to secure financing within the ninety (90) day period referred to in
Section 8(c), above, it shall forfeit the Earnest Money Deposit referred to in
Section 2(a), above.
9. Closing - Closing Agent. The sale of the Property shall be
closed in escrow at the offices of the Title Company, provided said company is
bonded and licensed to act as an escrow agent, otherwise any escrow agent that
may be selected by Seller and Buyer (herein the "Closing Agent") after
satisfaction or waiver in writing of all conditions stated in Paragraph 8
above, upon ten (10) business days' advance written notice given to Buyer by
Seller; provided, that the Closing Date shall not occur, any later than August
31, 1996, as long as the conditions stated in Paragraph 8 have been satisfied
or waived. Seller and Buyer shall deposit in escrow with the Closing Agent all
instruments, documents and monies necessary to complete the sale in accordance
with this Agreement. Escrow fees shall be divided equally between Seller and
Buyer. For purposes of this Agreement, the term "Closing Date" shall mean the
date on which all appropriate documents are recorded and proceeds of the sale
are available for disbursement to Seller.
(a) on or before the Closing Date:
(i) Seller shall deliver to Buyer the following:
(1) a General Warranty Deed (in form and
substance acceptable to Buyer and Buyer's counsel) duly
executed and acknowledged by Seller, conveying to Buyer, or
its assignee, all the Property in indefeasible fee simple free
and clear of any lien, encumbrance or exception other than the
Permitted Exceptions.
(2) An extended coverage ALTA policy of Title
Insurance issued by the Title Company conforming to the
requirements of Section 4 above insuring the title in
indefeasible fee simple in the amount of the Purchase Price
and containing no exceptions other than the Permitted
Exceptions.
(3) Funds to pay the any state or, local taxes,
one-half (1/2) of the escrow fee and all Title Policy costs,
and such other funds as are
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necessary to cover any other costs or expenses which are to be
paid by Seller under this Agreement. Seller may, as an
alternative to providing such funds, deposit with the Closing
Agent a written authorization satisfactory to the Closing
Agent providing for the deduction of such amounts out of
escrow funds due Seller.
(4) A Non-Foreign Affidavit in form and substance
satisfactory to Buyer, duly executed and acknowledged by
Seller.
(5) A certification executed by Seller in a form
acceptable to Buyer certifying that Seller's representations
and warranties as set forth in Section 7 above are true and
correct as of the Closing Date.
(6) A duly executed Bill of Sale in form
acceptable to Buyer conveying to Buyer all equipment and other
tangible and intangible personal property included as part of
the Property hereunder.
(7) A duly executed assignment instrument in form
acceptable to Buyer covering all of the Development Documents,
Permits, warranties and similar items comprising the Property,
together with the originals of such documents (or copies if
the originals are unavailable) in Seller's possession.
(ii) Buyer shall deliver to Seller the following:
(1) The consideration required pursuant to Section 2
above.
(2) Such other evidence of the authority and capacity
of Buyer and their representative as Seller or the Title
Company may reasonably require.
(b) Expenses. Seller shall pay the cost of
one-half of the escrow fee charged by the Closing Agent, Seller's share of the
prorations as set forth in Section 9(c) below, the cost of the owner's Policy
of Title Insurance, including any endorsements thereto, the Survey, and
Seller's own attorneys' fees. Buyer shall pay its proportionate share of the
prorations as set forth in Section 9(c) below, one-half of the escrow fee
charged by the Closing Agent, the recording fees for the Deed and
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Buyer's own attorneys' fees Except as otherwise provided in this Section, all
other expenses hereunder shall be paid by the party incurring such expenses.
(c) Prorations. General and/or Real property ad valorem
taxes, based on the taxes for the calendar year immediately preceding the
Closing Date, installments of current year special assessments, insurance
premiums (if and to the extent that Seller's policies are assumed by Buyer),
utility charges and other operating income or expenses, if any, shall be
prorated to the Closing Date, based upon actual days involved and the most
recent assessed valuation and mill levy. Seller shall be responsible for all
ad valorem taxes or installments of special assessments for any period prior to
the Closing Date. Except with respect to real property taxes and assessments,
to the extent that the amounts of such charges, expenses, and income referred
to in this Section are unavailable on the Closing Date or in the event of
prorations made on the basis of erroneous information or clerical errors, a
readjustment of these items shall be made within thirty (30) days following the
Closing Date or as soon as practical after discovery of any erroneous
information or clerical error. With respect to real property taxes and
assessments, the parties will readjust the proration after the next actual tax
bill is issued. Expense items shall be prorated as of the Closing Date, with
Buyer bearing all expenses for the Closing Date. Seller shall, on or before
the Closing Date, furnish to Buyer and the Closing Agent all information
necessary to compute the prorations provided for in this section.
10. Default by Seller.
(a) Seller shall be in default hereunder upon the
occurrence of any one or more of the following events:
(i) Any of Seller's warranties or
representations set forth herein are untrue or
inaccurate in any material respect.
(ii) Seller shall fail to meet, comply with or
perform any material covenant, agreement or
obligation on its part required, within the time
limits and in the manner required in this Agreement.
(b) In the event of a default by Seller hereunder,
Buyer may, at Buyer's option, do any of the following:
(i) Terminate this Agreement by written
notice delivered to Seller at or prior to the
Closing Date whereupon the Earnest Money shall
immediately be returned to Buyer; or
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(ii) Enforce specific performance of this
Agreement against Seller; or
(iii) In addition to and not to the
exclusion of the remedy in Section 10 (b) (i)
above, bring an action against Seller for damages.
11. Default by Buyer. In the event of a default
by Buyer hereunder, Seller, as Seller's sole and exclusive remedy for such
default, shall be entitled to terminate this Agreement by notice to Buyer and
retain Buyer's Earnest Money deposit, it being agreed between Buyer and Seller
that such selling shall be liquidated damages for a default of Buyer hereunder
because of the difficulty, inconvenience, and the uncertainty of ascertaining
actual damages for such default.
12. Attorneys' Fees. If either party is required
to bring any action or otherwise refer this Agreement to an attorney for, the
enforcement of any of the covenants, terms or provisions set forth herein the
prevailing party, in addition to all other remedies provided herein, shall
receive from the other party all the costs, including without limitation
reasonable attorneys' fees and expert witness fees and expenses, incurred in
the enforcement of the covenants, terms and provisions of this Agreement
(whether or not an action is instituted) and including without limitation any
such costs and fees incurred in any declaratory action, arbitration and on any
appeal or in any bankruptcy proceeding.
13. Brokerage Commission. On the Closing Date,
Seller shall pay any and all real estate commissions due and owing Sheldon-Gold
Realty, Inc., as a result of this transaction. Seller shall indemnify, defend
and hold Buyer harmless from any and all claims for real estate commissions,
brokers fees and similar obligations arising out of this transaction.
14. Seller Cooperation. Seller, upon request of
Buyer, agrees to cooperate and assist Buyer in obtaining all government
approvals necessary to develop the Property; provided, however, that nothing
contained herein shall require Seller to (i) incur any cost, expense or
financial obligation in performing its obligations under this Section 14 or
(ii) assume the responsibility of obtaining any such approvals.
15. Notices. All notices, demands, requests and
other communications required or permitted hereunder shall be in writing, and
shall be deemed delivered on the earlier of (i) three (3) business days after
posting of registered or certified mail, addressed to the addressee at the
address set forth below or at such other address as such party may have
specified
-14-
<PAGE> 15
theretofore by notice delivered in accordance with this Section, or (ii)
actual receipt by the addressee:
IF TO SELLER:
102 East Pikes Peak Avenue, Suite 600
Colorado Springs, CO 80903-1822
IF TO BUYER:
New Crossings International Corporation
c/o Dennis Rattie
1201 Pacific Avenue, Suite 1800
Tacoma, WA 98402
With a copy to:
Craig S. Gilbert
Bogle & Gates P.L.L.C.
Bellevue Place
10500 NE 8th Street, Suite 1500
Bellevue, WA 98004-4398
16. Survival. The provisions of this Agreement shall
survive Closing.
17. Governing Law. The laws of the state of Colorado
shall govern the validity, enforcement, and interpretation of this Agreement.
18. Integration; Modification; Waiver. This Agreement
constitutes the complete and final expression of the agreement of the parties
relating to the Property, and supersedes all previous contracts, agreements and
understandings of the parties, either oral or written, relating to the
Property. This Agreement cannot be modified, or any of the terms hereof
waived, except by an instrument in writing (referring specifically to this
Agreement) executed by the party against whom enforcement of the modification
or waiver is sought.
19. Good Faith. Seller and Buyer shall act in good faith
in all respects relative to the transactions contemplated hereby.
20. Counterpart Execution. This Agreement may be
executed in several counterparts, each of which shall be fully effective as an
original and all of which together shall constitute one and the same
instrument.
21. Invalid Provisions. If any one or more of the
provisions of this Agreement, or the applicability of any such provision to a
specific situation, shall be held invalid or
-15-
<PAGE> 16
unenforceable, such provision shall be modified to the minimum extent necessary
to make it or its application valid and enforceable, and the validity and
enforceability of all other provisions of this Agreement and all other
applications of any such provision shall not be affected thereby.
22. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of Seller and Buyer, and their respective heirs,
personal representatives, successors and assigns. Except as expressly provided
herein, nothing in this Agreement is intended to confer on any person, other
than the parties hereto and their respective heirs, personal representatives,
successors and assigns, any rights or remedies under or by reason of this
Agreement.
23. Indemnity. Seller agrees to indemnify, defend and
hold Buyer harmless of and from any and all liability, loss, damage or expense
(including reasonable attorneys' fees), as a result of any action, suit,
proceeding, lien or claim affecting the Property or any portion thereof, or,
any contracts and/or services related thereto, in relation to which the facts
which give rise to such action, suits or proceedings arose or occurred prior
to the Closing Date.
24. Further Assurances. From time to time, at Buyers
request, whether on or after the Closing, and without further consideration,
Seller shall execute and deliver any further instruments of conveyance and take
such other actions as Buyer may reasonably require to complete more effectively
the transfer to Buyers of the Property acquired under this Agreement.
25. Time. Time is of the essence of this Agreement.
26. Assignment by Buyer. Buyer shall have the right at
any time to assign its rights and interests hereunder to a third person.
27. Seller's Acceptance. Buyer's offer is made subject
to the acceptance of Seller on or before 5:00 p.m. on March 22, 1996.
28. SPECIAL TAXING DISTRICTS. SPECIAL TAXING DISTRICTS
MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES
PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS.
PROPERTY OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL
LEVIES AND EXCESSIVE TAX BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE
CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE
SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER SHOULD
INVESTIGATE THE DEBT FINANCING REQUIREMENTS OF THE AUTHORIZED GENERAL
OBLIGATION INDEBTEDNESS OF SUCH
-16-
<PAGE> 17
DISTRICTS, EXISTING MILL LEVIES OF SUCH DISTRICT SERVICING SUCH INDEBTEDNESS,
AND THE POTENTIAL FOR AN INCREASE IN SUCH MILL LEVIES.
SELLER:
/s/ Lindsay J. Case
---------------------------
Lindsay J. Case
/s/ R.W. Case II
---------------------------
R.W. Case II
Dated: March 22, 1996
BUYER:
NEW CROSSINGS INTERNATIONAL
CORPORATION
By: /s/
------------------------
Its Vice President
---------------------
Dated: April 4, 1996
-17-
<PAGE> 18
STATE OF COLORADO )
) ss.
COUNTY OF El Paso )
On this day personally appeared before me LINDSAY J. CASE, to me known
to be the individual described in and who executed the within and foregoing
instrument, and acknowledged that he signed the same as his free and voluntary
act and deed, for the uses and purposes therein mentioned.
Given under my hand and official seal this 22nd day of March, 1996.
/s/ Brittany Anderson
----------------------------------
(Signature)
[NOTARY SEAL]
Brittany Anderson
----------------------------------
(Name legibly printed
Notary Public in and for the State
of Colorado, residing at Colorado Springs.
My appointment expires August 1, 1999.
STATE OF COLORADO )
) ss.
COUNTY OF El Paso, )
On this day personally appeared before me R.W. CASE, II to me known to
be the individual described in and who executed the within and foregoing
instruments, and acknowledged that he signed the same as his free and voluntary
act and deed, for the uses and purposes therein mentioned.
Given under my hand and official seal this 22nd day of March 1996.
/s/ Brittany Anderson
---------------------------------
(Signature)
[NOTARY SEAL]
Brittany Anderson
---------------------------------
(Name legibly printed or stamped)
Notary Public in and for the State of
Colorado, residing at Colorado Springs.
My appointment expires August 1, 1999.
-18-
<PAGE> 19
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 3rd day of April, 1996, before me personally appeared Lee
Field, to me known to be the Vice President of the corporation that executed
the within and foregoing instrument, and acknowledged said instrument to be the
free and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument and that the seal affixed is the corporate seal of said corporation
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Kelly Rose
---------------------------------
(Signature)
[NOTARY SEAL] /s/ Kelly Rose
---------------------------------
(Name legibly printed or stamped)
Notary Public in and for the State of
Washington, residing at Pugallop
My appointment expires 8-9-94.
-19-
<PAGE> 20
EXHIBIT "A"
LEGAL DESCRIPTION
TO BE PROVIDED BY THE TITLE COMPANY
-1-
<PAGE> 21
EXHIBIT "B"
EARNEST MONEY NOTE
$5,000 ______________________, 1996
1. Principal Obligation. For value received, the undersigned
Maker hereby promises to pay to the order of ______________ (the "Holder") the
principal amount of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00) upon the terms
and conditions set forth below.
2. Interest. No interest shall accrue on the unpaid principal
unless Maker fails to pay any amounts owed hereunder when due, in which case
interest shall accrue at the Default Rate of ten percent (10%) per annum.
3. Due Date. The entire principal amount shall be paid to the
Closing Agent identified in that certain Real Property Purchase and Sale
Agreement for the property generally located at Vickers and Union Boulevard in
Colorado Springs, Colorado, signed on or about the same date as this Note (the
"Purchase Agreement") as provided in Section 2(a) of the Purchase Agreement.
All amounts owed hereunder shall be paid in full, in lawful money of the United
States of America, in same day funds, which shall be legal tender for public
and private debts at the time of payment.
4. Waiver. Makers hereby waive presentment, demand of payment,
protest and notice of nonpayment, and any and all other notices and demands
whatsoever.
MAKER:
NEW CROSSINGS INTERNATIONAL
CORPORATION
By /s/
----------------------------------
Its Vice President
----------------------------------
<PAGE> 1
EXHIBIT 10.48
Lease and Security Agreement
by and between
Nationwide Health Properties, Inc.,
a Maryland corporation,
as "Landlord"
and
New Crossings International Corporation,
a Nevada corporation
as "Tenant"
Dated March 27, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Renewal Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Construction of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Construction Period Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Stub Period and Initial Operating Term Minimum Rent . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Operating Term Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Renewal Term Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Renewal Term Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Total Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Rent Cap and Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Proration for Partial Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Form for Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Absolute Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Taxes, Assessments and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Right to Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Tax Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Course of Construction; Fire and Other Casualty . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Public Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Professional Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Workers Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Boiler Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Business Interruption Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 Deductible Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. Use, Maintenance and Alteration of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Tenant's Maintenance Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Permitted Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 No Liens; Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.6 Alterations by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Capital Improvements Funded by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.8 Compliance With IRS Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Condition And Title Of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. Landlord and Tenant Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Tenant Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Landlord's Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.4 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8. Representations And Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Due Authorization And Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.3 No Breach of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9. Financial, Management and Regulatory Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Monthly Facility Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Quarterly Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Annual Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Regulatory Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10. Events of Default and Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Receivership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Remedies Cumulative; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.6 Performance of Tenant's Obligations by Landlord . . . . . . . . . . . . . . . . . . . . . . . . 39
11. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12. Damage by Fire or Other Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.1 Reconstruction Using Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.2 Surplus Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.3 No Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.1 Complete Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.3 Lease Remains in Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14. Provisions on Termination of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.1 Surrender of Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
14.2 Removal of Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.3 Title to Personal Property Not Removed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.4 Management of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.5 Correction of Deficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15. Notices and Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16. Right of Entry; Examination of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17. Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
18. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
19. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
20. Preservation of Gross Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
21. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
21.1 Hazardous Material Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
21.2 Tenant Notices to Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
21.3 Extension of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
21.4 Participation in Hazardous Materials Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 50
21.5 Environmental Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
21.6 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
21.7 Hazardous Materials Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
21.8 Hazardous Materials Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
22. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
23. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
24. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
25. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
26. Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
27. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
28. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
29. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
30. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
31. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
32. Waiver and Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
33. Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
34. Incorporation of Recitals and Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
35. Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
36. Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
37. Joint and Several . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
38. Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . 59
39. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
CONSTRUCTION ADDENDUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
40. Development Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
41. Conditions to Initial Disbursement of Development Advance . . . . . . . . . . . . . . . . . . . . . . 62
42. Satisfaction of Initial Disbursement Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
43. Conditions to All Disbursements of Development Advance . . . . . . . . . . . . . . . . . . . . . . . . 63
44. Use of Development Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
45. Shortage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
46. Change Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
47. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
48. Substantial Completion Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
49. Tenant's Purchase Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
50. Completion by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
51. Stub Period Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
52. Third-Party Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
53. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
iv
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<TABLE>
<S> <C>
54. Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
55. Landlord's Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
56. Documents and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
57. Design Materials and Workmanship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
58. Correction of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
EXHIBITS
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT B - APPRAISAL PROCESS
EXHIBIT C - PERMITTED EXCEPTIONS
EXHIBIT D - GROUP LEASES
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<PAGE> 7
Lease and Security Agreement
THIS LEASE AND SECURITY AGREEMENT ("Lease") is made and entered into as of
the 27th day of March, 1996 by and between Nationwide Health Properties, Inc.,
a Maryland corporation ("Landlord"), and New Crossings International
Corporation, a Nevada corporation ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the owner of that certain unimproved real property,
located in Tacoma, Washington and more specifically described in Exhibit "A"
attached hereto. The foregoing property owned by Landlord and any improvements
constructed thereon shall be collectively referred to in this Lease as the
"Premises";
WHEREAS, Landlord desires to lease the Premises to Tenant, and Tenant
desires to lease the Premises from Landlord; and
WHEREAS, pursuant to that certain Side Letter Agreement dated December 15,
1995, between Landlord and Tenant, Landlord and Tenant desire Tenant to
construct, on the Premises, a residential and/or healthcare and/or long-term
care facility which provides various services for the infirm, frail and/or
elderly, including, without limitation, residential, assistance with daily
living functions, long term healthcare services and other medically related
services (collectively, "ALF/ILF") licensed for seventy (70) units (the
"Facility") and Landlord will fund construction of the Facility pursuant to the
Construction Addendum attached hereto and incorporated herein (the
"Construction Addendum").
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WHEREAS, Crossings International Corporation, a Washington corporation
("Guarantor"), has agreed to guarantee Tenant's obligations under this Lease.
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein, Landlord hereby leases and lets unto Tenant the
Premises for the term and upon the conditions and provisions hereinafter set
forth.
1. Term; Construction of Facility.
1.1 Term.
1.1.1 The "Construction Period" of this Lease shall commence on
the date Landlord advances the Purchase Price and other funds pursuant
to that certain Purchase and Sale Agreement dated March 22, 1996
between Landlord as buyer and Tenant as seller and shall end on the day
immediately prior to the first day of the Stub Period. Once it has
been determined, the parties shall enter into an amendment to this
Lease confirming the commencement date.
1.1.2 The "Stub Period" of this Lease shall commence on the Stub
Period Commencement Date (as defined in Section 51 of the Construction
Addendum) and shall end December 31 of that year.
1.1.3 The "Initial Operating Term" of this Lease shall commence
on the January 1 of the year following the year in which the Stub
Period Commencement Date occurs and shall end on December 31, 2015
unless earlier terminated in accordance with the provisions hereof.
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<PAGE> 9
1.1.4 The Initial Operating Term and all Renewal Terms are
referred to collectively as the "Operating Period", and the
Construction Period, the Stub Period and the Operating Period are
referred to collectively as the "Term".
1.2 Renewal Terms. The Operating Period may be extended for three (3)
separate renewal terms (each a "Renewal Term") of ten (10) years each, upon the
satisfaction of all of the following terms and conditions:
1.2.1 Not more than thirty (30) days before or after the date
which is fifteen (15) months prior to the end of the then current Term,
Tenant shall give Landlord written notice that Tenant desires to
determine the applicable Minimum Rent for a subsequent Renewal Term
pursuant to the provisions of Section 2.4 below for the purpose of
evaluating whether Tenant desires to exercise its right to extend the
then current Term for one (1) Renewal Term. On or before the date which
is twelve (12) months prior to the end of the then current Term, Tenant
shall give Landlord written notice if Tenant desires to exercise its
right to extend the then current Term for one (1) Renewal Term.
1.2.2 There shall be no continuing Event of Default under this
Lease, either on the date of Tenant's notices to Landlord pursuant to
Section 1.2.1 above, or on the last day of the then current Term.
1.2.3 Concurrently with the notices required under Section 1.2.1,
Tenant shall give notices with respect to the renewal or extension of
the then current term of the Group Facilities (as defined and described
on Exhibit "D" attached hereto. Tenant hereby acknowledges that the
exercise of its renewal option set forth in this Section 1.2 is
contingent upon the concurrent exercise of all of
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<PAGE> 10
Tenant's renewal or extension options with respect to the Group
Facilities. In no event shall Tenant be entitled to exercise its
renewal options under this Section 1.2 unless Tenant concurrently
exercises its renewal and extension options with respect to the Group
Facilities.
1.2.4 All other provisions of this Lease shall remain in full
force and effect and shall continuously apply throughout the Renewal
Term(s).
1.3 Construction of Facility. Tenant shall construct the Facility,
and Landlord shall fund such construction, in accordance with the Construction
Addendum.
2. Rent. Tenant shall pay to Landlord minimum rent ("Minimum Rent") and
additional rent ("Additional Rent") as follows:
2.1 Construction Period Rent. During the Construction Period, Minimum
Rent shall accrue as follows, monthly, in arrears:
2.1.1 Prior to the date of the first disbursement of the
Development Advance rent shall accrue at the monthly rate of $3,354.17
compounded monthly at ten percent (10%) per annum.
2.1.2 Beginning with the first business day of the month
following the first disbursement of the Development Advance, and on the
first business day of each month thereafter, the Minimum Rent shall be
calculated separately for each disbursement of the Development Advance
as follows: (i) the amount of each such disbursement of the Development
Advance multiplied by (ii) the average (determined as a 20 trading-day
average) of (x) a percentage equal to two hundred ninety-five (295)
basis points over the then dividend yield on the common stock of
Landlord, and (y) a percentage equal to three hundred eighty
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<PAGE> 11
(380) basis points over the 10 year United States Treasury Rate, where
the amounts set forth in subsections (x) and (y) are calculated on the
date of the each such individual disbursement. The Minimum Rent
calculated for each individual disbursement of the Development Advance
shall compound monthly in arrears at the rate so calculated for each
individual disbursement.
2.1.3 During the Construction Period, Minimum Rent shall be the
sum of the Minimum Rent calculated pursuant to Section 2.1.1 and the
Minimum Rent amounts for each disbursement of the Development Advance
calculated pursuant to Section 2.1.2.
2.1.4 Landlord shall provide Tenant with a statement of accrued rent
within a reasonable time after Tenant's written request.
2.2 Stub Period and Initial Operating Term Minimum Rent. During the Stub
Period and the Initial Operating Term, Tenant shall pay to Landlord Minimum
Rent equal to Landlord's Original Investment multiplied by the Blended Rate. As
used in this Lease, "Landlord's Original Investment" equals the sum of (i) The
Land Acquisition Cost, (ii) the sum of all disbursements under the Development
Advance, and (iii) all Accrued Construction Period Rent. As used in this Lease,
the "Land Acquisition Cost" equals the sum of $402,500. As used in this Lease,
"Accrued Construction Period Rent" equals all accrued but unpaid rent during
the Construction Period. As used in this Lease, the "Blended Rate" equals the
weighted average of the 10% rate for the Land Acquisition Cost and the rates at
which each of the disbursements of the Development Advance have been made,
weighted according to the amount of the disbursement, without taking into
account the amount of time such advance has been outstanding.
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<PAGE> 12
Such Minimum Rent with respect to each month shall be paid in advance on the
first business day of each such calendar month. At the request of either party,
the parties shall enter into an amendment to this Lease confirming the amount
of Initial Operating Period Rent payable hereunder.
2.3 Operating Term Additional Rent.
2.3.1 Commencing with the first Lease Year of the Operating
Period, Tenant agrees to pay Additional Rent to Landlord on a quarterly
basis in arrears no more than 45 days after the end of each quarter of
each Lease Year, as applicable. Such Additional Rent shall be
Landlord's Original Investment multiplied by (i) in the first year of
the Operating Period, the number of months in the stub period
(expressed as a decimal, based on a 30 day month) divided by twelve
(12) multiplied by twenty (20) basis points per annum (the "Year One
Factor"), (ii) in the second year of the Operating Period, the Year One
Factor plus twenty (20) basis points per annum, (iii) the third year of
the operating period and thereafter (including any renewal terms), the
Year One Factor plus forty (40) basis points per annum.
2.3.2 Commencing with the fourth Lease Year of the Operating
Period and continuing thereafter during the Initial Operating Term,
Tenant agrees to pay, in addition to the Additional Rent provided in
Section 2.3.1, Additional Rent to Landlord on a quarterly basis in
arrears no more than 45 days after the end of each quarter of the Lease
Year. Such Additional Rent shall be equal to the sum of (i) ten percent
(10%) of the amount by which the Gross Revenues for the Lease Year
through the applicable quarter exceed the prorated Gross Revenues
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<PAGE> 13
for the applicable portion of the Base Year and (ii) five percent
(5%) of the amount by which the Gross Medicare Home Health Revenues
for the Lease Year through the applicable quarter exceed the prorated
Gross Medicare Home Health Revenues for the applicable portion of the
Base Year and (iii) five percent (5%) of the amount by which the Gross
Non-Medicare Home Health Revenues for the Lease Year through the
applicable quarter exceed the prorated Gross Non-Medicare Home Health
Revenues for the applicable portion of the Base Year.
2.3.3 "Gross Revenues" shall be calculated according to generally
accepted accounting principles consistently applied ("GAAP") and shall
be defined as all revenues generated by the operation, sublease and/or
use of the Premises in any way, excluding (i) contractual allowances
during the Term for billings not paid by or received from the
appropriate governmental agencies or third party providers; (ii) all
proper resident billing credits and adjustments according to GAAP
relating to health care accounting; (iii) federal, state or local sales
or excise taxes and any tax based upon or measured by said revenues
which is added to or made a part of the amount billed to the resident
or other recipient of such services or goods, whether included in the
billing or stated separately; (iv) Gross Medicare Home Health Revenues;
and (v) Gross Non-Medicare Home Health Revenues.
2.3.4 "Gross Medicare Home Health Revenues" shall be calculated
according to GAAP and shall be defined as all revenues not disallowed
by the Medicare program (or any successor program) for Medicare home
health services provided by Tenant or any Affiliate of Tenant to the
residents of the Premises.
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<PAGE> 14
2.3.5 "Gross Non-Medicare Home Health Revenues" shall be
calculated according to GAAP and shall be defined as all revenues
generated by Tenant or any Affiliate of Tenant for non-Medicare home
health services to the residents of the Premises, excluding Gross
Medicare Home Health Revenues.
2.3.6 "Lease Year" shall be defined as the successive twelve (12)
month periods commencing on the date of the first day of the Operating
Period.
2.3.7 The "Base Year" during the Initial Operating Term shall
mean the third Lease Year of the Operating Period.
2.4 Renewal Term Minimum Rent. The Minimum Rent for each Renewal Term
shall be expressed as an annual amount but shall be payable in advance in equal
monthly installments on the first business day of each calendar month. Such
annual Minimum Rent shall be equal to the product of:
2.4.1 the greater of (i) the fair market value of the Premises on
the date of Tenant's notice of exercise to extend for a Renewal Term
pursuant to Section 1.2.1 or (ii) Landlord's Original Investment in the
Premises, as increased by any amount advanced by Landlord pursuant to
Section 5.7 below and as decreased by any net award paid to Landlord
pursuant to Section 13.2 below, both as applicable.
2.4.2 a percentage equal to three hundred twenty-five (325) basis
points over the 10 year United States Treasury rate as determined on a
30-day trading average immediately prior to the date of Tenant's notice
of exercise pursuant to Section 1.2.1.
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<PAGE> 15
If within ten (10) days of the date of Tenant's notice of exercise to determine
the applicable Minimum Rent for a subsequent Renewal Term pursuant to Section
1.2.1, Landlord and Tenant are unable to agree on the fair market value of the
Premises for purposes of this calculation, such fair market value shall be
established by the appraisal process described on Exhibit "B" attached hereto.
The Minimum Rent for the applicable Renewal Term must be finally determined by
such appraisal process on or before twelve (12) months prior to the expiration
of the then current Term or Tenant shall lose its right to extend the Term.
Landlord and Tenant acknowledge and agree that this Section is designed to
establish a fair market Minimum Rent for the Premises during the applicable
Renewal Terms.
2.5 Renewal Term Additional Rent. Except during the first Lease Year
of any Renewal Term, Tenant shall pay to Landlord Additional Rent in each
Renewal Term on a quarterly basis in arrears no more than 45 days after the end
of each Lease Year quarter. The Additional Rent for each Renewal Term shall be
calculated as provided in Section 2.3 except that the Base Year for the purpose
of determining Additional Rent pursuant to Section 2.3.2 shall be the first
Lease Year of the applicable Renewal Term.
2.6 Total Rent. For all purposes of calculating and paying Minimum
Rent and Additional Rent under this Lease, the total of the Minimum Rent plus
Additional Rent payable by Tenant in any Lease Year will not be less than the
total Minimum Rent plus Additional Rent paid by Tenant for the previous Lease
Year.
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<PAGE> 16
2.7 Rent Cap and Floor. During the Operating Period:
2.7.1 Notwithstanding any of the other terms of this Section 2
but subject to Sections 2.7.2 and 2.7.4 below, the total of the Minimum
Rent and Additional Rent due during each Lease Year shall not increase
from one Lease Year to the next by an amount in excess of (i) three and
one-half percent (3.5%), multiplied by (ii) the sum of the Minimum Rent
and the Additional Rent due during the immediately preceding Lease
Year.
2.7.2 The terms of Section 2.7.1 above shall have no
applicability in determining the calculation of the Minimum Rent or
Additional Rent due during the first Lease Year of any Renewal Term.
2.7.3 Notwithstanding any of the other terms of this Lease but
subject to Section 2.7.4, in no event shall the Minimum Rent in the
first Lease Year of any Renewal Term exceed one hundred fifteen percent
(115%) of the total Minimum Rent plus Additional Rent due for the last
Lease Year in the Initial Operating Term or preceding Renewal Term, as
applicable.
2.7.4 Notwithstanding any of the other terms of this Section 2, the
terms of Section 2.6 above shall continue to apply such that the sum of
the Minimum Rent and the Additional Rent due during any Lease Year
shall in no event be less than the sum of the Minimum Rent and the
Additional Rent due during the immediately preceding Lease Year.
2.7.5 To the extent that Section 2.7.1 above operates to limit
the rent for any Lease Year, the amount of rent which would have
otherwise been paid or payable by Tenant will be carried forward on a
cumulative basis and will be paid
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<PAGE> 17
by Tenant to Landlord in any subsequent Lease Year (other than the
first Lease Year of a Renewal Term) to the extent that the total of the
Minimum Rent and Additional Rent for such Lease Year is less than one
hundred three and one-half percent (103.5%) of the total of the Minimum
Rent and Additional Rent for the then immediately preceding Lease Year.
2.7.6 To the extent that Section 2.7.3 above operates to limit
the Minimum Rent for any Renewal Term, the amount of rent which would
have otherwise been paid or payable by Tenant in such Renewal Term will
be carried forward and will be paid by Tenant to Landlord in the
subsequent Renewal Term (evenly divided over all of the months in such
subsequent Renewal Term) to the extent that the Minimum Rent for such
subsequent Renewal Term is less than one hundred fifteen percent (115
%) of the total of the Minimum Rent and Additional Rent for the last
Lease Year in the preceding Renewal Term.
2.7.7 Within sixty (60) days of the end of each Lease Year,
Tenant shall deliver to Landlord a report in a form mutually agreed
upon by Landlord and Tenant, certified by an officer or general partner
of Tenant, as applicable, setting forth the calculations required by
the application of this Section 2.7. If said report provides that
Tenant owes Landlord any sum of money, Tenant shall accompany such
report delivered to Landlord with such funds. If said report provides
that Landlord owes Tenant any sum of money, such sum shall be applied
as a credit against future installments of Minimum Rent and Additional
Rent due from Tenant to Landlord; provided, however, if such sum is
owed by Landlord to Tenant with respect to the last Lease Year of the
Term, Landlord
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<PAGE> 18
shall pay such sum to Tenant within thirty (30) days of Landlord's
receipt of the report in question.
2.7.8 For the purpose of comparing the total of Minimum Rent and
Additional Rent from Lease Year to Lease Year pursuant to Sections
2.7.1 and 2.7.4 above, the increase in Minimum Rent by reason of any
disbursement by Landlord pursuant to Sections 5.1.5 or 5.7 of the Lease
shall be treated as follows: (i) for the purpose of comparing the total
rent in the Lease Year in which such disbursement is made against the
total rent in the preceding Lease Year, such increase in Minimum Rent
shall be ignored, and (ii) for the purpose of comparing the total rent
in the Lease Year in which such disbursement is made to the total rent
in the following Lease Year, such increase in Minimum Rent shall be
deemed effective on the first day of the Lease Year in which the
disbursement is made.
2.8 Proration for Partial Periods. The rent for any month during the
Term which begins or ends on other than the first or last calendar day of a
calendar month shall be prorated based on actual days elapsed.
2.9 Form for Additional Rent. Tenant shall accompany each payment of
Additional Rent with a completed calculation supporting such payment in a form
mutually approved by Landlord and Tenant.
2.10 Absolute Net Lease. All rent payments shall be absolutely net to
the Landlord free of taxes (as described in Section 3.1 hereof), assessments,
utility charges, operating expenses, refurnishings, insurance premiums or any
other charge or expense in connection with the Premises. All expenses and
charges, whether for upkeep,
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maintenance, repair, refurnishing, refurbishing, restoration, replacement,
insurance premiums, taxes, utilities, and other operating or other charges of a
like nature or otherwise, shall be paid by Tenant. This provision is not in
derogation of the specific provisions of this Lease, but in expansion thereof
and as an indication of the general intention of the parties hereto. Tenant
shall continue to perform its obligations under this Lease even if Tenant
claims that Tenant has been damaged by any act or omission of Landlord.
Therefore, Tenant shall at all times remain obligated under this Lease without
any right of set-off, counterclaim, abatement, deduction, reduction or defense
of any kind, except in the event that Landlord breaches its obligations under
Section 18 or as otherwise expressly provided therein. Tenant's sole right to
recover damages against Landlord by reason of a breach or alleged breach of
Landlord's obligations under this Lease shall be to prove such damages in a
separate action against Landlord.
3. Taxes, Assessments and Other Charges:
3.1 Tenant's Obligations. Tenant agrees to pay and discharge
(including the filing of all required returns) any and all taxes (including but
not limited to real estate and personal property taxes, business and
occupational license taxes, ad valorem sales, use, single business, gross
receipts, transaction privilege, rent or other excise taxes, but not including
taxes, if any, based on Landlord's net income) and other assessments levied or
assessed against the Premises or any interest therein during the Term, prior to
delinquency or imposition of any fine, penalty, interest or other cost.
3.2 Proration. At the commencement and at the end of the Term, all
such taxes and assessments shall be prorated.
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3.3 Right to Protest. Landlord and/or Tenant shall have the right,
but not the obligation, to protest the amount or payment of any real or
personal property taxes or assessments levied against the Premises; provided
that in the event of any protest by Tenant, Landlord shall cooperate with
Tenant but shall not incur any expense because of any such protest, Tenant
shall diligently and continuously prosecute any such protest and
notwithstanding such protest, except as provided in Section 5.5 below, Tenant
shall pay any tax, assessment or other charge before the imposition of
any penalty or interest.
3.4 Tax Bills. Landlord shall promptly forward to Tenant copies of
all tax bills and payment receipts relating to the Premises received by
Landlord.
3.5 Other Charges. Tenant agrees to pay and discharge, punctually as
and when the same shall become due and payable without penalty, all
electricity, gas, garbage collection, cable television, telephone, water,
sewer, and other utilities costs and all other charges, obligations or deposits
assessed against the Premises during the Term.
4. Insurance.
4.1 General Insurance Requirements. All insurance provided for in
this Lease shall be maintained under valid and enforceable policies issued by
insurers of recognized responsibility, licensed and approved to do business in
the State of Washington, having a general policyholders rating of not less than
"A-" and a financial rating of not less than "10" in the then most current
Best's Insurance Report. Any and all policies of insurance required under this
Lease shall name the Landlord as an additional insured and shall be on an
"occurrence" basis. In addition, Landlord shall be shown as the loss payable
beneficiary under the casualty insurance policy maintained by Tenant pursuant
to Section 4.2. All policies of insurance required herein may be in the form of
"blanket" or
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"umbrella" type policies which shall name the Landlord and Tenant as their
interests may appear and allocate to the Premises the full amount of insurance
required hereunder. Original policies or satisfactory certificates from the
insurers evidencing the existence of all policies of insurance required by this
Lease and showing the interest of the Landlord shall be filed with the Landlord
prior to the commencement of the Term and shall provide that the subject policy
may not be canceled except upon not less than ten (10) days prior written
notice to Landlord. If Landlord is provided with a certificate, upon Landlord's
request Tenant shall provide Landlord with a complete copy of the insurance
policy evidenced by such certificate within 30 days of the commencement of the
Term. Originals of the renewal policies or certificates therefor from the
insurers evidencing the existence thereof shall be deposited with Landlord not
less than ten (10) days prior to the expiration dates of the policies. If
Landlord is provided with a certificate for a renewal policy, upon Landlord's
request Tenant shall deliver a copy of the complete renewal policy to Landlord
within 30 days of the expiration of the replaced policy. Any claims under any
policies of insurance described in this Lease shall be adjudicated by and at
the expense of the Tenant or of its insurance carrier, but shall be subject to
joint control of Tenant and Landlord.
4.2 Course of Construction; Fire and Other Casualty.
4.2.1 During the Construction Period, Tenant shall maintain
standard builder's "all risks" course of construction insurance.
4.2.2 After the Substantial Completion Date, Tenant shall keep
the Premises insured against loss or damage from all causes under
standard "all risk" property insurance coverage, without exclusion for
fire, lightning, windstorm,
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<PAGE> 22
explosion, smoke damage, vehicle damage, sprinkler leakage, flood (if
the Premises is located in a flood zone and with coverage not less than
Five Million Dollars ($5,000,000) per policy year), vandalism,
earthquake (if the Premises is located in an earthquake zone and with
coverage not less than Five Million Dollars ($5,000,000) per policy
year), malicious mischief or any other risk as is normally covered
under an extended coverage endorsement, in the amounts that are not
less than the full insurable value of the Premises including all
equipment and personal property (whether or not Landlord Personal
Property) used in the operation of the Premises, but in no event less
than eighty percent (80%) of Landlord's Original Investment as
determined at the end of the Construction Period. The term "full
insurable value" as used in this Lease shall mean the actual
replacement value of the Premises (including all improvements) and
every portion thereof, including the cost of compliance with changes in
zoning and building codes and other laws and regulations, demolition
and debris removal and increased cost of construction. In addition, the
casualty insurance required under this Section 4.2 will include an
agreed amount endorsement such that the insurance carrier has accepted
the amount of coverage and has agreed that there will be no
co-insurance penalty.
4.3 Public Liability. Tenant shall maintain comprehensive general
public liability insurance coverage (including products liability coverage)
against claims for bodily injury, death or property damage occurring on, in or
about the Premises and the adjoining sidewalks and passageways, such insurance
to include a broad form endorsement and to afford protection to Landlord and
Tenant of not less than Five
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Million Dollars ($5,000,000) with respect to bodily injury or death to any one
person, not less than Five Million Dollars ($5,000,000) with respect to any one
accident, and not less than Five Million Dollars ($5,000,000) with respect to
property damage; provided, that Landlord and Tenant in their reasonable
judgment shall agree in the future to increase such limits to the extent that
any such increase may be reasonable and customary for transactions and
properties similar to the Premises.
4.4 Professional Liability Insurance. After the Substantial
Completion Date, Tenant shall maintain insurance against liability imposed by
law upon Tenant and its Affiliates for damages on account of professional
services rendered or which should have been rendered by Tenant (or its
Affiliates) or any person for which acts Tenant (or its Affiliates) is legally
liable on account of injury, sickness or disease, including death at any time
resulting therefrom, and including damages allowed for loss of service, in a
minimum amount of Five Million Dollars ($5,000,000) for each claim and Five
Million Dollars ($5,000,000) in the aggregate.
4.5 Workers Compensation. After the Substantial Completion Date,
Tenant shall comply with all legal requirements regarding worker's
compensation, including any requirement to maintain worker's compensation
insurance against claims for injuries sustained by Tenant's employees in the
course of their employment.
4.6 Boiler Insurance. After the Substantial Completion Date, if a
boiler and/or pressure vessel is located at the Premises, Tenant shall maintain
boiler and pressure vessel insurance, including an endorsement for boiler
business interruption insurance, on any fixtures or equipment which are capable
of bursting or exploding, in an
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amount not less than Five Million Dollars ($5,000,000) for damage to property,
bodily injury or death resulting from such perils.
4.7 Business Interruption Insurance. After the Substantial Completion
Date, Tenant shall maintain, at its expense, business interruption insurance
against loss of rental value for a period of not less than one (1) year;
provided, that, so long as Tenant continues to pay all Minimum Rent, Additional
Rent and any other amounts to be paid by Tenant under the terms of this Lease,
Tenant shall be entitled to receive all proceeds of such business interruption
insurance.
4.8 Deductible Amounts. The policies of insurance which Tenant is
required to provide under this Lease will not have deductibles or self-insured
retentions in excess of Fifty Thousand Dollars ($50,000).
5. Use, Maintenance and Alteration of the Premises.
5.1 Tenant's Maintenance Obligations. After the Substantial
Completion Date:
5.1.1 Tenant will keep and maintain the Premises in good
appearance, repair and condition and maintain proper housekeeping.
Tenant shall promptly make or cause to be made all repairs, interior
and exterior, structural and nonstructural, ordinary and extraordinary,
foreseen and unforeseen, necessary to keep the Premises in good and
lawful order and condition and in substantial compliance with any
applicable requirements for the licensing of an ALF/ILF in the State in
which the Premises is located or as otherwise required under all
applicable local, state and federal laws.
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5.1.2 As part of Tenant's obligations under this Section 5.1,
Tenant shall be responsible to maintain, repair and replace all
Landlord Personal Property and all Tenant Personal Property, as defined
in Section 7.1 below, in good condition, ordinary wear and tear
excepted, consistent with prudent industry practice for ALF/ILF
facilities.
5.1.3 Without limiting Tenant's obligations to maintain the
Premises under this Lease, within thirty (30) days after the end of
each Lease Year commencing with the end of the sixth (6th) Lease Year
of the Operating Period, Tenant shall provide Landlord with evidence
satisfactory to Landlord in the reasonable exercise of Landlord's
discretion that Tenant has in such Lease Year spent on Upgrade
Expenditures for the Premises, an amount at least equal to the Required
Upgrade Expenditures. As used herein, the "Required Upgrade
Expenditures" for any Lease Year shall be calculated as follows: In the
fourth (4th) Lease Year an amount shall be calculated equal to One
Hundred Fifty Dollars ($150.00) times the number of units in the
Premises (the "Yearly Benchmark"). For each subsequent Lease Year, the
Yearly Benchmark for such year shall be the Yearly Benchmark of the
previous Lease Year, increased for increases in the United States
Department of Labor, Bureau of Labor Statistics Consumer Price Index
for all Urban Wage Earners and Clerical Workers, United States Average,
Subgroup "All Items" (1982-1984 = 100). Commencing with the sixth (6th)
Lease Year and every Lease Year thereafter, the Required Upgrade
Expenditures shall equal the sum of (i) the Yearly Benchmark for the
applicable Lease Year and (ii) the Yearly Benchmarks for the two
previous Lease Years,
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minus the sum of the Upgrade Expenditures made in the two previous
Lease Years. If the Average Upgrade Expenditures for a particular Lease
Year is less than or equal to zero, then no Upgrade Expenditures are
required in that Lease Year.
5.1.4 The term "Upgrade Expenditures" is defined to mean upgrades
or improvements to the Premises which have the effect of maintaining or
improving the competitive position of the Premises in its marketplace.
Non-exclusive examples of Upgrade Expenditures are new or replacement
wallpaper, tiles, window coverings, lighting fixtures, painting,
upgraded landscaping, carpeting, architectural adornments, common area
amenities and the like. It is expressly understood that neither capital
improvements or repairs (such as but not limited to repairs or
replacements to the structural elements of the walls, parking area, or
the roof or to the electrical, plumbing, HVAC or other mechanical or
structural systems in the Premises) nor expenditures to keep the
Premises functional, safe and/or licensed shall be considered to be
Upgrade Expenditures. For purposes of Section 5.1.3 only, "evidence
satisfactory to Landlord" may consist of a certificate of an officer of
Tenant, certifying as to the matters set forth in Section 5.1.3,
together with, in Landlord's sole discretion, an inspection by Landlord
and its representative, inspectors and consultants of the Premises
and/or of all contracts, books and records relating to Tenant's
operations at the Premises. In the event that a material deficiency is
found with respect to Tenant's obligations under Section 5.1.3, in
addition to any other rights and remedies provided to Landlord under
this Lease, Tenant shall pay for Landlord's
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out-of-pocket costs for any such inspections. If Tenant fails to make
at least the above amount of Upgrade Expenditures, Tenant shall
promptly on demand from Landlord (but in no event more than five days)
pay to Landlord the applicable shortfall in Upgrade Expenditures. Such
funds shall be the sole property of Landlord and Landlord may in its
sole discretion provide such funds to Tenant to correct the shortfall
in Upgrade Expenditures or may simply retain such funds as supplemental
rent hereunder.
5.1.5 [Intentionally Omitted].
5.2 Regulatory Compliance.
5.2.1 During the Operating Period, Tenant and the Premises shall
comply with all federal, state and local licensing and other laws and
regulations applicable to an ALF/ILF as well as with any applicable
certification requirements of Medicare and Medicaid (or any successor
program) required to permit Tenant to serve its resident population.
Further, if any applicable federal, state or local law requires that
the Premises be licensed as an ALF/ILF for the use permitted under
Section 5.3 below, Tenant shall ensure that the Premises are licensed
in Tenant's name on or before June 30, 1997, and throughout the Term
and at the time the Premises are returned to Landlord at the
termination of this Lease, Tenant shall ensure that the Premises
continue to be licensed as an ALF/ILF with a licensed capacity of
seventy (70) units, and, if applicable to permit Tenant to serve its
resident population, fully certified for participation in Medicare and
Medicaid (or any successor program) throughout the Term and at the time
the Premises are returned to Landlord at the termination thereof, all
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without any suspension, revocation, decertification, penalty or
limitation. Nothing contained in this Section 5.2.1 is intended to
permit Tenant to reduce or eliminate its participation or the
participation of the Premises in any Medicare or Medicaid (or any
successor program) which exists as of the date of this Lease, except
with the consent of Landlord, which consent shall not be unreasonably
withheld. Further, Tenant shall not commit any act or omission that
would in any way violate any certificate of occupancy affecting the
Premises.
5.2.2 All inspection fees, costs and charges associated with a
change of any licensure or certification shall be borne solely by
Tenant.
5.3 Permitted Use. Tenant shall continuously use and occupy the
Premises during the Term, solely for the construction and operation of a
licensed ALF/ILF with at least seventy (70) units.
5.4 [Intentionally Omitted].
5.5 No Liens; Permitted Contests. Tenant shall not cause or permit
any liens, levies or attachments to be placed or assessed against the Premises
or the operation thereof for any reason. However, Tenant shall be permitted in
good faith and at its expense to contest the existence, amount or validity of
any lien upon the Premises by appropriate proceedings sufficient to prevent the
collection or other realization of the lien or claim so contested, as well as
the sale, forfeiture or loss of any of the Premises or any rent to satisfy the
same. Tenant shall provide Landlord with security satisfactory to Landlord in
Landlord's reasonable judgment to assure the foregoing. Each contest permitted
by this Section 5.5 shall be promptly and diligently prosecuted to a final
conclusion by Tenant.
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5.6 Alterations by Tenant. During the Operating Period, Tenant shall
have the right of altering, improving, replacing, modifying or expanding the
facilities, equipment or appliances in the Premises from time to time as it may
determine is desirable for the continuing and proper use and maintenance of the
Premises under this Lease; provided, however, that any alterations,
improvements, replacements, expansions or modifications in excess of Fifty
Thousand Dollars ($50,000) in any rolling twelve (12) month period shall
require the prior written consent of the Landlord, which consent shall not be
unreasonably withheld. The cost of all such alterations, improvements,
replacements, modifications, expansions or other purchases, whether undertaken
as an on-going licensing, Medicare or Medicaid (or any successor program) or
other regulatory requirement or otherwise shall be borne solely and exclusively
by Tenant (unless funded by Landlord under Section 5.7) and, except as provided
in the following sentence, shall immediately become a part of the Premises and
the property of the Landlord subject to the terms and conditions of this Lease.
Notwithstanding the previous sentence, any equipment acquired by Tenant at
Tenant's sole cost and expense that expands the services provided to the
residents of the Premises, rather than replaces existing equipment at the
Premises, and that does not constitute a fixture (under real property law),
shall constitute Tenant Personal Property subject to the security interest
granted to Landlord in Section 7.2 below. So long as there is no continuing
Event of Default, Tenant may remove at any time and dispose of the equipment
described in the preceding sentence free and clear of any security interest of
Landlord. All work done in connection therewith shall be done in a good and
workmanlike manner and in
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compliance with all existing codes and regulations pertaining to the Premises
and shall comply with the requirements of insurance policies required under
this Lease. In the event any items of the Premises have become inadequate,
obsolete or worn out or require replacement (by direction of any regulatory
body or otherwise), Tenant shall remove such items and exchange or replace the
same at Tenant's sole cost and the same shall become part of the Premises and
property of the Landlord.
5.7 Capital Improvements Funded by Landlord. In the event Tenant
desires to make a capital improvement or a related series of capital
improvements to the Premises other than those covered in the Construction
Addendum, and if Tenant desires that Landlord fund the same, Landlord shall, in
its discretion and without obligation, within thirty (30) days of Tenants'
written request therefor, consider Tenant's request to fund such capital
improvements. Each and every capital improvement funded by Landlord under this
Section 5.7 shall immediately become a part of the Premises and shall belong to
Landlord subject to the terms and conditions of this Lease. If Landlord funds
any capital improvements, Landlord's Original Investment shall be increased for
all purposes under this Lease by the amount of the funds provided by Landlord
for capital improvements.
5.8 Compliance With IRS Guidelines. Any improvement or modification
to the Premises shall satisfy the requirements set forth in Sections 4(4).02
and .03 of Revenue Procedure 75-21, 1975-1 C.B. 715, as modified by Revenue
Procedure 79-48, 1979-2 C.B. 529. Landlord reserves the right to refuse to
consent to any improvement or
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modification to the Premises if, in its judgment, such improvement or
modification does not meet the foregoing requirements.
6. Condition And Title Of Premises. Tenant acknowledges that it is
presently engaged in the operation of ALF/ILF facilities in the State of
Washington and has expertise in the ALF/ILF industry. Tenant has thoroughly
investigated the Premises, has selected the Premises to its own specifications,
understands the necessary steps to construct the Facility on the Premises, has
determined that the Development Advance is sufficient for completion of such
construction, and has no reason to believe that the Facility cannot be
constructed and licensed within the schedule provided in the Construction
Addendum. Tenant accepts the Premises for construction and subsequent use as an
ALF/ILF under this Lease on an "AS IS" basis and will assume all responsibility
and cost for the correction of any observed or unobserved deficiencies or
violations. In making its decision to enter into this Lease, Tenant has not
relied on any representations or warranties, express or implied, of any kind
from Landlord. Tenant has examined the condition of title to the Premises prior
to the execution and delivery of this Lease and has found the same to be
satisfactory.
7. Landlord and Tenant Personal Property.
7.1 Tenant Personal Property. Tenant shall install, affix or assemble
or place on the Premises all items of furniture, fixtures, equipment and
supplies not included as Landlord Personal Property as Tenant reasonably
considers to be appropriate for Tenant's use of the Premises as contemplated by
this Lease (the "Tenant Personal Property"). Tenant shall provide and maintain
during the entire Term all Tenant
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Personal Property as shall be necessary in order to operate the Premises in
compliance with all requirements set forth in this Lease. All Tenant Personal
Property shall be and shall remain the property of Tenant and may be removed by
Tenant upon the expiration of the Term. However, if there is any Event of
Default, Tenant will not remove the Tenant Personal Property from the Premises
and will on demand from Landlord convey the Tenant Personal Property to
Landlord by executing a bill of sale in a form reasonably required by Landlord.
In any event, Tenant will repair all damage to the Premises caused by any
removal of the Tenant Personal Property.
7.2 Landlord's Security Interest.
7.2.1 The parties intend that if Tenant defaults under this
Lease, Landlord will control the Tenant Personal Property and the
Intangible Property (as defined in Section 7.4 below) (to the extent
assignable) so that Landlord or its designee can operate or re-let the
Premises intact for use as an ALF/ILF.
7.2.2 Therefore, to implement the intention of the parties, and
for the purpose of securing the payment and performance of Tenant's
obligations under this Lease, Tenant, as debtor, hereby grants to
Landlord, as secured party, a security interest in and an express
contractual lien upon, all of Tenant's right, title and interest in and
to the Tenant Personal Property and in and to the Intangible Property
(to the extent assignable) and any and all products and proceeds
thereof, in which Tenant now owns or hereafter acquires an interest or
right, including any leased Tenant Personal Property. This Lease
constitutes a security agreement covering all such Tenant Personal
Property and the Intangible
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Property (to the extent assignable). The security interest granted to
Landlord in this Section 7.2.2. is intended by Landlord and Tenant to
be subordinate to any security interest granted in connection with the
financing or leasing of all or any portion of the Tenant Personal
Property so long as the lessor or financier of such Tenant Personal
Property agrees to give Landlord written notice of any default by
Tenant under the terms of such lease or financing arrangement, to give
Landlord a reasonable time following such notice to cure any such
default and to consent to Landlord's written assumption of such lease
or financing arrangement upon Landlord's curing of any defaults
thereunder. This security agreement and the security interest created
herein shall survive the termination of this Lease if such termination
results from the occurrence of an Event of Default.
7.3 Financial Statements. If required by Landlord at any time during
the Term, Tenant will execute and deliver to Landlord, in form reasonably
satisfactory to Landlord, additional security agreements, financing statements,
fixture filings and such other documents as Landlord may reasonably require to
perfect or continue the perfection of Landlord's security interest in the
Tenant Personal Property and the Intangible Property and any and all products
and proceeds thereof now owned or hereafter acquired by Tenant. Tenant shall
pay all fees and costs that Landlord may incur in filing such documents in
public offices and in obtaining such record searches as Landlord may reasonably
require. In the event Tenant fails to execute any financing statements or other
documents for the perfection or continuation of Landlord's security interest,
Tenant hereby appoints Landlord as its true and lawful attorney-in-fact to
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execute any such documents on its behalf, which power of attorney shall be
irrevocable and is deemed to be coupled with an interest.
7.4 Intangible Property. The term "Intangible Property" means all
rents, profits, income or revenue derived from the use of rooms or other space
within the Premises or the providing of services in or from the Premises;
documents, chattel paper, instruments, contract rights, deposit accounts,
general intangibles, choses in action, now owned or hereafter acquired by
Tenant (including any right to any refund of any taxes or other charges
heretofore or hereafter paid to any governmental authority) arising from or in
connection with Tenant's operation or use of the Premises; all licenses and
permits now owned or hereinafter acquired by Tenant, necessary or desirable for
Tenant's use of the Premises under this Lease, including without limitation, if
applicable, any certificate or determination of need or other similar
certificate; and the right to use any trade or other name now or hereafter
associated with the operation of the Premises by Tenant, including, without
limitation, the name "Allenmore Assisted Living"; but shall not include any
accounts receivable now owned or hereafter acquired by Tenant.
8. Representations And Warranties. Landlord and Tenant do hereby each for
itself represent and warrant to each other as follows:
8.1 Due Authorization And Execution. This Lease and all agreements,
instruments and documents executed or to be executed in connection herewith by
either Landlord or Tenant were duly authorized and shall be binding upon the
party that executed and delivered the same.
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8.2 Due Organization. Landlord and Tenant are duly organized, validly
existing and in good standing under the laws of the State of their respective
formations and are duly authorized and qualified to do all things required of
the applicable party under this Lease within the State of Washington.
8.3 No Breach of Other Agreements. Neither this Lease nor any
agreement, document or instrument executed or to be executed in connection
herewith, violates the terms of any other agreement to which either Landlord or
Tenant is a party.
9. Financial, Management and Regulatory Reports. During the Operating
Period:
9.1 Monthly Facility Reports. Within thirty (30) days after the end
of each calendar month during the Term, Tenant shall prepare and deliver
monthly financial reports (in the form Tenant currently generates, together
with any changes in such form that may be approved by Landlord) to Landlord
consisting of a balance sheet, income statement, total patient days, occupancy
and payor mix concerning the business conducted at the Premises. Without
limitation, such reports shall clearly state Gross Revenues, Gross Medicare
Home Health Revenues and Gross Non-Medicare Home Health Revenues for the
applicable period.
9.2 Quarterly Financial Statements. Within forty-five (45) days of
the end of each of the first three quarters of the fiscal year of both Tenant
and Guarantor, Tenant shall deliver the quarterly consolidated financial
statements, substantially in the form as previously provided to Landlord, of
both Tenant and Guarantor to Landlord.
9.3 Annual Financial Statement. Within ninety (90) days of the fiscal
year end of both Tenant and Guarantor, Tenant shall deliver to Landlord an
internally
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prepared annual consolidated financial statement of Guarantor and an annual
consolidated financial statement of Tenant, audited by a certified public
accounting firm acceptable to Landlord in Landlord's reasonable discretion.
Notwithstanding any of the other terms of this Section 9.3, if Tenant or
Guarantor become subject to any reporting requirements of the Securities and
Exchange Commission (the "SEC") during the Term, Tenant shall concurrently
deliver to Landlord such reports as are delivered to the SEC pursuant to
applicable securities laws.
9.4 Accounting Principles. All of the reports and statements required
hereby shall be prepared in accordance with GAAP and Tenant's accounting
principles and procedures consistently applied.
9.5 Regulatory Reports. In addition, Tenant shall promptly, but in
any event no later than ten (10) business days of receipt thereof, deliver to
Landlord all federal, state and local licensing and reimbursement certification
surveys, inspection and other reports received by Tenant as to the Premises and
the operation of business thereon, including, without limitation, state
department of health licensing surveys, any applicable Medicare and Medicaid
(and successor programs) certification surveys and life safety code reports.
Within five (5) calendar days of receipt thereof, Tenant shall give Landlord
written notice of any violation of any federal, state or local licensing or
reimbursement certification statute or regulation including without limitation
Medicare or Medicaid (or successor programs) if applicable, any suspension,
termination or restriction placed upon Tenant or the Premises, the operation of
business thereon or the ability to admit patients, or any violation of any
other permit, approval or certification in
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connection with the Premises or its business, by any federal, state or local
authority including without limitation Medicare or Medicaid (or successor
programs), if applicable.
10. Events of Default and Landlord's Remedies.
10.1 Events of Default. The occurrence of any of the following shall
constitute an event of default on the part of Tenant hereunder ("Event of
Default"):
10.1.1 The failure to pay within five (5) calendar days of the
date when due any Minimum Rent, Additional Rent, taxes or assessments,
utilities, premiums for insurance or other charges or payments required of
Tenant under this Lease;
10.1.2 A material breach by Tenant or any Guarantor of any of the
representations, warranties or covenants in favor of Landlord as set forth
in the Purchase and Sale Agreement dated December 15, 1995, by and between
Landlord, Tenant, Guarantor and 2010 Union Limited Partnership, a
Washington limited partnership ("Union Limited Partnership") (the "Purchase
Agreement");
10.1.3 A material default by Tenant or any Guarantor (or any
Affiliate of either) ("Affiliate" being defined to mean, with respect to
any person or entity, any other person or entity which "Controls" (as
defined in Section 22.1 below), is Controlled by or is under common Control
with the first person or entity) under any obligation other than this Lease
owed by Tenant or any Guarantor (or any Affiliate of either) to Landlord or
any Affiliate of Landlord (including, without limitation, any of the Other
Leases [as hereinafter defined], any other loan or financing agreement or
any other lease, but not including that certain Loan Agreement dated
December 15, 1995 by and between Landlord, as lender, and Union Limited
Partnership, as borrower, and the "Loan
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Documents" as defined therein), which default is not cured within any
applicable cure period provided in the documentation for such obligation.
As used herein, "Other Leases" shall mean, collectively, and excluding this
Lease, the following: (i) those certain Leases and Security Agreements,
dated December 15, 1995, between Landlord and Tenant, with respect to the
following facilities: A) The Atrium, 3350 30th Street, Boulder, Colorado
80301; B) Canterbury Gardens, 11265 E. Mississippi Ave., Aurora, Colorado
80012; C) Ridge Point, 3375 34th Street, Boulder, Colorado 80301; D) River
Place, 739 E. Parkcenter Blvd., Boise, Idaho 83706; E) Albany Residential,
1560 Davidson St. SE, Albany, Oregon 97321; F) Courtyard Village, 1929
Grand Prairie Rd SE, Albany, Oregon 97321; G) Forest Grove Residential,
3110 19th Ave., Forest Grove, Oregon 97116; H) The Heritage at Rogue
Valley, 3033 Barnett Rd., Medford, Oregon 97504; I) McMinnville
Residential, 775 E 27th Street, McMinnville, Oregon 97128; and J) Columbia
Edgewater, 1629 George Washington Way, Richland, Washington 99352; and (ii)
that certain Sublease and Security Agreement, dated concurrently herewith,
with respect to Heritage, Mt. Hood, 25200 S.E. Stark Street, Gresham,
Oregon 97030; and (iii) that certain Sublease and Security Agreement
between 2010 Union Limited Partnership, a Washington limited partnership,
as landlord, and Tenant, as tenant, with respect to Union Park at
Allenmore, 2010 South Union Ave., Tacoma, Washington 98405.
10.1.4 A material default by Tenant or any Guarantor with respect
to any obligation which affects the Premises or any of the "Premises" (as
such term is defined in the Other Leases) in the Other Leases, under any
other lease or financing
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agreement with any other party, which default is not cured within any
applicable cure period provided in the documentation for such obligation;
10.1.5 Any material misstatement or omission of fact in any
written report, notice or communication from Tenant or any Guarantor to
Landlord with respect to Tenant, any Guarantor or the Premises;
10.1.6 Any change (voluntary or involuntary, by operation of law
or otherwise) in the person, persons, entity or entities which ultimately
exert effective control over the management of the affairs of Tenant or any
Guarantor as of the date hereof; provided, however, nothing contained in
this Section 10.1.6 is intended to restrict the authority of the respective
boards of directors of Tenant or any Guarantor to appoint officers or
management of Tenant or any Guarantor, and the following shall not be
deemed to be an Event of Default under this Section 10.1.6.: an initial
public offering of Tenant; the Brim Merger (as defined in Section 22.2
below); or the CCI Conversion (as defined in Section 22.2 below).
10.1.7 An assignment by Tenant or any Guarantor of all or
substantially all of its property for the benefit of creditors;
10.1.8 The appointment of a receiver, trustee, or liquidator for
Tenant or any Guarantor, or any of the property of Tenant or any Guarantor,
if within three (3) business days of such appointment Tenant does not
inform Landlord in writing that Tenant or Guarantor intends to cause such
appointment to be discharged and Tenant or Guarantor does not thereafter
diligently prosecute such discharge to completion within thirty (30) days
after the date of such appointment;
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10.1.9 The filing by Tenant or any Guarantor of a voluntary
petition under any federal bankruptcy law or under the law of any state to
be adjudicated as bankrupt or for any arrangement or other debtor's relief,
or in the alternative, if any such petition is involuntarily filed against
Tenant or any Guarantor, by any other party and Tenant does not within
three (3) business days of any such filing inform Landlord in writing of
the intent by Tenant or Guarantor to cause such petition to be dismissed,
if Tenant or Guarantor does not thereafter diligently prosecute such
dismissal, or if such filing is not dismissed within ninety (90) days after
filing thereof;
10.1.10 The failure to perform or comply with any other term or
provision of this Lease (other than those provisions set forth in Section
10.1.11 below) not requiring the payment of money, including, without
limitation, the failure to comply with the provisions hereof pertaining to
the use, operation and maintenance of the Premises or the breach of any
representation or warranty of Tenant in this Lease; provided, however, the
default described in this Section 10.1.10 is curable and shall be deemed
cured, if: (i) within three (3) business days of Tenant's receipt of a
notice of default from Landlord, Tenant gives Landlord notice of its intent
to cure such default; and (ii) Tenant cures such default within thirty (30)
days after such notice from Landlord, unless such default cannot with due
diligence be cured within a period of thirty (30) days because of the
nature of the default or delays beyond the control of Tenant, and cure
after such thirty (30) day period will not have a material and adverse
effect upon the Premises, in which case such default shall not constitute
an Event of Default if Tenant uses its best efforts to cure such default by
promptly
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commencing and diligently pursuing such cure to the completion thereof,
provided, however, no such default shall continue for more than one hundred
twenty (120) days from Tenant's receipt of a notice of default from
Landlord;
10.1.11 There shall be no cure period in the event of the breach by
Tenant of (i) the obligation to provide replacement policies of insurance
as required in Section 4.1 above, (ii) the provisions of Section 20 below,
or (iii) the provisions of Section 22 below with respect to assignments
and other related matters; and
10.1.12 All notice and cure periods provided herein shall run
concurrently with any notice or cure periods provided by applicable law.
10.2 Remedies. Upon the occurrence of an Event of Default, Landlord
may exercise all rights and remedies under this Lease and the laws of the State
of Washington available to a lessor of real and personal property in the event
of a default by its lessee, and as to the Tenant Personal Property and
Intangible Property all remedies granted under the laws of such State to a
secured party under its Uniform Commercial Code. Without limiting the
foregoing, Landlord shall have the right to do any of the following:
10.2.1 Sue for the specific performance of any covenant of Tenant
under this Lease as to which Tenant is in breach;
10.2.2 Upon compliance with the requirements of applicable law,
Landlord may do any of the following: enter upon the Premises, terminate
this Lease, dispossess Tenant from the Premises and/or collect money
damages by reason of Tenant's breach, including without limitation all rent
which would have accrued after
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such termination and all obligations and liabilities of Tenant under this
Lease which survive the termination of the Term;
10.2.3 Elect to leave this Lease in place and sue for rent and/or
other money damages as the same come due;
10.2.4 Before or after repossession of the Premises pursuant to
Section 10.2.2, and whether or not this Lease has been terminated, Landlord
shall have the right (but shall be under no obligation) to relet any
portion of the Premises to such tenant or tenants, for such term or terms
(which may be greater or less than the remaining balance of the Term),
for such rent, or such conditions (which may include concessions or free
rent) and for such uses, as Landlord, in its absolute discretion, may
determine, and Landlord may collect and receive any rents payable by reason
of such reletting. Landlord shall have no duty to mitigate damages unless
required by applicable law and shall not be responsible or liable for any
failure to relet any of the Premises or for any failure to collect any rent
due upon any such reletting. Tenant agrees to pay Landlord, immediately
upon demand, all expenses incurred by Landlord in obtaining possession and
in reletting any of the Premises, including fees, commissions and costs of
attorneys, architects, agents and brokers;
10.2.5 Sell the Tenant Personal Property in a non-judicial
foreclosure sale;
10.2.6 Require Tenant to purchase the Premises from Landlord, as
provided in the Construction Addendum;
10.2.7 Elect to leave this Lease in place and take over
construction of the Facility, as provided in the Construction Addendum; and
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10.2.8 For the purpose of calculating rent loss damages payable to
Landlord, Additional Rent for all periods after an Event of Default shall
be calculated based on the higher of the sum of (i) actual Gross Revenues,
Gross Medicare Home Health Revenues and Gross Non-Medicare Home Health
Revenues or (ii) extrapolated Gross Revenues, Gross Medicare Home Health
Revenues and Gross Non-Medicare Home Health Revenues based on Gross
Revenues, Gross Medicare Home Health Revenues and Gross Non-Medicare Home
Health Revenues performance prior to the Event of Default.
10.3 Receivership. Tenant acknowledges that one of the rights and
remedies available to Landlord under applicable law is to apply to a court of
competent jurisdiction for the appointment of a receiver to take possession of
the Premises, to collect the rents, issues, profits and income of the Premises
and to manage the operation of the Premises. Tenant further acknowledges that
the revocation, suspension or material limitation of any license required for
the lawful operation of the Premises as an ALF/ILF under the laws of the State
of Washington will materially and irreparably impair the value of Landlord's
investment in the Premises. Therefore, in any of such events, and in addition
to any other right or remedy of Landlord under this Lease, subject to
applicable laws and regulations, Landlord may petition an appropriate court for
the appointment of such a receiver to enter upon and take possession of the
Premises, to manage the operation of the Premises (or, upon Landlord's
election, any portion thereof as to which Tenant has suffered the revocation,
suspension or material limitation of any such license), to collect and disburse
all rents, issues, profits and income
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generated thereby and to preserve or replace to the extent possible the ALF/ILF
license and provider certification of the Premises or to otherwise substitute
the licensee or provider thereof. Subject to any applicable laws and
regulations, the receiver shall be entitled to a reasonable fee for its
services as a receiver.
10.4 Late Charges. Tenant acknowledges that the late payment of any
Minimum Rent or Additional Rent will cause Landlord to lose the use of such
money and incur costs and expenses not contemplated under this Lease,
including, without limitation, administrative and collection costs and
processing and accounting expenses, the exact amount of which is extremely
difficult to ascertain. Therefore, if any installment of Minimum Rent or
Additional Rent is not paid within five (5) calendar days after the due date
for such rent payment, then Tenant shall thereafter pay to Landlord on demand a
late charge equal to ten percent (10%) of the amount of any installment of
Minimum Rent or Additional Rent not paid on the due date. Landlord and Tenant
agree that this late charge represents a reasonable estimate of such costs and
expenses and is fair compensation to Landlord for the loss suffered from such
nonpayment by Tenant.
10.5 Remedies Cumulative; No Waiver. No right or remedy herein
conferred upon, or reserved to Landlord, except the remedies provided by
Section 49, is intended to be exclusive of any other right or remedy, and each
and every right and remedy shall be cumulative and in addition to any other
right or remedy given hereunder or now or hereafter existing at law or in
equity. No failure of Landlord to insist at any time upon the strict
performance of any provision of this Lease or to exercise any option, right,
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power or remedy contained in this Lease shall be construed as a waiver,
modification or relinquishment thereof as to any similar or different breach
(future or otherwise) by Tenant. A receipt by Landlord of any rent or other sum
due hereunder (including any late charge) with knowledge of the breach of any
provision contained in this Lease shall not be deemed a waiver of such breach,
and no waiver by Landlord of any provision of this Lease shall be deemed to
have been made unless expressed in a writing signed by Landlord.
10.6 Performance of Tenant's Obligations by Landlord. If Tenant at any
time shall fail to make any payment or perform any act on its part required to
be made or performed under this Lease, then Landlord may, without waiving or
releasing Tenant from any obligations or default of Tenant hereunder, make any
such payment or perform any such act for the account and at the expense of
Tenant, and may enter upon the Premises for the purpose of taking all such
action thereon as may be reasonably necessary therefor. No such entry shall be
deemed an eviction of Tenant. All sums so paid by Landlord and all necessary
and incidental costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred in connection with the performance of
any such act by Landlord, together with interest at the rate of the Prime Rate
as reported daily by the Wall Street Journal plus 5% (or if said interest rate
is violative of any applicable statute or law, then the maximum interest rate
allowable) from the date of the making of such payment or the incurring of such
costs and expenses by Landlord, shall be payable by Tenant to Landlord on
demand.
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11. Security Deposit. Within one hundred and fifty (150) days of the first
day of the Construction Period, Tenant shall deposit with Landlord (from its
own funds, and not from the Development Advance) the sum of Fifty-Five Thousand
Dollars ($55,000) representing a security deposit against the faithful
performance of the terms and conditions contained in this Lease. Within three
hundred (300) days of the first day of the Construction Period, Tenant shall
deposit with Landlord (from its own funds, and not from the Development
Advance) an additional Fifty-Five Thousand Dollars ($55,000) representing a
security deposit against the faithful performance of the terms and conditions
contained in this Lease. Landlord shall not be deemed a trustee as to such
deposit and shall have the right to commingle said security deposit with its
own or other funds. Interest thereon shall be paid by Landlord to the Tenant on
a quarterly basis in arrears (i) if Landlord segregates such deposit from its
general funds, at the average rate earned in such period on Landlord's cash and
cash equivalent investments, and (ii) if Landlord does not segregate such
deposit from its general funds, at the average cost of funds for Landlord for
short term borrowings for such period. Tenant shall have the right to
substitute a letter of credit for such deposit on terms and issued by a
financial institution acceptable to Landlord.
12. Damage by Fire or Other Casualty.
12.1 Reconstruction Using Insurance. In the event of the damage or
destruction of any portion of the Premises, Tenant shall forthwith notify
Landlord and diligently repair or reconstruct the same as nearly as possible to
its value, condition and character immediately prior to such damage or
destruction. Any net insurance proceeds
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payable with respect to the casualty shall be used for the repair or
reconstruction of the Premises pursuant to reasonable disbursement controls in
favor of Landlord. If such proceeds are insufficient for such purposes, Tenant
shall provide the required additional funds.
12.2 Surplus Proceeds. If there remains any surplus of insurance
proceeds after the completion of the repair or reconstruction of the Premises,
such surplus shall belong to and be paid to Tenant.
12.3 No Rent Abatement. The rent payable under this Lease shall not
abate by reason of any damage or destruction of the Premises by reason
of an insured or uninsured casualty. Tenant hereby waives all rights under
applicable law to abate, reduce or offset rent by reason of such damage or
destruction.
13. Condemnation.
13.1 Complete Taking. If during the Term all or substantially all of
the Premises is taken or condemned by any competent public or quasi-public
authority, then Tenant may, at Tenant's election, made within thirty (30) days
of such taking by condemnation, terminate this Lease, and the current Minimum
Rent and Additional Rent shall be prorated as of the date of such termination.
The award payable upon such taking shall be allocated between Landlord and
Tenant as so allocated by the taking authority. In the absence of such
allocation by the taking authority, the award shall be allocated as agreed by
Landlord and Tenant. Failing such agreement within thirty (30) days after the
effective date of such taking, the award shall be allocated between
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Landlord and Tenant pursuant to the appraisal procedure described on Exhibit
"B" attached hereto.
13.2 Partial Taking. In the event such condemnation proceeding or
right of eminent domain results in a taking of less than all or substantially
all of the Premises, the Minimum Rent and Additional Rental thereto shall be
abated to the same extent as the diminution in the fair market value of the
Premises by reason of the condemnation. Such diminution in the fair market
value shall be as agreed between Landlord and Tenant, but failing such
agreement within thirty (30) days of the effective date of the condemnation the
same will be determined by appraisal pursuant to Exhibit "B" attached hereto.
Landlord shall be entitled to receive and retain any and all awards for the
partial taking and damage and Tenant shall not be entitled to receive or retain
any such award for any reason; provided, however, Landlord shall make all or a
portion of such award available to Tenant to the extent necessary to, as a
result of such taking, make the remaining portion of the Premises operational
and functional. Landlord's Original Investment will be reduced for all purposes
under this Lease by reason of any award paid to Landlord under this Section
13.2 which was not made available to be used by Tenant in accordance with the
terms of the previous sentence.
13.3 Lease Remains in Effect. Except as provided above, this Lease
shall not terminate and shall remain in full force and effect in the event of
a taking or condemnation of the Premises, or any portion thereof, and Tenant
hereby waives all rights under applicable law to abate, reduce or offset rent
by reason of such taking.
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14. Provisions on Termination of Term.
14.1 Surrender of Possession. Tenant shall, on or before the last day
of the Term, or upon earlier termination of this Lease, surrender to Landlord
the Premises (including, at Landlord's cost, copies of all business records
relating to the Premises and all resident charts and records along with
appropriate resident consents) in good condition and repair, ordinary wear and
tear excepted.
14.2 Removal of Personal Property. If Tenant is not then in default
hereunder Tenant shall have the right in connection with the surrender of the
Premises to remove from the Premises all Tenant Personal Property but not the
Landlord Personal Property (including the Landlord Personal Property replaced
by Tenant or required by the State of Washington or any other governmental
entity to operate the Premises for the purpose set forth in Section 5.3 above).
Any such removal shall be done in a workmanlike manner leaving the Premises in
good and presentable condition and appearance, including repair of any damage
caused by such removal. At the end of the Term or upon the earlier termination
of this Lease, Tenant shall return the Premises to Landlord with the Landlord
Personal Property (or replacements thereof) in the same condition and utility
as was delivered to Tenant at the commencement of the Term, normal wear and
tear excepted.
14.3 Title to Personal Property Not Removed. Title to any of Tenant
Personal Property which is not removed by Tenant upon the expiration of the
Term shall, at Landlord's election, vest in Landlord; provided, however, that
Landlord may remove and
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dispose at Tenant's expense of any or all of such Tenant Personal Property
which is not so removed by Tenant without obligation or accounting to the
Tenant.
14.4 Management of Premises. Upon the expiration or earlier
termination of the Term, Landlord or its designee, upon written notice to
Tenant, may elect to assume the responsibilities and obligations for the
management and operation of the Premises and Tenant agrees to cooperate fully
with Landlord or its designee to accomplish the transfer of such management and
operation without interrupting the operation of the Premises. Tenant shall not
commit any act or be remiss in the undertaking of any act that would jeopardize
any licensure or certification of the Premises, and Tenant shall comply with
all requests for an orderly transfer of the ALF/ILF license, Medicare and
Medicaid (or any successor program) certifications and possession at the time
of any such surrender. Upon the expiration or earlier termination of the Term,
Tenant shall promptly deliver copies (at Landlord's expense except following an
Event of Default) of all of Tenant's books and records relating to the Premises
and its operations to Landlord.
14.5 Correction of Deficiencies. Upon termination or cancellation of
this Lease, Tenant shall at its sole cost make any additions or alterations to
the Premises necessitated by, or imposed in connection with, a change of
ownership inspection survey by any federal, state or local governmental agency
with jurisdiction over the Premises for the transfer of operation of the
Premises from Tenant or Tenant's assignee or subtenant to Landlord or
Landlord's designee at the expiration or earlier termination of the Term in
accordance herewith. Tenant shall indemnify Landlord for any loss, damage, cost
or
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expense incurred by Landlord to correct any deficiencies of a physical nature
that would be required to maintain the level of care then being provided to the
residents of the Premises as identified by the State of Washington Department
of Health or any other applicable government agency (including, without
limitation, Medicare or Medicaid (or any successor program) providers) in the
course of the change of ownership inspection and audit. To the extent permitted
by applicable rules and regulations, Tenant shall be permitted in good faith
and at its expense to contest the determination of the existence and amount of
any alleged deficiencies. Each contest permitted by this Section 14.5 shall be
promptly and diligently prosecuted to a final conclusion by Tenant.
15. Notices and Demands. All notices and demands, certificates, requests,
consents, approvals, and other similar instruments under this Lease shall be in
writing and shall be deemed to have been properly given upon actual receipt
thereof or within two (2) business days of being placed in the United States
certified or registered mail, return receipt requested, postage prepaid (a) if
to Tenant, addressed to c/o Crossings International Corporation, 1201 Pacific
Avenue, Suite 1800, Tacoma, Washington 98402, Attn: President, Fax No. (206)
383-9979 with a copy to Bogle & Gates, 4700 Two Union Square, Seattle,
Washington 98101, Attn: Kyle Lukins, Fax No. (206) 621-2660, or at such other
address as Tenant from time to time may have designated by written notice to
Landlord, (b) if to Landlord, addressed to Nationwide Health Properties, Inc.,
4675 MacArthur Court, Suite 1170, Newport Beach, California 92660, Fax No.
(714) 251-9644 with a copy to O'Melveny & Myers, 610 Newport Center Drive,
Suite 1700, Newport Beach, California 92660 Attn: Real Estate Department
Chairman, Fax No. (714) 669-
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6994, or at such address as Landlord may from time to time have designated by
written notice to Tenant. Refusal to accept delivery shall be deemed delivery.
If Tenant is not an individual, notice may be made to any officer, general
partner or principal thereof. Notice to any one co-Tenant shall be deemed
notice to all co-Tenants.
16. Right of Entry; Examination of Records. Landlord and its representative
may enter the Premises at any reasonable time after reasonable notice to Tenant
for the purpose of inspecting the Premises for any reason including, without
limitation, Tenant's default under this Lease, or to exhibit the Premises for
sale, lease (but as to showing for lease, in the twelve (12) months prior to
the expiration of the Initial Operating Term or any applicable Renewal Term, so
long as there is no Event of Default under this Lease, only if Tenant has not
exercised its option to renew pursuant to Section 1.2.1 above) or mortgage
financing, or posting notices of default, or non-responsibility under any
mechanic's or materialman's lien law or to otherwise inspect the Premises for
compliance with the terms of this Lease. Any such entry shall not unreasonably
interfere with patients, patient care, or any other of Tenant's operations.
During normal business hours, Tenant will permit Landlord and Landlord's
representatives, inspectors and consultants to examine all contracts, books and
records relating to Tenant's operations at the Premises, whether kept at the
Premises or at some other location, including, without limitation, Tenant's
financial records relating to the Premises.
17. Landlord May Grant Liens. Without the consent of Tenant, Landlord may,
subject to the terms and conditions set forth below in this Section 17, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title
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retention agreement ("Encumbrance") upon the Premises, or any portion thereof
or interest therein (including this Lease), whether to secure any borrowing or
other means of financing or refinancing or otherwise. Any such Encumbrance
shall provide that it is subject to the rights of Tenant under this Lease, and
shall further provide that so long as no Event of Default shall have occurred
under this Lease, Tenant's occupancy hereunder, including but without
limitation Tenant's right of quiet enjoyment provided in Section 18, shall not
be disturbed in the event any such lienholder or any other person takes
possession of the Premises through foreclosure proceeding or otherwise. Upon
the request of Landlord, Tenant shall subordinate this Lease to the lien of a
new Encumbrance on the Premises, on the condition that the proposed lender
agrees not to disturb Tenant's rights under this Lease so long as Tenant is not
in default hereunder.
18. Quiet Enjoyment. So long as there is no Event of Default by Tenant,
Landlord covenants and agrees that Tenant shall peaceably and quietly have,
hold and enjoy the Premises for the Term, free of any claim or other action not
caused or created by Tenant (excepting, however, intrusion of Tenant's quiet
enjoyment occasioned by condemnation or destruction of the property as referred
to in Section 12 and 13 hereof).
19. Applicable Law. This Lease shall be governed by and construed in
accordance with the internal laws of the State of Washington without regard to
the conflict of laws rules of such State.
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20. Preservation of Gross Revenues.
20.1 Tenant acknowledges that a fair return to Landlord on its
investment in the Premises is dependent, in part, on the concentration on the
Premises during the Term of the ALF/ILF business of Tenant and its Affiliates
in the geographical area of the Premises. Tenant further acknowledges that the
diversion of patient care activities from the Premises to other facilities or
other healthcare providers owned or operated by Tenant or its Affiliates at or
near the end of the Term will have a material adverse impact on the value and
utility of the Premises.
20.1.1 Therefore, Tenant agrees that during the Term, and for a
period of one (1) year thereafter, neither Tenant nor any of its Affiliates
shall, without the prior written consent of Landlord, operate, own,
participate in or otherwise receive revenues from any other facility or
institution providing services or similar goods to those provided on or in
connection with the Premises and the permitted use thereof as contemplated
under this Lease, within a Three (3) mile radius of the Premises other than
the Union Park at Allenmore Facility located at 2010 South Union Avenue,
Tacoma, Washington 98405. Notwithstanding the foregoing, Tenant may develop
or purchase such other facilities within such radius of the Premises with
the consent of Landlord, which consent shall not be unreasonably withheld.
20.1.2 In addition, Tenant hereby covenants and agrees that for a
period of one year following the expiration or earlier termination of this
Lease, neither Tenant nor any of its Affiliates shall, without prior
written consent of Landlord, hire, engage or
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otherwise employ any management or supervisory personnel working on or in
connection with the Premises.
20.2 Except as required for medically appropriate reasons, prior to
and after Lease termination, neither Tenant nor any of its Affiliates will
recommend or solicit the removal or transfer of any patient from the Premises
to any other nursing or health care facility, or to any senior housing or
retirement housing facility.
20.3 In the event the Brim Merger (as defined in Section 22.2 below)
occurs, the provisions of this Section 20 shall not apply to any facilities
which, as of the date of this Lease, are owned, operated or under development
by the Brim Subsidiary (as defined in Section 22.2 below).
21. Hazardous Materials.
21.1 Hazardous Material Covenants. Tenant's use of the Premises shall
comply with all Hazardous Materials Laws. In the event any Environmental
Activities occur or are suspected to have occurred in violation of any
Hazardous Materials Laws or if Tenant has received any Hazardous Materials
Claim against the Premises, Tenant shall promptly obtain all permits and
approvals necessary to remedy any such actual or suspected problem through the
removal of Hazardous Materials or otherwise, and upon Landlord's approval of
the remediation plan, remedy any such problem to the satisfaction of Landlord,
in accordance with all Hazardous Materials Laws and good business practices.
21.2 Tenant Notices to Landlord. Tenant shall immediately advise
Landlord in writing of:
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21.2.1 any Environmental Activities in violation of any Hazardous
Materials Laws,
21.2.2 any Hazardous Materials Claims against Tenant or the
Premises,
21.2.3 any remedial action taken by Tenant in response to any
Hazardous Materials Claims or any Hazardous Materials on, under or about
the Premises in violation of any Hazardous Materials Laws,
21.2.4 Tenant's discovery of any occurrence or condition on or in
the vicinity of the Premises that materially increase the risk that the
Premises will be exposed to Hazardous Materials,
21.2.5 all communications to or from Tenant, any governmental
authority or any other person relating to Hazardous Materials Laws or
Hazardous Materials Claims with respect to the Premises, including
copies thereof.
21.3 Extension of Term. Notwithstanding any other provision of this
Lease, in the event any Hazardous Materials are discovered on, under or about
the Premises in violation of any Hazardous Materials Law, the Term shall be
automatically extended and this Lease shall remain in full force and effect
until the earlier to occur of the completion of all remedial action or
monitoring, as approved by Landlord, in accordance with all Hazardous Materials
Laws, or the date specified in a written notice from Landlord to Tenant
terminating this Lease (which date may be subsequent to the date upon which the
Term was to have expired).
21.4 Participation in Hazardous Materials Claims. Landlord shall have
the right, at Tenant's sole cost and expense and with counsel chosen by
Landlord, to join and
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participate in, as a party if it so elects, any legal proceedings or actions
initiated in connection with any Hazardous Materials Claims.
21.5 Environmental Activities shall mean the use, generation,
transportation, handling, discharge, production, treatment, storage, release or
disposal of any Hazardous Materials at any time to or from the Premises or
located on or present on or under the Premises. Nothing contained in the
foregoing or elsewhere in this Section 21 is intended to, nor shall it, limit
the liability of Tenant, if any, to Landlord with respect to any representation
or warranty given by Tenant to landlord with respect to Hazardous Materials or
environmental matters generally as set forth in the Purchase Agreement.
21.6 Hazardous Materials shall mean (i) any petroleum products and/or
by-products (including any fraction thereof), flammable substances, explosives,
radioactive materials, hazardous or toxic wastes, substances or materials,
known carcinogens or any other materials, contaminants or pollutants which pose
a hazard to the Premises or to persons on or about the Premises or cause the
Premises to be in violation of any Hazardous Materials Laws; (ii) asbestos in
any form which is friable; (iii) urea formaldehyde in foam insulation or any
other form; (iv) transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty (50) parts
per million or any other more restrictive standard then prevailing; (v) medical
wastes and biohazards; (vi) radon gas; and (vii) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety
of
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the occupants of the Premises or the owners and/or occupants of property
adjacent to or surrounding the Premises.
21.7 Hazardous Materials Claims shall mean any and all enforcement,
clean-up, removal or other governmental or regulatory actions or orders
threatened, instituted or completed pursuant to any Hazardous Material Laws,
together with all claims made or threatened by any third party against the
Premises, Landlord or Tenant relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.
21.8 Hazardous Materials Laws shall mean any laws, ordinances,
regulations, rules, orders, guidelines or policies relating to the environment,
health and safety, Environmental Activities, Hazardous Materials, air and water
quality, waste disposal and other environmental matters.
22. Assignment and Subletting. Tenant shall not, without the prior written
consent of Landlord, which may be withheld at Landlord's sole discretion,
voluntarily or involuntarily assign or hypothecate this Lease or any interest
herein or sublet the Premises or any part thereof except to residents of the
Premises and providers of incidental services to residential tenants such as
barber shops, beauty shops and the like, provided, that the square footage of
space in the Premises allocated to such providers shall not exceed in the
aggregate five percent (5%) of the total square footage of the building
included in the Premises. For the purposes of this Lease, a management or
similar agreement shall be considered to be an assignment of this Lease by
Tenant. Any of the foregoing acts without such consent shall be void but shall,
at the option of
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Landlord in its sole discretion, constitute an Event of Default giving rise to
Landlord's right, among other things, to terminate this Lease. Without limiting
the foregoing, this Lease shall not, nor shall any interest of Tenant herein,
be assigned or encumbered by operation of law without the prior written consent
of Landlord which may be withheld at Landlord's sole discretion.
Notwithstanding the foregoing, Tenant may without Landlord's consent assign
this Lease or sublet the Premises or any portion thereof to a wholly-owned
subsidiary of Tenant, provided that such subsidiary fully assumes the
obligations of Tenant under this Lease, Tenant remains fully liable under this
Lease, any Guarantor remains fully liable with respect to its guaranty of this
Lease, the use of the Premises remains unchanged, and no such assignment or
sublease shall be valid and no such subsidiary shall take possession of the
Premises until an executed counterpart of such assignment or sublease has been
delivered to Landlord. Anything contained in this Lease to the contrary
notwithstanding, Tenant shall not sublet the Premises on any basis such that
the rental to be paid by the sublessee thereunder would be based, in whole or
in part, on either the income or profits derived by the business activities of
the sublessee, or any other formula, such that any portion of the sublease
rental received by Landlord would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the U.S. Internal Revenue Code, or any
similar or successor provision thereto.
22.1 For the purpose of this Lease, the transfer, assignment, sale,
hypothecation or other disposition of any stock of Tenant and/or Guarantor,
which results in a change in the Person (as hereinafter defined) which
ultimately exerts effective Control (as hereinafter defined) over the
management of the affairs of Tenant and/or Guarantor, as
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of the date hereof, shall be deemed to be an assignment of the Lease. For
purposes herein, "Control" shall mean, as applied to any individual,
partnership, association, corporation or other entity (collectively, "Person"),
the possession, directly or indirectly, of the power to direct the management
and policies of that Person, whether through ownership, voting control, by
contract or otherwise. Notwithstanding the foregoing, nothing contained in this
Section 22.1 is intended to restrict the authority of the respective boards of
directors of Tenant and/or Guarantor to appoint officers or management of
Tenant and/or Guarantor.
22.2 Notwithstanding anything to the contrary contained in Section
22.1, in no event shall (i) an initial public offering of Tenant (the "IPO");
or (ii) a merger of Tenant with Brim Senior Living, Inc., an Oregon corporation
(the "Brim Subsidiary"), a wholly-owned subsidiary of Brim, Inc., an Oregon
corporation ("Brim") (the "Brim Merger"); or (iii) a leveraged buyout by
existing management of Tenant and/or Brim (the "Mgmt LBO"); (iv) an employee
stock option plan leveraged buyout (the "ESOP LBO"); or (v) the exercise of the
rights of Capital Consultants, Inc., an Oregon corporation ("CCI") to convert
its preferred stock in Tenant to common stock under that certain Securities
Purchase Agreement or the Restructuring Agreement, in each case by and between
CCI, as agent, and Tenant which may result in CCI gaining Control in Tenant
(the "CCI Conversion"), be deemed to be an assignment of this Lease; provided,
however, that, without limiting Section 22.1, (x) after such IPO, any transfer,
assignment, sale, hypothecation or other disposition of the voting stock of
Tenant which results in twenty-five percent (25%) or more of the voting stock
of Tenant being held by any Person or
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related group of Persons who did not have such ownership after the IPO shall be
deemed to be an assignment of the Lease; and (y) after the Brim Merger, the
Control of the surviving corporation must be held by Tenant or Brim and (z)
with respect to the Mgmt LBO or the ESOP LBO, NHP must have approved in
advance, upon its reasonable discretion, the terms of any leveraged buyout.
23. Indemnification. To the fullest extent permitted by law, Tenant agrees
to protect, indemnify, defend and save harmless Landlord, its directors,
officers, shareholders, agents and employees from and against any and all
foreseeable or unforeseeable liability, expense loss, costs, deficiency, fine,
penalty, or damage (including without limitation punitive or consequential
damages) of any kind or nature, including reasonable attorneys' fees, from any
suits, claims or demands, on account of any matter or thing, action or failure
to act arising out of or in connection with this Lease (including, without
limitation, the breach by Tenant of any of its obligations hereunder), the
Premises, or the operations of Tenant on the Premises, including, without
limitation, all Environmental Activities on the Premises, all Hazardous
Materials Claims or any violation by Tenant of a Hazardous Materials Law
with respect to the Premises; provided, however, such indemnity shall not
extend to any such suit, claim or damage which is caused solely by the willful
misconduct or gross negligence of Landlord, its directors, officers, agents and
employees. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Landlord believes is covered by this indemnity, Landlord shall
give Tenant notice of the matter. Tenant shall defend Landlord against
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such matter at Tenant's sole cost and expense with legal counsel satisfactory
to Landlord. Landlord may elect to defend the matter with its own counsel at
Tenant's expense.
24. Holding Over. If Tenant shall for any reason remain in possession of
the Premises after the expiration or earlier termination of this Lease, such
possession shall be a month-to-month tenancy during which time Tenant shall pay
as rental each month, 1 1/2 times the aggregate of the monthly Minimum Rent
payable with respect to the last Lease Year plus Additional Rent allocable to
the month, all additional charges accruing during the month and all other sums,
if any, payable by Tenant pursuant to the provisions of this Lease with respect
to the Premises. Nothing contained herein shall constitute the consent, express
or implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease, nor shall anything contained herein be
deemed to limit Landlord's remedies pursuant to this Lease or otherwise
available to Landlord at law or in equity.
25. Estoppel Certificates. Each of Landlord and Tenant shall, at any time
upon not less than five (5) days prior written request by the other party,
execute, acknowledge and deliver to the requesting party or its designee a
statement in writing, executed by an officer or general partner certifying that
this Lease is unmodified and in full force and effect (or, if there have been
any modifications, that this Lease is in full force and effect as modified, and
setting forth such modifications), the dates to which Minimum Rent, Additional
Rent and additional charges hereunder have been paid, certifying that no
default by either Landlord or Tenant exists hereunder or specifying each such
default and as to other matters as the requesting party may reasonably request.
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26. Conveyance by Landlord. If Landlord or any successor owner of the
Premises shall convey the Premises in accordance with the terms hereof,
Landlord or such successor owner shall thereupon be released from all future
liabilities and obligations of Landlord under this Lease arising or accruing
from and after the date of such conveyance or other transfer as to the Premises
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
27. Waiver of Jury Trial. Landlord and Tenant hereby waive any rights to
trial by jury in any action, proceedings or counterclaim brought by either of
the parties against the other in connection with any matter whatsoever arising
out of or in any way connected with this Lease, including, without limitation,
the relationship of Landlord and Tenant, Tenant's use and occupancy of the
Premises, or any claim of injury or damage relating to the foregoing or the
enforcement of any remedy hereunder.
28. Attorneys' Fees. If Landlord or Tenant brings any action to interpret
or enforce this Lease, or for damages for any alleged breach hereof, the
prevailing party in any such action shall be entitled to reasonable attorneys'
fees and costs as awarded by the court in addition to all other recovery,
damages and costs.
29. Severability. In the event any part or provision of the Lease shall be
determined to be invalid or enforceable, the remaining portion of this Lease
shall nevertheless continue in full force and effect.
30. Counterparts. This Lease may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute
one and the same agreement.
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31. Binding Effect. Subject to the provisions of Section 22 above, this
Lease shall be binding upon and inure to the benefit of Landlord and Tenant and
their respective heirs, personal representatives, successors in interest and
assigns.
32. Waiver and Subrogation. Landlord and Tenant hereby waive to each other
all rights of subrogation which any insurance carrier, or either of them, may
have as to the Landlord or Tenant by reason of any provision in any policy of
insurance issued to Landlord or Tenant, provided such waiver does not thereby
invalidate the policy of insurance.
33. Memorandum of Lease. Landlord and Tenant shall, promptly upon the
request of either, enter into a short form memorandum of the Lease, in form
suitable for recording under the laws of the State of Washington in which
reference to this Lease shall be made. The party requesting such recordation
shall pay all costs and expenses of preparing and recording such memorandum of
this Lease.
34. Incorporation of Recitals and Attachments. The recitals and exhibits,
schedules, addenda and other attachments to this Lease are hereby incorporated
into this Lease and made a part hereof.
35. Titles and Headings. The titles and headings of sections of this Lease
are intended for convenience only and shall not in any way affect the meaning
or construction of any provision of this Lease.
36. Usury Savings Clause. Nothing contained in this Lease shall be deemed
or construed to constitute an extension of credit by Landlord to Tenant.
Notwithstanding the foregoing, in the event any payment made to Landlord
hereunder is deemed to
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violate any applicable laws regarding usury, the portion of any payment deemed
to be usurious shall be held by Landlord to pay the future obligations of
Tenant as such obligations arise and, in the event Tenant discharges and
performs all obligations hereunder, such funds will be reimbursed to Tenant
upon the expiration of the Term. No interest shall be paid on any such funds
held by Landlord.
37. Joint and Several. If more than one person or entity is the Tenant
hereunder, the liability and obligations of such persons or entities under this
Lease shall be joint and several.
38. Survival of Representations, Warranties and Covenants. All of the
obligations, representations, warranties and covenants of Tenant under this
Lease shall survive the expiration or earlier termination of the Term.
39. Interpretation. Both Landlord and Tenant have been represented by
counsel and this Lease has been freely and fairly negotiated. Consequently, all
provisions of this Lease shall be interpreted according to their fair meaning
and shall not be strictly construed against any party.
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Executed as of the date indicated above.
TENANT:
NEW CROSSINGS INTERNATIONAL
CORPORATION,
a Nevada corporation
By: /s/ David M. Boitano
-------------------------------
Name: David M. Boitano
-----------------------------
Title: Vice President
----------------------------
LANDLORD:
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: /s/ Gary Stark
-------------------------------
Name: Gary Stark
-----------------------------
Title: Vice President
----------------------------
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STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On 9 April, 1996, before me, Joanne L. Ator, a Notary Public in and for
said State, personally appeared, David M. Boitano, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s)/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Joanne L. Ator (Seal)
---------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF ORANGE )
On April 11, 1996, before me, Paula M. Bennion, a Notary Public in and for
said State, personally appeared Gary Stark, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Paula M. Bennion (Seal)
---------------------------
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CONSTRUCTION ADDENDUM
40. Development Advance. Subject to the terms of this Addendum, Landlord
agrees to advance to Tenant, pursuant to one or more disbursements, an
aggregate amount (the "Development Advance") not to exceed Four Million Four
Hundred Thirty-One Thousand Dollars ($4,431,000). The Development Advance shall
be used by Tenant to pay the costs of constructing the Facility.
41. Conditions to Initial Disbursement of Development Advance. The initial
disbursement of the Development Advance shall not be made by Landlord until
Tenant has satisfied all of the following conditions at Tenant's sole cost and
expense:
(a) Tenant shall provide Landlord with complete copies of the plans
and specifications for the Facility in form and substance acceptable to
Landlord in the exercise of its reasonable discretion.
(b) Tenant shall provide Landlord with a complete copy of the
construction budget for the Facility in form and substance acceptable to
Landlord in the exercise of its reasonable discretion. Any such
construction budget shall include, without limitation, all direct and
indirect costs of development, legal fees, architectural and engineering
costs, permits and other fees, design costs, construction costs, land
acquisition costs, site improvements, equipment, fixtures and furniture.
(c) Tenant shall provide Landlord with a complete copy of the
construction schedule for the Facility in form and substance acceptable to
Landlord in the exercise of its reasonable discretion.
(d) Tenant shall provide Landlord with complete copies of the
following documents, in form and substance acceptable to Landlord in the
exercise of its reasonable discretion:
i) The construction contract with the general contractor, all
other direct contracts with respect to any work in connection with the
Facility, and each significant subcontract (as determined by Landlord)
entered into or to be entered into with respect to the Facility; and
ii) An assignment in favor of Landlord of the plans and
specifications, the design architect's agreement, the general contract,
the construction contract, and to all subcontracts, and all other
agreements relating to the construction of the Facility or required for
the use, occupancy or operation of the Facility, together with consents
to such assignments as deemed appropriate by Landlord. To the extent
the assignment of the general contract eliminates the need for a direct
assignment of subcontracts, the requirement for assignments of
subcontracts shall be waived.
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(e) Tenant shall have obtained, and provided to Landlord, evidence
satisfactory to Landlord that all utilities necessary for the construction
and operation of the Facility are available and are adequate to serve the
Facility for the uses permitted under the Lease, as amended hereby, and
that all conditions to Tenant's ability to utilize such utilities have been
satisfied.
(f) Tenant shall have obtained and provided to Landlord evidence
satisfactory to Landlord of all authorizations, including, without
limitation, building permits, environmental approvals, sewer and water
permits, zoning and land use entitlements, and all other approvals,
consents, permits and licenses issued or to be issued by any governmental
authority and required for the construction of the Facility in accordance
with the plans and specifications and in accordance with all applicable
laws, ordinances and regulations.
(g) Landlord shall have received and approved a list, certified by
Tenant and the general contractor, of all personalty (including, but not
limited to, materials, fixtures, installations and fabrications) to be
incorporated into the Facility and that are to be stored, assembled,
manufactured or otherwise located in a location other than the Facility.
(h) Tenant shall have obtained, and delivered to Landlord
certificates evidencing such course of construction insurance as may be
reasonably required by Landlord.
42. Satisfaction of Initial Disbursement Conditions. The conditions set
forth in Section 41 shall be satisfied by August 31, 1996. Tenant's failure to
so satisfy such conditions shall constitute an Event of Default after notice
and the expiration of any applicable cure period as set forth in Section 10 and
Landlord may, at its option, in addition to all other remedies available
pursuant to this Lease, or applicable law, require Tenant to purchase the
Premises from Landlord as provided in Section 49 of this Addendum.
43. Conditions to All Disbursements of Development Advance. Except as
provided in Section 51, no disbursement of the Development Advance shall be
made by Landlord unless Tenant shall have satisfied all of the following
conditions at Tenant's sole cost and expense:
(a) Tenant shall give Landlord at least five (5) days written notice
of Tenant's request for a disbursement of the Development Advance, which
notice shall include the following:
i) A statement of the amount of the requested disbursement;
ii) An itemized account of expenditures to be paid or
reimbursed from the requested disbursement, certified by Tenant to be
true and correct expenditures which have already been paid or are due
and owing;
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iii) A certificate from the architect for the Facility
certifying that the work relating to the expenditures for which the
disbursement is requested has actually been performed and complies with
the plans and specifications for the Facility;
iv) A statement from Tenant confirming that the construction of
the Facility is proceeding in accordance with the construction
schedule, the plans and specifications, and the construction budget
(all as previously approved by Landlord), certified by Tenant to be
true and correct in all material respects; and
v) Any other information or documentation Landlord shall
reasonably require.
(b) Tenant shall not have had a disbursement of Development Advance
in the same calendar month, and the disbursement shall be in an amount not
less than $100,000, provided, however, the last disbursement may be in the
amount of remaining funds in the Development Advance.
(c) Tenant shall have permitted Landlord to inspect the Facility at
such times and in such manner as Landlord shall request, all at the
reasonable expense of Tenant.
(d) As of the date of Tenant's request for a disbursement, or as of
the date of disbursement, no Event of Default and no event which with the
giving of notice or the passage of time would constitute an Event of
Default shall exist under the Lease.
(e) All governmental authorizations required for the construction of
the Facility, and all insurance required of Tenant, shall remain in full
force and effect.
(f) Each request for a disbursement of the Development Advance
containing a request for funds to pay for any item which is not then
located on the Facility shall specifically note the fact that the item(s)
in question are located off-site, and Landlord may decline to disburse
funds with respect to the same unless and until Landlord has received all
documentation required by Landlord to assure Landlord of its ownership
interest therein.
(g) Tenant shall cause to be delivered to Landlord lien waivers and
releases (partial, or final, as appropriate) from the general contractor,
each construction contractor and subcontractor that is receiving in excess
of $25,000, covering the amount of such payment, all in form and substance
satisfactory to Landlord. Tenant shall also deliver to Landlord copies of
invoices or purchase orders from each payee with an identifying reference
to the Facility, which invoices or purchase orders shall support the full
amount of costs contained in the requested disbursement.
44. Use of Development Advance. Landlord shall make disbursements of the
Development Advance only for items on the construction budget approved by
Landlord
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and as provided in Section 51. No disbursement of the Development Advance shall
be made for Tenant's overhead charges or construction supervision other than
reasonable and customary construction supervision. Landlord reserves the right
to make disbursements of the Development Advance directly to Tenant, jointly to
Tenant and to its vendors, subcontractors and materialman and/or directly to
Tenant's vendors, subcontractors and materialman.
45. Shortage. Landlord shall have the right at any time and in the
reasonable exercise of Landlord's judgment to determine whether the costs for
construction (including, without limitation, all Minimum Rent during the
Construction Period) of the Facility are greater than Landlord has approved,
and Tenant shall, within ten (10) days after notice from Landlord that the
Development Advance will be insufficient to fully complete the Facility and pay
all costs for such completion, deposit with Landlord, cash in the amount of the
shortage. Interest shall be paid at prevailing money market rates by Landlord
on amounts deposited with Landlord pursuant to this Section. Any cash deposited
by Tenant pursuant to this Section shall be disbursed by Landlord prior to
disbursing any portion of the Development Advance.
46. Change Orders. Landlord's prior written approval shall be required with
respect to any Change Orders (as defined below) with an aggregate value of
$100,000 or more, or which have the effect, as reasonably determined by
Landlord, of delaying the date on which the Facility will be Substantially
Complete. As used herein, "Change Orders" shall mean any change in the plans
and specifications, the general contract, the construction budget, the
construction schedule or any other construction contract relating to the
Facility.
47. Liens. All construction shall be free and clear of defects and liens or
claims for liens for materials supplied or labor or services performed in
connection with the Facility. No disbursement of the Development Advance shall
be made by Landlord if Landlord reasonably suspects that such disbursement
might be subject to mechanic's or material supplier's liens or any intervening
or other liens against the Premises.
48. Substantial Completion Date. Tenant shall diligently pursue completion
of the Facility according to plans and specifications and the construction
schedule previously approved by Landlord and construction of the Facility shall
be substantially complete by June 30, 1997 (the "Completion Deadline"). The
Facility shall be deemed substantially complete on the day (the "Substantial
Completion Date") that Tenant provides to Landlord evidence satisfactory to
Landlord of (i) the certification of the architect for the Facility that the
facility is built substantially in compliance with the plans and specifications
approved by Landlord, (ii) a governmental certificate of occupancy for human
use and habitation or its equivalent for the Premises, and (iii) all licenses
necessary for operation of the Facility. Tenant's failure to substantially
complete the construction of the Facility by the Completion Deadline, or to
complete each of the items set forth in the Construction Schedule within the
time set forth therein shall constitute an Event of Default after notice and
the expiration of any applicable cure period as set forth in the Section 10 and
Landlord may, at its option, in addition to all other remedies
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<PAGE> 72
available pursuant to this Lease or applicable law, require Tenant to purchase
the Premises as provided in Section 49 of this Addendum.
49. Tenant's Purchase Obligation. If Landlord exercises its right to
require the Tenant to Purchase the property pursuant to Sections 42 or 48 of
this Addendum, Tenant shall purchase the Premises from Landlord for a cash
price equal to Landlord's Original Investment plus any rent or other amounts
due, but unpaid, as of the closing date of such transaction (as increased by
any amounts advanced by Landlord pursuant to Section 5.7 and decreased by any
net award paid to Landlord pursuant to Section 13.2). So long as Tenant
continues to pay all Minimum Rent and other amounts due as provided in this
Lease, Tenant shall have one hundred and eighty (180)days from Landlord's
exercise of its option pursuant to this Section in which to consummate such
purchase utilizing an escrow at a national title company selected by Landlord.
Such escrow shall be documented on such title company's standard sale escrow
instructions without representations or warranties and without any due
diligence or other contingencies in favor of the buyer. Tenant shall pay all
costs of such sale transaction. At the close of such sale, Landlord shall
deliver to Tenant title to the Premises subject only to those title exceptions
shown on Exhibit "C" attached hereto. Tenant's failure to complete the purchase
of the Premises or to pay Minimum Rent and other amounts due as provided herein
shall, upon expiration of the cure period set forth in Section 10.1.1,
constitute an Event of Default and the amount owed to Landlord by Tenant
pursuant to this Section for the purchase of the Premises shall bear interest
from the date due at a per annum rate equal to the lesser of the Bank of
America reference rate plus five percent (5%) or the highest rate permitted by
law (the "Agreed Rate"). In addition to the remedies provided in this Section
49, Landlord shall have the right to receive all attorneys' fees and costs
incurred in connection with Tenant's default and the repurchase of the
Premises. The remedies provided in this Section 49, if elected by Landlord,
shall together be an exclusive remedy and Tenant's consummation of the purchase
in accordance with this Section 49 and payment of attorneys' fees and costs
shall cure the Event of Default hereunder for the purposes of any agreement or
document that may be cross-defaulted with this Lease.
50. Completion by Landlord. After the occurrence of an Event of Default
pursuant to Sections 42 and 48 of this Addendum, Landlord may elect to leave
the Lease in place and take over construction of the Facility using the
Development Advance, but without relieving Tenant of its obligation to pay any
shortage pursuant to Section 45. In such event, Tenant shall cooperate with
Landlord's taking over of construction and shall provide all documents or
information and perform any act reasonably necessary to smoothly effectuate the
transition.
51. Stub Period Commencement Date. The "Stub Period Commencement Date"
shall be the earlier of the Substantial Completion Date or the Completion
Deadline.
52. Third-Party Servicer. Tenant hereby acknowledges and agrees that
Landlord may, at its election, require that any or all disbursements of the
Development Advance be made through a third-party disbursement and inspection
service. If Landlord so elects, all
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reasonable costs and expenses relating to such third-party servicer, including
without limitation all administration and inspection charges, shall be paid by
Tenant.
53. No Waiver. The waiver by Landlord of compliance with any requirement(s)
with respect to any given disbursement of the Development Advance shall not
affect Landlord's right to require strict compliance with all requirements as
to any subsequent disbursement.
54. Survey. Upon completion of construction of the Facility, Tenant shall,
at Tenant's sole cost and expense, provide Landlord with an as-built survey
showing the improvements constructed by Tenant.
55. Landlord's Property. Any personal property purchased with the
Development Advance shall be the property of Landlord ("Landlord's Personal
Property"). Any improvements or fixtures constructed with the Development
Advance shall be the property of Landlord.
56. Documents and Information. All information provided to Landlord
pursuant to this Addendum shall be true, accurate and complete in all material
respects with reference to all material facts. Tenant shall promptly notify
Landlord of any material change in any document or information provided to
Landlord.
57. Design Materials and Workmanship. Tenant shall cause the architect of
the Facility to design the Facility in accordance with prudent industry
practice. The materials and equipment incorporated in the Facility shall be of
quality of workmanship equal to or better than the quality of those originally
incorporated in Tenant's River Place Facility located at 739 E. Parkcenter
Blvd., Boise, Idaho 83706. The facility shall be built in compliance with the
plans and specifications approved by Landlord and all applicable laws and in
accordance with prudent industry practice.
58. Correction of Defects. Within five (5) days after notice thereof,
Tenant will proceed with diligence to correct all defects in the Facility and
any departure from the plans and specifications except as approved by Landlord
in writing or permitted under Section 46 of this Addendum. The disbursement of
any portion of the Development Advance shall not constitute a waiver of
Landlord's rights pursuant to this Section. If Tenant fails to commence
correction of such defects within five (5) days' notice thereof, or at any time
after such commencement fails to diligently pursue such correction, Landlord
may correct such defects and Tenant shall, upon demand, reimburse such costs,
which shall bear interest from the date of Landlord's original notice of
defects at the Agreed Rate.
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EXHIBIT "A"
Legal Description
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF WASHINGTON, CITY OF
TACOMA, COUNTY OF PIERCE, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL A:
BEGINNING 825 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12,
TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE W.M.;
THENCE WEST 264 FEET;
THENCE SOUTH 165 FEET;
THENCE EAST 264 FEET;
THENCE NORTH 165 FEET TO THE POINT OF BEGINNING.
PARCEL B:
BEGINNING 990 FEET SOUTH OF THE NORTHEAST CORNER OF SECTION 12,
TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE W.M.;
THENCE WEST 264 FEET;
THENCE SOUTH 165 FEET;
THENCE EAST 264 FEET;
THENCE NORTH 165 FEET TO THE POINT OF BEGINNING.
PARCEL C:
BEGINNING AT A POINT 1,155 FEET SOUTH OF THE NORTHEAST CORNER OF
SECTION 12, TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE W.M.;
THENCE SOUTH TO THE SOUTHEAST CORNER OF THE NORTHEAST 1/4 OF THE
NORTHEAST 1/4 OF SAID SECTION 12;
THENCE WEST 264 FEET;
THENCE NORTH TO A POINT DUE WEST OF INITIAL POINT;
THENCE EAST 264 FEET TO THE POINT OF BEGINNING;
EXCEPT THE EAST 15 FEET THEREOF;
AND EXCEPT THE SOUTH 30 FEET THEREOF.
A-1
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PARCEL D:
BEGINNING AT A POINT 1,155 FEET SOUTH OF THE NORTHEAST CORNER OF
SECTION 12, TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE W.M.;
THENCE WEST 15 FEET;
THENCE SOUTH TO THE NORTH LINE OF SOUTH 23RD STREET;
THENCE EAST 15 FEET;
THENCE NORTH TO THE POINT OF BEGINNING.
A-2
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EXHIBIT "B"
Appraisal Process
If Landlord and Tenant are unable to agree upon the Fair Market Value of
the Premises within any relevant period provided in this Lease, each shall
within ten (10) days after written demand by the other select one MAI Appraiser
to participate in the determination of fair market value. For all purposes
under this Lease, the fair market value of the Premises shall be the fair
market value of the Premises, unencumbered by this Lease. Within ten (10) days
of such selection, the MAI Appraisers so selected by Landlord and Tenant shall
select a third MAI Appraiser. The three (3) selected MAI Appraisers shall each
determine the fair market value of the Premises within thirty (30) days of the
selection of the third appraiser. To the extent consistent with sound appraisal
practices as then existing at the time of any such appraisal, and if requested
by Landlord, such appraisal shall be made on a basis consistent with the basis
on which the Premises was appraised at the time of its acquisition by Landlord.
Tenant and Landlord shall each pay one-half the fees and expenses of any MAI
Appraiser retained pursuant to this Exhibit.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, the MAI Appraiser
selected by the other party shall alone determine the fair market value of the
Premises in accordance with the provisions of this Exhibit and the fair market
value so determined shall be binding upon Landlord and Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are unable
to agree upon a third MAI Appraiser within the time period set forth in the
first paragraph of this Exhibit, either Landlord or Tenant shall have the right
to apply at Landlord's and Tenant's equal expense to the presiding judge of the
court of original trial jurisdiction in the county in which the Premises is
located to name the third MAI Appraiser.
Within five (5) days after completion of the third MAI Appraiser's
appraisal, all three Appraisers shall meet and a majority of the MAI Appraisers
shall attempt to determine the fair market value of the Premises. If a majority
are unable to determine the fair market value at such meeting, the three
appraisals shall be added together and their total divided by three. The
resulting quotient shall be the fair market value of the Premises. If, however,
either or both of the low appraisal or the high appraisal are more than ten
percent (10%) lower or higher than the middle appraisal, any such lower or
higher appraisal shall be disregarded. If only one appraisal is disregarded,
the remaining two appraisals shall be added together and their total divided by
two, and the resulting quotient shall be such fair market value. If both the
lower appraisal and higher appraisal are disregarded as provided herein, the
middle appraisal shall be such fair market value. In any event, the result of
the foregoing appraisal process shall be final and binding.
B-1
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"MAI Appraiser" shall mean an appraiser licensed or otherwise qualified to
do business in the State and who has substantial experience in performing
appraisals of facilities similar to the Premises and is certified as a member
of the American Institute of Real Estate Appraisers or certified as a SRPA by
the Society of Real Estate Appraisers, or, if such organizations no longer
exist or certify appraisers, such successor organization or such other
organization as is approved by Landlord.
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EXHIBIT "C"
Permitted Exceptions
1. The standard printed exceptions, conditions and exclusions from
coverage contained in the standard coverage owner's title policy then
prevailing in use at the title company which consummates the sale transaction.
2. Any matters which an accurate survey of the Premises may show.
3. Any matters shown as title exceptions in that certain ALTA owner's
policy of title insurance issued by Chicago Title Insurance Company in favor of
Landlord in connection with Landlord's acquisition of the Premises from Tenant.
4. Such other matters burdening the Premises which were created with the
consent or knowledge of Tenant or arising out of Tenant's acts or omissions.
C-1
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EXHIBIT "D"
Group Facilities
The following documents are referred to as the "Group Facilities". The Group
Facilities must all be renewed or extended in accordance with their terms for
any one to be renewed or extended.
1. Lease and Security Agreement by and between Nationwide Health Properties,
Inc., a Maryland corporation and New Crossings International Corporation, a
Nevada corporation dated March 27, 1996 for the facility known as Allenmore
Assisted Living.
2. Sublease and Security Agreement dated December 15, 1995 between 2010 Union
Park Limited Partnership, a Washington limited partnership and New
Crossings International Corporation, a Maryland corporation for the
facility known as Union Park at Allenmore as amended by that certain First
Amendment to Sublease and Security Agreement dated March 27, 1996.
D-1
<PAGE> 1
EXHIBIT 10.49
LEASE AGREEMENT
OF
VETERANS OF FOREIGN WARS POST 91
This lease is made as of this 2nd day of December, 1985, between Wild
West Post No. 91 Veterans of Foreign Wars of the United States, a corporation,
formerly Wild West Post No. 91, Department of Washington, Veterans of Foreign
Wars of the United States, a corporation, hereinafter called the Lessor, and
2010 Union Limited Partnership, hereinafter called the Lessee, witnesseth:
I. DEMISE
The Lessor leases to the Lessee the premises in the City of Tacoma,
County of Pierce, and State of Washington, legally described on Exhibit A
attached hereto and by this reference incorporated herein.
II. TERM
To have and to hold the premises for the term of 75 years from the
date of the endorsement of the mortgage for insurance or beginning on the
opening day of the facility to be constructed on the premises whichever
condition meets the United States Department of Housing and Urban Development
Federal Housing Administration leasehold 207 (HUD) projects or in the event HUD
is not involved, then from the completion of construction as evidenced by a
final certificate of occupancy issued by the City of Tacoma. At the end of the
term of 75 years the premises shall revert back to the lessor.
III. RENT
The Lessee agrees to pay the Lessor as rent for the premises the sum
of $18,000 yearly, payable in monthly installments, on the first day of each
month and each succeeding month in each and every year during the said term, in
advance, at such office of the Lessor or his agent in said City of Tacoma, as
the Lessor may from time to time designate, the first payment to be made as
described above under heading TERM. The rental amount shall increase by 15%
each 10 years except as provided in paragraph 15.
IV. ERECT BUILDING
The Lessee shall at its own cost erect upon the premises a building in
accordance with the plans and specifications of an architect and surveyor to be
designated later to the approval of the Lessor, which shall not be unreasonably
withheld, signed by the parties hereto annexed, the said building to cost no
less than $3,000,000, shall begin construction of said building by December 31,
1986, and shall complete the said building in all respects fit for immediate
occupancy on or before the 31st day of December, 1987, unless prevented by
accident or unavoidable causes. The Lessor shall be indemnified against all
mechanics' and other liens which may arise or be created in the erection of the
said building and that, when completed the said building and premises shall be
free from all liens except as hereinafter provided.
V. TAXES
The Lessee, commencing with the date of receipt of the final
certificate(s) of occupancy, shall pay and discharge all
<PAGE> 2
existing and future taxes, assessments, duties, impositions and burdens
assessed, charged, or imposed, upon the premises or any erections thereon, or
upon the owner or occupier in respect thereof, and shall deliver to the Lessor
promptly proper and sufficient receipts and other evidence of the payment and
discharge of the same. Lessee will also pay any additional taxes which are
incurred by the Lessor as a result of actions by the Lessee under this lease.
VI. LIENS OR ENCUMBRANCES
The Lessee shall not suffer the premises or any erection or
improvements thereon to become subject to any lien, charge, or encumbrance
whatsoever, other than a mortgage as hereinafter provided and shall indemnify
the Lessor against all such liens, charges and encumbrances; it being expressly
agreed that the Lessee shall have no authority, express or implied, to create
any lien, charge, or encumbrance, other than a mortgage upon the premises or
the improvements thereon.
VII. ASSIGNMENTS
The Lessee shall not assign this lease, except with the Lessors
written consent unless rent and all taxes, assessment, duties, impositions, and
burdens which the Lessee has covenanted to pay and all liens, charges, and
encumbrances other than mortgages as hereinafter provided, shall have been duly
paid and discharged, and unless the assignee shall in the instrument of
assignment expressly assume the Lessee's covenants and obligations hereunder,
and unless the instrument of assignment shall be legal and sufficient for that
purpose, and shall have been first submitted to and left with the Lessor for a
period of 90 days before the delivery thereof to the assignees and unless the
same shall be recorded at or about the time of such delivery thereof in the
proper recorders office. It being hereby expressly agreed that any assignment,
except by mortgage as hereinafter provided, or by devise, which shall be made
or attempted to be made in breach of the Lessee's covenants herein contained
shall be void and of no effect; provided, that the Lessee may at any time by
mortgage or deed in trust for that purpose mortgage his estate in the premises
to secure any actual debt, and in such case may make the proceeds of the
insurance on the buildings and improvements erected on the premises payable, in
case of loss, to such mortgagee or trustee.
VIII. INSURANCE
The Lessee shall keep the buildings and improvements including any
temporary buildings and any buildings under construction upon the premises
insured against loss or damage for fire for their full insurable value in the
company satisfactory to the Lessor, and shall furnish the Lessor with a
complete list of all such insurance; shall pay all the premiums necessary for
those purposes immediately as they become due, and deliver to the Lessor the
receipts therefore.
IX. DAMAGE OR DESTRUCTION
In case of damage or destruction by fire or otherwise, the Lessee
shall repair, restore or rebuild the buildings and improvements on the
premises, in accordance with the original plans and specifications or if
changed with prior approval of the Lessor, with all reasonable dispatch and in
any event such repair, restoration, or rebuilding shall commence within 12
months from the time of such damage or destruction. Provided, that in case the
Lessee shall not commence repair, restoration, or rebuilding within the
specified 12 month period, then such insurance money in excess of all valid
lien holders' claims (excluding Lessee) recovered by the Lessee shall be paid
to the
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<PAGE> 3
Lessor as liquidated damages for the breach of the lease and said lease shall
terminate.
X. REPAIRS
The Lessee shall keep the building to be erected, and all subsequent
buildings and erections erected on the premises and the drains and
appurtenances thereto in good condition and repair.
XI. ALTERATIONS
The Lessee shall not make any alteration in the external elevation or
architectural design of the building on the premises or injure or remove any of
the principal walls or timbers thereof, without consent in writing of the
Lessor.
XII. NEW BUILDINGS
The Lessee shall not erect or permit to be erected on the premises any
new buildings or make or permit to be made any addition to the building to be
erected upon the premises, except in accordance with plans and specifications
previously approved by the Lessor.
XIII. LESSOR TO ENTER
The Lessee shall permit the Lessor and his agents at all reasonable
times to enter upon the premises to view the condition of the premises and
buildings.
XIV. ACCESS
The Lessee shall be granted an access in the form of an easement to
the property covered by this lease. The location of this access shall be
mutually agreed upon by the parties in writing.
XV. LANDSCAPING AND IMPROVEMENTS TO NON-LEASED AREA
The Lessee shall improve the entryway in the form of landscaping in
the amount up to $50,000. Lessee shall also make improvements to the existing
building of the Lessor up to an amount of $50,000. Lease payment over the
first 2 years of the lease shall be reduced pro rata based on the ratio of
actual expenditures made by the Lessee pursuant to this paragraph over the
maximum amount of such expenditures which is equal to $100,000. All plans and
specifications for such improvements to the entry and the Lessor's building
shall be subject to approval by the Lessor.
XVI. UNLAWFUL USE
The Lessee shall not make or suffer any use or occupancy of the
premises contrary to any law or ordinance now or hereinafter enforced.
XVII. INDEMNITY
The Lessee shall indemnify the Lessor against all costs and expenses,
including counsel fees, lawfully and reasonably incurred in or about the
premises, or in the defense of any action or proceeding, or in discharging the
premises from any charge, lien, or encumbrance, or in obtaining possession
after default of the Lessee or the termination of this lease.
XVIII. SURRENDER
At the termination of this lease the Lessee shall surrender the
premises with all buildings erected thereon and
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<PAGE> 4
additions thereto and all landlords fixtures affixed thereto within the last
_____ years of the said term in such repair and condition as shall be in
accordance with the covenants herein contained.
XIX. QUIET POSSESSION
The Lessor shall warrant and defend the Lessee in the enjoyment and
peaceful possession of the premises during said term.
XX. LESSEE ASSIGNING SHALL BE DISCHARGED
Upon any assignment of this lease by way of sale made by the Lessee in
conformity with the terms of this lease, the Lessee making such assignment
shall be free from all further obligations hereunder.
XXI. RE-ENTRY
It is expressly agreed that if rent shall remain unpaid for 15 days
after demand, or if any material covenant on the Lessee's part shall not be
performed or observed by it within 15 days after notice by Lessor of such
failure, then it shall be lawful for the Lessor at any time to re-enter upon
the premises, and thereupon this lease shall terminate, but without effecting
any right of action of the Lessor in respect of any of the Lessee's covenants.
No waiver by the Lessor of any covenant shall be a waiver of any succeeding
breach of the same covenant.
XXII. EMINENT DOMAIN
In case the whole of the premises shall at any time during said term be
taken by any public authority for any public use, the entire damages which may
be awarded for such taking shall be apportioned between the Lessor and the
Lessee; if they cannot agree upon such apportionment, by the arbitration of
three persons, to whom such apportionment shall be referred, one of such persons
to be nominated by the Lessor, and one to be nominated by the Lessee, and the
third to be appointed by writing under the hands of the two so nominated before
the reference is proceeded with, and the decision of any two of the arbitrators
shall be binding; and if either the Lessor or the Lessee shall refuse or neglect
to appoint an arbitrator within 10 days after the other shall have appointed an
arbitrator and served written notice upon the other requiring him to appoint an
arbitrator then upon such failure the party making the request and having
himself appointed an arbitrator may appoint another arbitrator to act on behalf
of the party so failing to appoint, and the arbitrator so appointed may proceed
and act in all respects as if appointed by the party so failing to make such
appointment. In case a part only of the premises shall be so taken for public
use, the rights, duties, and obligations of the Lessor and the Lessee shall be
determined, if they cannot agree by the arbitration of three persons to be
nominated and appointed as hereinbefore provided, to whom such determination
shall be referred, and who shall have full power and authority to make any
determination which they shall deem just and equitable, taking into
consideration the quantity and value of the land taken, the extent of the injury
thereby caused to the buildings, the cost of restoring the buildings and the
value of the buildings if restored, the period of the unexpired term of this
lease, and all the other facts and circumstances which the arbitrators shall
deem material, including full power and authority to determine, among other
things, as they shall deem just and equitable, any one or more of the following
matters, viz: That the whole or any part of the damages which may be awarded by
the public authorities for such taking shall be applied to the restoration of
the buildings which may be upon
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<PAGE> 5
the premises at the time of such taking; that such damages shall be apportioned
between the Lessor and the Lessee to be paid to either one of them; that the
whole or any part of the rent shall be abated from the time of the taking or
for any less time; that the lease shall be otherwise modified; or that the
lease shall terminate--and to award and direct specific performance of any one
or more of the said or any other matters which they shall determine, to the end
that the rights, duties, and obligations of the parties shall be justly and
equitably and finally determined upon all the facts and circumstances as they
shall then exist. The costs of the reference of the arbitrators shall be paid
by the parties in equal shares.
XXIII. REPRESENTATIVES BOUND
It is agreed that the covenants, stipulations, and conditions herein
contained shall inure to the benefit of and shall be binding upon the
successors, heirs and assigns of the Lessor and the successors, heirs,
executors, administrators, and assigns of the Lessee.
XXIV. CONDITIONS
This lease is subject to (1) proper zoning approval for the project
under consideration; and (2) the ability to so construct the retirement
facility consisting of approximately 100 to 120 units upon the leased premises.
XXV. CANCELLATION
This lease shall be cancellable if Lessee uses the premises for any
other use than to construct a retirement facility consisting of approximately
100 to 120 units.
XXVI. ARBITRATION
All disputes involving the terms of this lease between the Lessor and
the Lessee and any other parties so designated through assignment or otherwise
shall be subject to mandatory arbitration to resolve any conflicts.
XXVII. EFFECT
This Lease Agreement supersedes and replaces in all respects each and
every lease agreement between the parties hereto concerning the premises which
was executed and delivered or recorded prior to the date of recordation of this
Lease Agreement.
LESSOR, LESSEE:
WILD WEST POST NO. 91, 2010 UNION LIMITED PARTNERSHIP
VETERANS OF FOREIGN WARS
OF THE UNITED STATES
By /s/ By /s/
------------------------ -----------------------------
Its Board Chairman Its Managing General Partner
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<PAGE> 6
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this 23rd day of October, 1987, before me, the undersigned,
personally appeared _______________, to me known to be the Board Chairman of
WILD WEST POST NO. 91, VETERANS OF FOREIGN WARS OF THE UNITED STATES, the
corporation that executed the foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he is
authorized to execute the said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
/s/
---------------------------------------
Notary Public in and for the State
of Washington residing at _____________
My commission expires _________________
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this 23rd day of October, 1987, before me, the undersigned,
personally appeared Donald W. Bell, to me known to be the Managing General
Partner of 2010 UNION LIMITED PARTNERSHIP, the limited partnership that
executed the foregoing instrument, and acknowledged said instrument to be the
free and voluntary act and deed of said limited partnership, for the uses and
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
/s/
----------------------------------------
Notary Public in and for the State
of Washington residing at ____________
My commission expires ________________
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<PAGE> 7
EXHIBIT A
Parcel B:
The North half of the following described tract: Beginning at a point 495 feet
South of the Northeast corner of Section 12, Township 20 North, Range 2 East of
the W.M., in Pierce County, Washington; Running Thence South 165 feet; thence
West 264 feet; thence North 165 feet; thence East 264 feet to the point of
beginning. Except the West 15 feet thereof. Except portion deeded to the city
of Tacoma under auditor's File No. 8610060308.
ALSO:
The South half of the following described tract: Beginning 330 feet South of
the Northeast corner of Section 12, Township 20 North, Range 2 East of the
W.M.; in Pierce County, Washington; thence South 165 feet; thence West 264
feet; thence North 165 feet; thence East 264 feet to the point of beginning.
Except the West 15 feet thereof. Except portion deeded to the city of Tacoma
under auditor's File No. 8610060308.
Parcel C:
Commencing at a point 577.5 feet South of the Northeast corner of Section 12,
Township 20 North, Range 2 East of the W.M., thence South 82.5 feet; thence
West 264 feet; thence North 82.5 feet; thence East 264 feet to the point of
beginning. Except the West 15 feet thereof. Except portion deeded to the city
of Tacoma under auditor's File No. 8610060308.
Parcel D:
The East half of the following described property: Beginning 660 feet South of
the Northeast corner of Section 12, Township 20 North, Range 2 East of the
W.M.; thence South 165 feet; thence West 264 feet; thence North 165 feet;
thence East 264 feet to the point of beginning.
ALSO:
The West half of the following described property: Beginning 660 feet South of
the Northeast corner of Section 12, Township 20 North, Range 2 East of
Willamette Meridian; Thence South 165 feet; thence West 264 feet; thence North
165 feet; thence East 264 feet to point of beginning, in Pierce County,
Washington. Except portion deeded to the city of Tacoma under auditor's File
No. 8610060308.
Parcel A:
Beginning 362 feet South of the Northwest Corner of Government lot 1, in
Section 7, Township 20 North, Range 3 East of the W.M.,
Thence East parallel with the North line of said lot 1, 38.00 feet;
Thence South parallel with the West line of said lot 1, 180.00 feet;
Thence East parallel with the North line of said lot 1, 18.00 feet;
Thence South parallel with the West line of said lot 1, 18.00 feet;
Thence East parallel with the North line of said lot 1, 142.00 feet;
Thence North parallel with the West line of said lot 1, 158.00 feet;
Thence East parallel with the North line of said lot 1, 9.00 feet;
Thence North parallel with the West line of said lot 1, 40.00 feet;
Thence East parallel with the North line of said lot 1, 47.91 feet to the
Westerly right of way line of Union Ave. as conveyed to the City of Tacoma by
deed recorded December 6, 1966, under recording number 2171084; Thence
Southerly along said Westerly right of way line 321.34 feet to the South line
of the North 679.00 feet, as measured along the West line of said government
lot 1; Thence West parallel with the North line of said lot 1, 310.25 feet to
the West line of said lot 1; Thence North along said West line of lot 1,
317.00 feet to the beginning.
Situate in the County of Pierce, State of Washington.
<PAGE> 8
AMENDMENT OF LEASE AGREEMENT
THIS LEASE AMENDMENT (the "Amendment") is made and entered into as of
this 15th day of April, 1993, by and between Wild West Post No. 91 Veterans of
Foreign Wars of the United States ("Lessor") and 2010 Union Limited Partnership
(the "Lessee"), as an amendment to that certain Lease Agreement of Veterans of
Foreign Wars Post No. 91 (hereinafter the "Lease") entered into on December 2,
1985.
For and in consideration of the covenants and agreements herein set forth
to be kept and performed by the parties hereto, the parties hereby amend, but
otherwise confirm, the Lease.
1. AMENDMENTS
1.1 The following language is hereby added to Section XV of the Lease:
The 2010 Union Limited Partnership agrees to pay up to a maximum
of $10,000.00 for roof repairs of the Lessor's building as
identified in the Roof Repair Contract attached to this Amendment
as Exhibit A and incorporated herein by reference. It is agreed by
the Lessor and Lessee that the $10,000.00 represents fifty percent
(50%) of the costs associated with the roof repairs and the
maximum amount that the Lessee will be
AMENDMENT OF LEASE AGREEMENT Page 1
<PAGE> 9
obligated to contribute towards the repair of the roof. Payment of
the $10,000.00 by Lessee will be amended over two years and
include interest at the rate of 8.5% and will be payable in equal
monthly installments of $451.36, which shall be considered
additional rent, and shall be made at the same time as the base
rent payment is made pursuant to Paragraph III of the Lease. At
the end of the two year period (or sooner if Lessee prepays) the
Lease payments shall revert back to the amount set forth in
Paragraph III of the Lease.
2. FURTHER PROVISIONS
2.1 It is understood by Lessor that the Lessee provides no guaranty or
warranty for the satisfactory completion of the roof work. Furthermore, the
Lessee assumes no responsibility for any damage existing within the Lessor's
building or on the premises created by the roof's current condition or for any
future damage attributable to the roof's condition. Finally, it is understood
that after the repairs to the roof of Lessee's building have been completed in
accordance with Exhibit A, the Lessee shall have no further responsibility for
roof repairs or maintenance under this Lease.
Except for as expressly set forth herein, the Lease is hereby
ratified and confirmed in its entirety. The terms defined in the Lease shall
have the same meaning in this Amendment.
AMENDMENT OF LEASE AGREEMENT Page 2
<PAGE> 10
Each party hereto represents and warrants to the other that the
execution of this Amendment has been fully authorized and that the execution and
delivery hereof, and the performance of the agreements set forth herein, are not
in violation of any agreement to which such party may be bound, and further
represents and warrants to the other that this Amendment is the valid act of
such party and fully enforceable against it.
LESSOR: LESSEE:
WILD WEST POST NO. 91 2010 UNION LIMITED PARTNERSHIP
VETERANS OF FOREIGN WARS
OF THE UNITED STATES
By /s/ Keith R. Lewis By /s/ Richard W. Boehlke
--------------------------- ---------------------------
Commander Managing General Partner
AMENDMENT OF LEASE AGREEMENT Page 3
<PAGE> 11
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this day personally appeared before me Keith R. Lewis, to me known to
be the Commander of the Wild West Post No. 91, Veterans of Foreign Wars of the
United States, a corporation that executed the within and foregoing instrument
and acknowledged the said instrument to be the free and voluntary act and deed
of said corporation, for the uses and purposes therein mentioned, and on oath
stated that he is authorized to executed said instrument and that the seal
affixed is the seal of said corporation.
GIVEN under my hand and official seal this 15th of April, 1993.
[SEAL JOANNE L. ATOR /s/ Joanne L. Ator
NOTARY PUBLIC 11-18-95 NOTARY PUBLIC in and for the
STATE OF WASHINGTON] State of Washington, residing
at Tacoma, WA, my commission
expires 11-18-95
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this day personally appeared before me Richard W. Boehlke, to me known
to be the General Partner of the 2010 Union Limited Partnership, the
partnership that executed the within and foregoing instrument and acknowledged
the said instrument to be the free and voluntary act and deed of said
partnership, for the uses and purposes therein mentioned, and on oath stated
that he is authorized to executed said instrument and that the seal affixed is
the seal of said partnership.
GIVEN under my hand and official seal this 15th of April, 1993.
[SEAL JOANNE L. ATOR /s/ Joanne L. Ator
NOTARY PUBLIC 11-18-95 NOTARY PUBLIC in and for the
STATE OF WASHINGTON] State of Washington, residing
at Tacoma, WA, my commission
expires 11-18-95
AMENDMENT OF LEASE AGREEMENT Page 4
<PAGE> 12
LEASE AMENDMENT
THIS LEASE AMENDMENT is made and entered into this ________ day of
______________, 1995, between WILD WEST POST NO. 91 VETERANS OF FOREIGN WARS OF
THE UNITED STATES, A __________________________corporation ("Lessor"), and 2010
UNION LIMITED PARTNERSHIP, a Washington limited partnership ("Lessee").
RECITALS
A. Lessor and Lessee have entered into a non-residential lease
dated December 2, 1985, as amended on April 15, 1993 (the "Lease"), for certain
real property in the City of Tacoma, County of Pierce, State of Washington,
which real property is more specifically described in the Lease.
B. Lessor and Lessee intend, by the execution and delivery of this
Amendment, to amend and supplement the Lease in certain material respects.
C. Unless otherwise noted, all capitalized terms herein have the
same meanings as set forth in the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lessor and Lessee hereby amend and
supplement the Lease as follows:
1. Section III. Section III of the Lease is amended to read as
follows:
Commencing December 1, 1995, the Lessee agrees to pay Lessor as rent
for the premises the sum of $20,700 yearly, payable in monthly
installments of $1,725, on the first day of each month and each
succeeding month in each and every year during the said term, in
advance, at such office of the Lessor or his agent in said City of
Tacoma, as the Lessor may from time to time designate. Commencing
December 1, 2003, and every five (5) years thereafter, the rental
amount shall increase by 7.5%.
2. Consent to Assignment. This Amendment is expressly conditioned
upon Lessor's execution of the attached Lessor Estoppel Agreement and Consent
to Assignment of Lease by Deed of Trust on or before November 28, 1995.
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<PAGE> 13
3. Remaining Provisions. All other provisions of the Lease remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
the day and year first above set forth.
LESSOR LESSEE
WILD WEST POST NO. 91 VETERANS 2010 UNION LIMITED PARTNERSHIP
OF FOREIGN WARS OF THE
UNITED STATES
BY
----------------------------- --------------------------------
----------------------------- --------------------------------
President ITS
-----------------------------
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<PAGE> 14
STATE OF WASHINGTON )
) ss.
COUNTY OF )
On this_____ day of _________, 1995, before me, the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and sworn,
personally appeared ___________________________________________, to me known to
be the President of WILD WEST POST NO. 91 VETERANS OF FOREIGN WARS OF THE
UNITED STATES, the corporation that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute the said instrument.
WITNESS my hand and official seal hereto affixed the day and year
first above written.
-----------------------------------------
Type Notary Name_________________________
Notary Public in and for the State
(SEAL) of Washington residing at ____________.
My commission expires: _____________.
STATE OF WASHINGTON )
) ss.
COUNTY OF )
On this_____ day of __________, 1995, before me, the undersigned, a
Notary Public in and for the Sate of Washington, duly commissioned and sworn,
personally appeared _____________________, to me known to be the
_______________ of 2010 UNION LIMITED PARTNERSHIP, the limited partnership
named in and which executed the foregoing instrument; and he acknowledged to me
that he signed the same as the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, being authorized so
to do.
WITNESS my hand and official seal the day and year in this certificate
above written.
-----------------------------------------
Type Notary Name_________________________
Notary Public in and for the State
(SEAL) of Washington residing at ____________.
My commission expires: _____________.
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<PAGE> 1
EXHIBIT 10.50
SUBLEASE AGREEMENT
This SUBLEASE AGREEMENT (the Sublease) is entered into by FRANCISCAN
HEALTH SERVICES NORTHWEST (Sublessor) and CROSSINGS CORPORATION (Sublessee).
The Sublease is effective October 1, 1994.
1. SUBLEASE. Sublessor hereby sublets to Sublessee, on the terms and
conditions set forth in this Sublease, the Premises (as defined below)
leased to Sublessor by AGC INTERNATIONAL UNION OF OPERATING ENGINEERS
LOCAL NO. 701 PENSION TRUST FUND ("Owner") pursuant to that certain
real property lease between Owner and Sublessor dated March 7, 1991,
as amended (the "Lease"), and Sublessee hereby accepts the Premises
and undertakes all of Sublessor's obligations under the Lease but
only as to the Premises. Subject to the terms of this Sublease,
Sublessee shall indemnify and hold Sublessor harmless from any
liability or obligation arising from Sublessee's failure to
observe each and every term of the Lease of the Premises.
2. PREMISES DEFINED. The Premises shall consist of the 18th floor
of the First Interstate Plaza, 1201 Pacific Avenue, Tacoma,
Washington (the "Building"). The Premises consist of 13,980 square
feet. In addition, the Premises include the right to 14 covered and 14
uncovered parking spaces in the Building garage.
3. EFFECTIVE DATE AND TERM. This Sublease takes effect on October 1,
1994, and shall expire December 31, 2001.
4. TENANT IMPROVEMENTS. At no cost to Sublessee, Sublessor shall make the
following tenant improvements to the Premises:
- Changes to the internal stairway to meet applicable governmental
and building-related code requirements
- Completion of cabling to Sublessee's reasonable satisfaction for
its telephone and computer network systems
5. FURNISHINGS INCLUDED. At no additional cost to Sublessee, Sublessor
will transfer ownership of the furnishings listed on Exhibit A, which is
attached to this Sublease, and such furnishings shall become and
remain the property of Sublessee.
1
<PAGE> 2
6. Rentals Payable. Sublessee shall pay to Sublessor the following base
rent for the Premises:
<TABLE>
<CAPTION>
Year Per Square Foot Rate
---- --------------------
<S> <C>
Oct.-Dec. 1994 $11.00
Jan.-Dec. 1995 $13.00
Jan.-Dec. 1996 $14.50
Jan.-Dec. 1997 $15.50
Jan.-Dec. 1998 $18.50
Jan.-Dec. 1999 $19.50
Jan.-Dec. 2000 $21.50
Jan.-Dec. 2001 $22.55
</TABLE>
7. Other Transactions. This Sublease is contingent on Sublessee's
ability to secure an assumption of or release from its obligations to
Owner under the existing terms and conditions of its current lease on
the 14th floor of the Building. Sublessee shall not be obligated to
pay any commissions or finder's fees in order to secure such
assumption or release.
Sublessee understands that the Lease was amended on September 30,
1992, to add a portion of the 17th floor of the Building to the Lease.
This portion of the Building is not included as part of the Premises,
and Sublessee shall have no responsibility with respect to such
portion. Sublessor shall have the right to further amend the Lease to
obtain a release from its obligations with respect to the 17th floor,
on such terms and conditions as Sublessor deems acceptable, provided
that Sublessor shall not by any such amendment impose any obligations
on Sublessee.
8. Assignment. Sublessee may not assign, sublease, transfer or otherwise
dispose of its interest under this Sublease without the express prior
written consent of Sublessor. Sublessor may not assign, sublease,
transfer or otherwise dispose of its interest under this Sublease
without the express prior written consent of Sublessee, except that
Sublessor may transfer its interest under this Sublease to Owner in
return for a release from any further obligations under the Lease, and
if Sublessor shall so transfer its interest, Sublessee shall treat
Owner as the Sublessor under this Sublease, the Sublease and the Lease
shall be deemed merged as to the Premises, Sublessee shall make all
performance required under this Sublease or the Lease directly to
Owner, and Sublessor shall have no further obligation under this
Sublease to Sublessee.
9. Approval of Owner. The obligations of Sublessor and Sublessee under
this Sublease are expressly contingent on approval hereof by Owner,
and this Sublease shall not take effect until such approval has been
obtained.
2
<PAGE> 3
EXECUTED by the parties as of the date first written above.
SUBLESSOR: SUBLESSEE:
By /s/ By /s/
----------------------------- --------------------------------
Its Its
---------------------------- --------------------------------
ACKNOWLEDGEMENTS
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this day personally appeared before me Mike Butler, known to be the
individual who executed the within and foregoing instrument on behalf of
Sublessor FRANCISCAN HEALTH SERVICES NORTHWEST, and acknowledged that s/he
signed the same as his/her free and voluntary act and deed, for the uses and
purposes therein mentioned. Given under my hand and seal this 2nd day of
September, 1994.
Kimberly A. Bullard
- ------------------------------------------
Notary Public for the State of Washington
residing at Tacoma My commission expires: 5/26/97
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this day personally appeared before me ________________, known to be the
individual who executed the within and foregoing instrument on behalf of
Sublessee CROSSINGS CORPORATION, and acknowledged that s/he signed the same as
his/her free and voluntary act and deed, for the uses and purposes therein
mentioned. Given under my hand and seal this _____ day of __________, 1994.
- -----------------------------------------
Notary Public for the State of Washington
residing at My commission expires:
------------------------- ----------
3
<PAGE> 4
CONSENT BY OWNER
AGC International Union of Operating Engineers Local No. 701 Pension Trust
Fund, acting through its agent First Capital Partners, Ltd., consents to the
foregoing Sublease.
FIRST CAPITAL PARTNERS, LTD., as agent for the Owner
By _____________________________
Its _______________________
4
<PAGE> 5
EXHIBIT "B"
A S S U M P T I O N A G R E E M E N T
This AGREEMENT is made this 30 day of August, 1990, by and between Forest Grove
Residential Center Limited Partnership, an Oregon Limited Partnership and
Robert Cook and Larry Draper, hereinafter referred to as "Seller," the Oregon
Housing Agency, State of Oregon, having its principal office at 1600 State
Street, Suite 100, Salem, Oregon, 97310, hereinafter referred to as the
"Agency," and Crossings International Corporation, hereinafter referred to as
"Purchaser."
R E C I T A L S
1. On October 31, 1988, Seller received a loan from the Agency in the
amount of Three Million Five Hundred Twenty-Seven Thousand Five
Hundred dollars (U.S. $3,527,500), hereinafter referred to as the
"Loan," to aid Seller in the construction and financing of a housing
development located in the area commonly known as Forest Grove,
Oregon, and legally described as follows:
See Exhibit A
2. The Loan is evidenced by a Promissory Note in the sum of Three Million
Five Hundred Twenty-Seven Thousand Five Hundred dollars (U.S.
$3,527,500), dated October 31, 1988, and executed by Seller, which
Promissory Note is hereinafter referred to as the "Note." The Note
is, by this reference, incorporated herein. A true and accurate copy
of the Note is available upon request from the Agency, 1600 State
Street, Suite 100, Salem, OR 97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located.
Said Trust Deed, dated October 31, 1988, executed by Seller, as
grantor, and in which the Agency is named as beneficiary and Chicago
Title Insurance Co., as trustee, was recorded on November 2, 1988, in
the office of the county clerk of the County of Washington, State of
Oregon, and is hereinafter referred to as "Trust Deed." The Trust
Deed is, by this reference, incorporated herein. A true and accurate
copy of the Trust Deed is available upon request from the Agency, 1600
State Street, Suite 100, Salem, OR 97310. Trust Deed #88-49062
4. The debt evidenced by the Note is further secured by the following
written agreements made by and between Seller and the Agency:
a. a Security Agreement dated October 31, 1988, hereinafter
referred to as "Security Agreements";
b. a Loan Agreement dated October 31, 1988, hereinafter referred
to as "Loan Agreement";
-1-
<PAGE> 6
c. a Management Agreement dated June 30, 1989, hereinafter
referred to as "Management Agreement".
The Security Agreement, Loan Agreement, and Management Agreement are,
by this reference, incorporated herein. True and accurate copies of
these documents are available upon request from the Agency, 1600 State
Street, Suite 100, Salem, OR 97310.
5. The Trust Deed, Security Agreement and Loan Agreement provide that
Seller shall not sell, convey or otherwise transfer any of the
Development or property described in the Trust Deed or Security
Agreements without the express written approval of the Agency.
6. The Seller has sold and conveyed, or is to sell and convey, the
Development and all of the property described in the Trust Deed and
Security Agreements to Purchaser, and both Seller and Purchaser have
requested the Agency to approve the sale.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
I
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Three Million Five Hundred Thirteen Thousand
Two Hundred dollars (U.S. $3,513.200) as of May 15, 1990.
II
PURCHASER'S ASSUMPTION OF LIABILITY
Purchaser agrees to pay the Note in installments at the times, in the manner,
and in all other respects as therein provided; to perform all of the
obligations provided in the Note, Trust Deed, Security Agreements, Loan
Agreement, and Management Agreement to be performed by Seller at the times, in
the manner, and in all respects as therein provided; and to be bound by all of
the terms of the Note, Trust Deed, Security Agreements, Regulatory Agreement,
and Management Agreement.
III
AGENCY'S CONSENT TO SALE OF DEVELOPMENT
The Agency hereby consents to the above-mentioned sale of the Development by
Seller to Purchaser, and to Purchaser's assumption of the obligations of Seller
under the Note, Trust Deed, Security Agreement, Regulatory Agreement, and
Management Agreement.
-2-
<PAGE> 7
IV
SELLER'S LIABILITY
Seller agrees that Purchaser's assumption of the obligations of Seller under
the Note, Trust Deed, Security Agreement, Regulatory Agreement, and Management
Agreement, and the Agency's consent to said assumption, does not release or
discharge Seller or any other party from liability under the Note, Trust Deed,
Security Agreement, Regulatory Agreement, or Management Agreement.
V
DISCLOSURE OF FINANCIAL INFORMATION
Seller and Purchaser hereby covenant and agree to furnish to the Agency on or
before 90 days from closing, a complete financial statement audited by an
Independent Certified Public Accountant, in a form acceptable to the Agency,
setting forth the results of operation of the Development for the fiscal year
ending July 1, 1989, and such other financial information as the Agency may
reasonably request. Seller and Purchaser further agree that violation of this
provision shall constitute a violation of the Regulatory Agreement by Seller
and Purchaser, who shall be jointly and severally liable for performance of the
obligations described in this paragraph V.
VI
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed and Security Agreements shall
remain subject to the liens, charges, and encumbrances of the Trust Deed and
Security Agreement, and nothing contained herein or done pursuant hereto shall
affect or be construed to affect the liens, charges, and encumbrances of the
Trust Deed and Security Agreement, or the priority thereof over other liens,
charges, or encumbrances, or to release or affect the liability of any party or
parties whomsoever would now or may hereafter be liable under or on account of
the Note, Trust Deed, or Security Agreement.
VII
TRANSFER OF DEVELOPMENT PROPERTY
Purchaser covenants and agrees that it shall not, without the express prior
written approval of the Agency, sell, lease, assign, dispose of, convey or
otherwise transfer or encumber any of the Development or the real or personal
property, including rents, covered by the Trust Deed or Security Agreement.
VIII
CONSENT TO FUTURE MODIFICATIONS
Seller, Purchaser, and any person or persons at any time obligated for the
performance of the terms of the Note, Trust Deed, Security Agreement,
Regulatory Agreement, HAP Contract, Pledge Agreement or Management Agreement,
hereby waive notice and consent to any and all extensions and modifications of
any of said instruments, deeds and agreements granted at any time by the Agency
to Seller, Purchaser, or any person or persons now or hereafter obligated or
liable under any of the said instruments, deeds or agreements.
-3-
<PAGE> 8
IX
INTERPRETATION
In this Agreement, the singular number includes the plural and the plural
number includes the singular. If this Agreement is executed by more than one
person, firm or corporation as Purchaser, or Seller, the obligations of each
such person, firm, or corporation hereinunder shall be joint and several.
X
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, and of the
Note, Trust Deed, Security Agreement, Regulatory Agreement, and Management
Agreement, shall govern and control notwithstanding any conflicting provision
in any existing or future agreement between Seller and Purchaser.
XI
LIMITATION
The right to plead any statute of limitations as a defense to any obligations or
demands secured by or mentioned in the Note, Trust Deed, Security Agreement,
Regulatory Agreement, or Management Agreement is hereby waived by Seller and
Purchaser to the full extent permissible by law.
XII
APPLICATION OF AGREEMENT
This Agreement applies to, inures to the benefit of, and binds all parties
hereto and their respective heirs, legatees, devisees, and administrators,
executors, successors and assigns.
XIII
GOVERNING LAW
The Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws of
the State of Oregon.
-4-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement at Portland, OR,
the day and year first above written.
OREGON HOUSING AGENCY PURCHASER: /s/
-------------------------
STATE OF OREGON
By: By: /s/
------------------------------ --------------------------------
Kathryn Eustrom, Manager Title: Managing Partner
Housing Finance Section -----------------------------
By: /s/
--------------------------------
Title: Managing Partner
-----------------------------
Seller: /s/
---------------------------
By:
--------------------------------
Title:
-----------------------------
By:
--------------------------------
Title:
-----------------------------
STATE OF OREGON )
) ss.
County of ________________) _________________, 19____
Personally appeared KATHRYN EUSTROM who, being first duly sworn, did say that
she is authorized to execute such instrument in behalf of the OREGON HOUSING
AGENCY, STATE OF OREGON, and acknowledged said instrument to be its voluntary
act and deed.
Before me: _________________________________
Notary Public for Oregon
My Commission expires:___________
-5-
<PAGE> 10
STATE OF OREGON )
COUNTY OF MULTNOMAH ) SS.
)
August 2, 1990
Personally appeared Richard W. Boehike and who
being duly sworn, each for himself and not one for the other, did say that the
former is the President of the CROSSINGS INTERNATIONAL CORPORATION, a
corporation, and that said instrument was signed in behalf of said corporation
by authority of its board of directors; and each of then acknowledged said
instrument to be its voluntary act and deed.
Before me:
/s/ M. Kimball
-------------------------
Notary Public for Oregon
My Commission expires 3/9/93
STATE OF OREGON )
) ss
County of Multnomah )
August 30, 1990 _______
Personally appeared, Larry H. Draper John F. Wood and Sheridan A. Thiringer,
each sworn for themselves did state that they are the managing partners of
Forest Grove Residential Center Limited Partnership and that said instrument
was executed on behalf of said partnership, as its voluntary act and deed.
/s/ M. Kimball
------------------------------------
Notary Public for Oregon
My commission expires 3/9/93
-6-
<PAGE> 11
Exhibit A
DESCRIPTION
PARCEL I
A parcel of land situated in the Northwest quarter of the Northwest quarter of
Section 5, Township 1 South, Range 3 West of the Willamette Meridian, in the
City of Forest Grove, County of Washington, and State of Oregon, described as
follows:
Beginning at a 5/8 inch iron rod located at the intersection of the centerlines
of 19th Avenue (formerly First Avenue) and Maple Street; thence North
89(degrees)43'13" West along the centerline of 19th Avenue a distance of 404.75
feet; thence South 00(degrees)29'47" West 33.00 feet to a point on the south
right of way line of 19th Avenue and the TRUE POINT OF BEGINNING of the tract
to be described; thence along said south right of way line South
89(degrees)43'13" East 374.57 feet to the west right of way line of Maple
Street (30.00 feet Westerly of the centerline thereof); thence along said west
right of way line South 00(degrees)48'00" West 293.51 feet to the south line of
that certain tract described in deed recorded in Book 809, Page 372, Washington
County Records; thence, parallel with the centerline of 19th Avenue, North
89(degrees)43'13" West 317.08 feet to the east line of that certain tract
conveyed to T.E. Miller by deed recorded in Book 227, Page 669, Washington
County Records; thence along the east line of said Miller Tract North
00(degrees)29'47" East 90.00 feet to the northeast corner of that certain tract
conveyed to William David and Margie Louise Howarth by deed recorded in Book
422, Page 468, Washington County Records; thence along the north line of the
said Howarth Tract North 89(degrees)43'13" West 55.94 feet; thence North
00(degrees)29' 47" East 203.50 feet to the true point of beginning.
PARCEL II
A parcel of land situated in the Northwest quarter of the Northwest quarter of
Section 5, Township 1 South, Range 3 West of the Willamette Meridian, in the
City of Forest Grove, County of Washington, and State of Oregon, described as
follows:
Beginning at a 5/8 inch iron rod located at the intersection of the centerlines
of 19th Avenue (formerly First Avenue) and Maple Street; thence along the
centerline of 19th Avenue North 89(degrees)43'13" West 404.75 feet; thence
South 00(degrees)29'47" West 33.00 feet to a point on the south right of way
line of 19th Avenue and the TRUE POINT OF BEGINNING of the tract to be
described; thence South 00(degrees)29'47" West 203.50 feet to the north line of
that certain tract conveyed to William David and Margie Louise Howarth by deed
recorded in Book 422, Page 468, Washington County Records; thence North
89(degrees)43'13" West along the north line of the said Howarth Tract 44.06
feet to the northwest corner thereof, said point also being on the east line of
a tract described in Deed Book 404, Page 164, Washington County Records; thence
along said last described east line North 00(degrees)29'47" East 1.75 feet to
the southeast corner of that certain tract of land described in contract of
sale to 74 Ventures, a partnership, recorded as Document 85043483, Deed Records
of Washington County; thence along the south line of said 74 Ventures Tract
North 89(degrees)43'13" West 100.00 feet to the southwest corner thereof;
thence North 00(degrees)29'47" East along the west line of the said 74 Ventures
Tract 201.75 feet to the south right of way line of 19th Avenue; thence South
89(degrees)43'13" East along said south right of way line 144.06 feet to the
true point of beginning.
STATE OF OREGON ) ss
County of Washington )
I, Jerry R. Hanson, Director of Assessment
and Taxation and Ex-Officio Recorder of
Conveyances for said county, do hereby
certify that the within instrument of
writing was certified
-7-
<PAGE> 1
90-56887
Washington County
(General)
EXHIBIT 10.51
ASSUMPTION AGREEMENT
This AGREEMENT is made this 30 day of August, 1990, by and between Forest
Grove Residential Center Limited Partnership, an Oregon Limited Partnership
and Robert Cook and Larry Draper, hereinafter referred to as "Seller," the
Oregon Housing Agency, State of Oregon, having its principal office at 1600
State Street, Suite 100, Salem, Oregon, 97310, hereinafter referred to as the
"Agency," and Crossings International Corporation, hereinafter referred to as
"Purchaser."
RECITALS
1. On October 31, 1988, Seller received a loan from the Agency in the amount
of Three Million Five Hundred Twenty-Seven Thousand Five Hundred dollars
(U.S. $3,527,500), hereinafter referred to as the "Loan," to aid Seller in
the construction and financing of a housing development located in the
area commonly known as Forest Grove, Oregon, and legally described as
follows:
See Exhibit A
2. The Loan is evidenced by a Promissory Note in the sum of Three Million Five
Hundred Twenty-Seven Thousand Five Hundred dollars (U.S. $3,527,500), dated
October 31, 1988, and executed by Seller, which Promissory Note is
hereinafter referred to as the "Note." The Note is, by this reference,
incorporated herein. A true and accurate copy of the Note is available
upon request from the Agency, 1600 State Street, Suite 100, Salem, OR
97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located. Said
Trust Deed, dated October 31, 1988, executed by Seller, as grantor, and in
which the Agency is named as beneficiary and Chicago Title Insurance Co.,
as trustee, was recorded on November 2, 1988, in the office of the county
clerk of the County of Washington, State of Oregon, and is hereinafter
referred to as "Trust Deed." The Trust Deed is, by this reference,
incorporated herein. A true and accurate copy of the Trust Deed is
available upon request from the Agency, 1600 State Street, Suite 100,
Salem, OR 97310. Trust Deed #88-49062
4. The debt evidenced by the Note is further secured by the following written
agreements made by and between Seller and the Agency:
a. a Security Agreement dated October 31, 1988, hereinafter referred to as
"Security Agreements";
b. a Regulatory Agreement dated October 31, 1988, hereinafter referred to
as "Regulatory Agreement";
-1-
<PAGE> 2
c. a Management Agreement dated June 30, 1989, hereinafter referred to as
"Management Agreement".
The Security Agreement, Regulatory Agreement, and Management Agreement are,
by this reference, incorporated herein. True and accurate copies of these
documents are available upon request from the Agency, 1600 State Street,
Suite 100, Salem, OR 97310.
5. The Trust Deed, Security Agreement and Regulatory Agreement provide that
Seller shall not sell, convey or otherwise transfer any of the Development
or property described in the Trust Deed or Security Agreements without the
express written approval of the Agency.
6. The Seller has sold and conveyed, or is to sell and convey, the Development
and all of the property described in the Trust Deed and Security Agreements
to Purchaser, and both Seller and Purchaser have requested the Agency to
approve the sale.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby,
the parties hereto covenant and agree as follows:
I
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Three Million Five Hundred Thirteen Thousand
Two Hundred dollars (U.S. $3,513,200) as of May 15, 1990.
II
PURCHASER'S ASSUMPTION OF LIABILITY
Purchaser agrees to pay the Note in installments at the times, in the manner,
and in all other respects as therein provided; to perform all of the
obligations provided in the Note, Trust Deed, Security Agreements, Regulatory
Agreement, and Management Agreement to be performed by Seller at the times, in
the manner, and in all respects as therein provided; and to be bound by all of
the terms of the Note, Trust Deed, Security Agreements, Regulatory Agreement,
and Management Agreement.
III
AGENCY'S CONSENT TO SALE OF DEVELOPMENT
The Agency hereby consents to the above-mentioned sale of the Development by
Seller to Purchaser, and to Purchaser's assumption of the obligations of
Seller under the Note, Trust Deed, Security Agrement, Regulatory Agreement, and
Management Agreement.
-2-
<PAGE> 3
IV
SELLER'S LIABILITY
Seller agrees that Purchaser's assumption of the obligations of Seller under
the Note, Trust Deed, Security Agreement, Regulatory Agreement, and Management
Agreement, and the Agency's consent to said assumption, does not release or
discharge Seller or any other party from liability under the Note, Trust Deed,
Security Agreement, Regulatory Agreement, or Management Agreement.
V
DISCLOSURE OF FINANCIAL INFORMATION
Seller and Purchaser hereby covenant and agree to furnish to the Agency on or
before 90 days from closing, a complete financial statement audited by an
Independent Certified Public Accountant, in a form acceptable to the Agency,
setting forth the results of operation of the Development for the fiscal year
ending July 1, 1989, and such other financial information as the Agency may
reasonably request. Seller and Purchaser further agree that violation of this
provision shall constitute a violation of the Regulatory Agreement by Seller
and Purchaser, who shall be jointly and severally liable for performance of the
obligations described in this paragraph V.
VI
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed and Security Agreements shall
remain subject to the liens, charges, and encumbrances of the Trust Deed and
Security Agreement, and nothing contained herein or done pursuant hereto shall
affect or be construed to affect the liens, charges, and encumbrances of the
Trust Deed and Security Agreement, or the priority thereof over other liens,
charges, or encumbrances, or to release or affect the liability of any party or
parties whomsoever would now or may hereafter be liable under or on account of
the Note, Trust Deed, or Security Agreement.
VII
TRANSFER OF DEVELOPMENT PROPERTY
Purchaser covenants and agrees that it shall not, without the express prior
written approval of the Agency, sell, lease, assign, dispose of, convey or
otherwise transfer or encumber any of the Development or the real or personal
property, including rents, covered by the Trust Deed or Security Agreement.
VIII
CONSENT TO FUTURE MODIFICATIONS
Seller, Purchaser, and any person or persons at any time obligated for the
performance of the terms of the Note, Trust Deed, Security Agreement, Regulatory
Agreement, HAP Contract, Pledge Agreement or Management Agreement, hereby waive
notice and consent to any and all extensions and modifications of any of said
instruments, deeds and agreements granted at any time by the Agency to Seller,
Purchaser, or any person or persons now or hereafter obligated or liable under
any of the said instruments, deeds or agreements.
-3-
<PAGE> 4
IX
INTERPRETATION
In this Agreement, the singular number includes the plural and the plural number
includes the singular. If this Agreement is executed by more than one person,
firm or corporation as Purchaser, or Seller, the obligations of each such
person, firm, or corporation hereinunder shall be joint and several.
X
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, and of the Note,
Trust Deed, Security Agreement, Regulatory Agreement, and Management Agreement,
shall govern and control notwithstanding any conflicting provision in any
existing or future agreement between Seller and Purchaser.
XI
LIMITATIONS
The right to plead any statute of limitations as a defense to any obligations or
demands secured by or mentioned in the Note, Trust Deed, Security Agreement,
Regulatory Agreement, or Management Agreement is hereby waived by Seller and
Purchaser to the full extent permissible by law.
XII
APPLICATION OF AGREEMENT
This Agreement applies to, inures to the benefit of, and binds all parties
hereto and their respective heirs, legatees, devisees, and administrators,
executors, successors and assigns.
XIII
GOVERNING LAW
This Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws of
the State of Oregon.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement at Portland, OR,
the day and year first above written.
OREGON HOUSING AGENCY PURCHASER: /s/
---------------------
STATE OF OREGON
By:
------------------------- By: /s/
Kathryn Eustrom, Manager -----------------------------
Housing Financing Section
Title: Managing Partner
-------------------------
By: John F. Wood
----------------------------
Title: Managing Partner
---------------------------
SELLER: /s/
--------------------------
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
STATE OF OREGON )
) ss.
County of ) , 19
-------------- ------------------ -----
Personally appeared KATHRYN EUSTROM who, being first duly sworn, did say that
she is authorized to execute such instrument in behalf of the OREGON HOUSING
AGENCY, STATE OF OREGON, and acknowledged said instrument to be its voluntary
act and deed.
Before me: -----------------------------------
Notary Public for Oregon
My Commission expires:
-------------
-5-
<PAGE> 6
STATE OF OREGON )
) ss.
County of Multnomah )
Personally________appeared ____________________________________________________
(Purchased) this 9th day of August _____, 1990, and acknowledged the
STATE OF OREGON ) _____________________________
COUNTY OF MULTNOMAH ) ss. Notary Public for Oregon
August 2, 1990 My Commission expires:_______
Personally appeared Richard W. Boehlke
the President of the Crossings International
Corporation, a corporation, and that said
instrument was signed on behalf of said
corporation by authority of its board of
directors; and each of then-acknowledged
said instrument to be its volutary act
and deed.
[SEAL]
Before me:
/s/ M. Kimball
----------------------------
Notary Public for Oregon
My Commission expires 3/9/93 ------------------------- (Seller)
------ 90, and acknowledged the foregoing
----------------------------------
Notary Public for Oregon
My Commission expires:
------------
STATE OF OREGON )
) ss
County of Multnomah )
August 30, 1990 ------
Personally appeared, Larry H. Draper John F. Wood and Sheridan A. Thiringer,
each sworn for themselves did state that they are the managing partners of
Forest Grove Residential Center Limited Partnership and that said instrument
was executed on behalf of said partnership, as its voluntary act and deed.
/s/ M. Kimball
-----------------------------------
Notary Public for Oregon
[SEAL] My comission expires 3/9/93
-6-
<PAGE> 7
dated October 31, 1988, the terms of which are by this reference, incorporated
herein.
IN WITNESS WHEREOF, the Maker caused this Trust Deed Note to be executed this
31 day of October, 1988.
MAKER: FOREST GROVE RESIDENTIAL CENTER
LIMITED PARTNERSHIP
By: /s/
-------------------------------------
Title:
By:
-------------------------------------
Title:
STATE OF OREGON )
) ss.
County of Multnomah )
On this 31 day of October, 1988, before me personally appeared Larry H. Draper,
Christine Beaulieu-Barta & Robert Cook who, each being duly sworn, did say
he/she is the general partner of Forest Grove Residential Center Limited
Partnership, a(n) Oregon limited partnership, and that the instrument was
signed and sealed on behalf of said partnership.
/s/
--------------------------------------------
Notary Public for Oregon
My Commission Expires: 03-18-91
Page 3 - Trust Deed Note
Forest Grove Residential Center
<PAGE> 1
EXHIBIT 10.52
EXHIBIT "B"
ASSUMPTION AGREEMENT
This AGREEMENT is made this 29th day of July, 1991, by and between
McMinnville Residential Estates Limited Partnership, hereinafter referred to as
"Seller," the Oregon Housing Agency, State of Oregon, having its principal
office at 1600 State Street, Suite 100, Salem, Oregon, 97310, hereinafter
referred to as the "Agency," and McMinnville Residential Center Limited
Partnership, hereinafter referred to as "Purchaser."
RECITALS
1. On March 22, 1991, Seller received a loan from the Agency in the amount
of Three Million Nine Hundred Thousand dollars (U.S. $3,900,000),
hereinafter referred to as the "Loan," to aid Seller in the construction
and financing of a housing development located in the area commonly known
as 775 East 27th, McMinnville, Oregon 97128, and legally described as
follows:
See Exhibit "A"
This housing development is identified by the Agency as Development No.
008-501091 and is hereinafter referred to as the "Development."
2. The Loan is evidenced by a Promissory Note in the sum of Three Million
Nine Hundred Thousand dollars (U.S. $3,900,000), dated March 22, 1991,
and executed by Seller, which Promissory Note is hereinafter referred to
as the "Note." The Note is, by this reference, incorporated herein. A
true and accurate copy of the Note is available upon request from the
Agency, 1600 State Street, Suite 100, Salem, OR 97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located. Said
Trust Deed, dated March 22, 1991, executed by Seller, as grantor, and in
which the Agency is named as beneficiary and Fidelity National Title, as
trustee, was recorded on March 26, 1991, in the office of the county clerk
of the County of Yamhill, State of Oregon, Film Volume 253, page 209, and
is hereinafter referred to as "Trust Deed." The Trust Deed is, by this
reference, incorporated herein. A true and accurate copy of the Trust
Deed is available upon request from the Agency, 1600 State Street, Suite
100, Salem, OR 97310.
4. The debt evidenced by the Note is further secured by the following
written agreements made by and between Seller and the Agency:
a. a Security Agreement dated March 22, 1991, hereinafter referred to as
"Security Agreement";
b. a Regulatory Agreement dated March 22, 1991, hereinafter referred to
as "Regulatory Agreement";
c. a Loan Agreement dated March 22, 1991, hereinafter referred to as
"Loan Agreement";
-1-
McMinnville Residential Estates Limited Partnership
<PAGE> 2
d. a Management Agreement dated March 22, 1991, hereinafter referred to as
"Management Agreement".
The Security Agreement, Regulatory Agreement, Loan Agreement,
and Management Agreement are, by this reference, incorporated herein.
True and accurate copies of these documents are available upon request
from the Agency, 1600 State Street, Suite 100, Salem, OR 97310.
5. The Trust Deed, Security Agreement, Loan Agreement and Regulatory
Agreement provide that Seller shall not sell, convey or otherwise transfer
any of the Development or property described in the Trust Deed or Security
Agreement without the express written approval of the Agency.
6. The Seller has sold and conveyed, or is to sell and convey, the
Development and all of the property described in the Trust Deed and
Security Agreement to Purchaser, and both Seller and Purchaser have
requested the Agency to approve the sale.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
I
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Three Million Eight Hundred Ninety Five
Thousand Three Hundred Seventy Eight and 35/100 dollars (U.S. $3,895,378.35) as
of June 15, 1991.
II
PURCHASER'S ASSUMPTION OF LIABILITY
Purchaser agrees to pay the Note in installments at the times, in the manner,
and in all other respects as therein provided; to perform all of the
obligations provided in the Note, Trust Deed, Security Agreement, Regulatory
Agreements, Loan Agreement and Management Agreement to be performed by Seller
at the times, in the manner, and in all respects as therein provided; and to be
bound by all of the terms of the Note, Trust Deed, Security Agreement,
Regulatory Agreement, Loan Agreement and Management Agreement.
III
AGENCY'S CONSENT TO SALE OF DEVELOPMENT
The Agency hereby consents to the above-mentioned sale of the Development by
Seller to Purchaser, and to Purchaser's assumption of the obligations of Seller
under the Note, Trust Deed, Security Agreement, Regulatory Agreement, Loan
Agreement and Management Agreement.
-2-
McMinnville Residential Estates Limited Partnership
<PAGE> 3
IV
SELLER'S LIABILITY
Seller agrees that Purchaser's assumption of the obligations of Seller under
the Note, Trust Deed, Security Agreements Regulatory Agreement, Loan Agreement
and Management Agreement, and the Agency's consent to said assumption, does not
release or discharge Seller or any other party from liability under the Note,
Trust Deed, Security Agreement, Regulatory Agreement, Loan Agreement or
Management Agreement.
V
DISCLOSURE OF FINANCIAL INFORMATION
Seller and Purchaser hereby covenant and agree to furnish to the Agency on or
within ninety (90) days of closing, a complete financial statement audited by
an Independent Certified Public Accountant, in a form acceptable to the Agency
and the Secretary of the U.S. Department of Housing and Urban Development,
setting forth the results of operation of the Development for the current
fiscal year as of the date of closing, and such other financial information as
the Agency may reasonably request. Seller and Purchaser further agree that
violation of this provision shall constitute a violation of the Regulatory
Agreement and Loan Agreement by Seller and Purchaser, who shall be jointly and
severally liable for performance of the obligations described in this
paragraph V.
VI
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed and Security Agreement shall
remain subject to the liens, charges, and encumbrances of the Trust Deed and
Security Agreements and nothing contained herein or done pursuant hereto shall
affect or be construed to affect the liens, charges, and encumbrances of the
Trust Deed and Security Agreement, or the priority thereof over other liens,
charges, or encumbrances, or to release or affect the liability of any party or
parties whomsoever would now or may hereafter be liable under or on account
of the Note, Trust Deed, or Security Agreement.
VII
TRANSFER OF DEVELOPMENT PROPERTY
Purchaser covenants and agrees that it shall not, without the express prior
written approval of the Agency, sell, lease, assign, dispose of, convey or
otherwise transfer or encumber any of the Development or the real or personal
property, including rents, covered by the Trust Deed or Security Agreement.
-3-
McMinnville Residential Estates Limited Partnership
<PAGE> 4
VIII
CONSENT TO FUTURE MODIFICATIONS
Seller, Purchaser, and any person or persons at any time obligated for the
performance of the terms of the Note, Trust Deed, Security Agreement, Regulatory
Agreement, Loan Agreement or Management Agreement, hereby waive notice and
consent to any and all extensions and modifications of any of said
instruments, deeds and agreements granted at any time by the Agency to Seller,
Purchaser, or any person or persons now or hereafter obligated or liable under
any of the said instruments, deeds or agreements.
IX
INTERPRETATION
In this Agreement, the singular number includes the plural and the plural
number includes the singular. If this Agreement is executed by more than one
person, firm or corporation as Purchaser, or Seller, the obligations of each
such person, firm, or corporation hereinunder shall be joint and several.
X
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, and of the
Note, Trust Deed, Security Agreement, Regulatory Agreement, Loan Agreement and
Management Agreement, shall govern and control notwithstanding any conflicting
provision in any existing or future agreement between Seller and Purchaser.
XI
LIMITATIONS
The right to plead any statute of limitations as a defense to any obligations
or demands secured by or mentioned in the Note, Trust Deed, Security
Agreement, Regulatory Agreement, Loan Agreement or Management Agreement is
hereby waived by Seller and Purchaser to the full extent permissible by law.
XII
APPLICATION OF AGREEMENT
This Agreement applies to, inures to the benefit of, and binds all parties
hereto and their respective heirs, legatees, devisees, and administrators,
executors, successors and assigns.
XII
GOVERNING LAW
This Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws
of the State of Oregon.
-4-
McMinnville Residential Estates Limited Partnership
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement at Portland,
Oregon, the day and year first above written.
OREGON HOUSING AGENCY PURCHASER: Richard W. Boehike
------------------------
STATE OF OREGON MCMINNVILLE RESIDENTIAL CENTER LIMITED
PARTNERSHIP, an Oregon limited partnership
By: Stephen Gordon By: Crossings International Corporation,
----------------------- a Washington corp., General Partner
Stephen Gordon, Manager by: Richard W. Boehike, President
Housing Finance Section
By:
---------------------------------------
Title:
---------------------------------
SELLER: McMINNVILLE RESIDENTIAL ESTATES
LIMITED PARTNERSHIP
By: Robert S. Cook, General Partner
---------------
Glenna L. Cook, General Partner
--------------
By: Mark R. Cook, General Partner
------------
Bonnie L. Cook, General Partner
--------------
John D. Petshow, General Partner
---------------
Linda Petshow, General Partner
-------------
STATE OF OREGON )
) ss.
County of Marion ) July 31, 1991
Personally appeared STEPHEN GORDON who, being first duly sworn, did say that he
is authorized to execute such instrument in behalf of the OREGON HOUSING
AGENCY, STATE OF OREGON, and acknowledged said instrument to be its voluntary
act and deed.
Before me: /s/
--------------------------------
Notary Public for Oregon
My Commission expires: 3-21-93
STATE OF OREGON )
County of Multnomah ) ss. July 29, 1991
Personally appeared JOHN D. PETSHOW and LINDA PETSHOW, general partners of
MCMINNVILLE RESIDENTIAL ESTATES LIMITED PARTNERSHIP (Seller) this 29th day of
July, 1991 and acknowledged the foregoing instrument to be their voluntary act
and deed.
/s/ Margaret M. Neikirk
(SEAL) -------------------------------
Notary Public in and for Oregon
my commission expires 3-18-95
-5-
McMinnville Residential Estates Limited Partnership
<PAGE> 6
STATE OF OREGON )
) ss.
County of Multnomah ) July 29, 1991
Personally appeared Richard W. Boehike, ** (Purchaser) this 29 day of July,
1991, and acknowledged the foregoing instrument to be his/its voluntary act and
deed.
*President of CROSSINGS INTERNATIONAL CORPORATION, a Washington corporation, as
general partner of McMINNVILLE RESIDENTIAL CENTER LIMITED PARTNERSHIP, an
Oregon Limited Partnership
/s/ Margaret M. Neikirk
------------------------------
Notary Public for Oregon
My Commission expires: 3-18-95
STATE OF OREGON )
) ss.
County of Multnomah ) July 30, 1991
Personally appeared Robert S. Cook & Glenna L.* (Seller) this 30 day of July,
1991, and acknowledged the foregoing instrument to be their voluntary act and
deed.
*Cook, General Partners of McMINNVILLE RESIDENTIAL ESTATES LIMITED PARTNERSHIP,
an Oregon limited partnership
/s/ Margaret M. Neikirk
------------------------------
Notary Public for Oregon
My Commission expires: 3-18-95
STATE OF OREGON )
County of Multnomah ) ss.
Personally appeared MARK COOK & BONNIE COOK, general partners of McMINNVILLE
RESIDENTIAL ESTATES LIMITED PARTNERSHIP (Seller) this 31 day of July, 1991, and
acknowledged the foregoing instrument to be their voluntary act and deed.
WPRDEV/406 /s/ Margaret M. Neikirk
------------------------------
Notary Public for Oregon
My Commission expires: 3-18-95
-6-
McMinnville Residential Estates Limited Partnership
<PAGE> 7
EXHIBIT A
A tract of land in the Southwest quarter of Section 9 and the Northwest quarter
of Section 16, Township 4 South, Range 4 West of the Willamette Meridian in the
John G. Baker Donation Land Claim and a portion of Lots 6 & 7, Joplings
Subdivision, McMinnville, Yamhill County, Oregon, being more particularly
described as follows:
Beginning at the Northeast corner of said Baker Donation Land Claim; thence
South 00(degrees)20'00" West 480.63 feet along the center line of North Hembree
Street; thence South 89(degrees)32'15" West 30.00 feet to an iron rod set in
CSP-9363 and the True Point of Beginning of this description; thence
continuing South 00(degrees)20'00" West 454.94 feet parallel with the
centerline of North Hembree Street to an iron rod set in CSP-9363 on the North
right-of-way line of 27th Street; thence South 89(degrees)32'15" West 305.00
feet along said North right-of-way line; thence North 00(degrees)20'00" West
454.94 feet; thence North 89(degrees)32'15" East 305.00 feet to the true point
of beginning.
STATE OF OREGON )
) ss.
COUNTY OF YAMHILL )
(SEAL)
I hereby certify that this instrument was received and duly recorded by me in
Yamhill County records.
Instrument #
/s/ T. Fuller
- ---------------
CHARLES STERN,
COUNTY CLERK
<PAGE> 1
EXHIBIT 10.53
ASSUMPTION AGREEMENT
This ASSUMPTION AGREEMENT (this "Agreement") is made as of the 18th day of
December, 1995, by and among CROSSINGS INTERNATIONAL CORPORATION, a
Washington corporation, hereinafter referred to herein as "Crossings", NEW
CROSSINGS INTERNATIONAL CORPORATION, a Nevada corporation ("New Crossings"),
the OREGON HOUSING & COMMUNITY SERVICES DEPARTMENT, STATE OF OREGON (formerly
known as the Oregon Housing Agency), having its principal office at 1600
State Street, Salem, Oregon, 97310, hereinafter referred to as the
"Department", and NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation,
hereinafter referred to as "NHP".
R E C I T A L S
1. On May 30, 1984, Albany Residential Center, an Oregon general
partnership, hereinafter referred to as "Original Borrower", received a
loan from the Department in the principal amount of Two Million Two
Hundred Thousand Dollars (U.S. $2,200,000), hereinafter referred to as
the "Loan," to aid Original Borrower in the construction and financing of
a housing development located at 1560 Davidson Street, S.E., Albany,
Oregon, and legally described as follows:
See Exhibit "A" attached and incorporated herein by
reference.
The housing development is identified by the Department as Albany
Residential Center and is hereinafter referred to as the "Development."
2. The Loan is evidenced by a Trust Deed Note in the sum of Two Million Two
Hundred Thousand and no/100 Dollars (U.S. $2,200,000.00), dated May 30,
1984, and executed by Original Borrower, which Trust Deed Note, as
amended by the Crossings' Assumption Agreement (hereinafter defined) is
hereinafter referred to as the "Note". The Note is, by this reference,
incorporated herein. A true and accurate copy of the Note is available
upon request from the Department, 1600 State Street, Salem, Oregon,
97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located.
Said Trust Deed, dated May 30, 1984, executed by Original Borrower, as
grantor, in which the Department is named as beneficiary and Safeco
Title Insurance Company, as trustee, and recorded on June 4, 1984 in
Linn County, Oregon Records, as amended by the Crossings' Assumption
Agreement, is hereinafter referred to as the "Trust Deed." The Trust
Deed is, by this reference,
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 1 -
<PAGE> 2
incorporated herein. A true and accurate copy of the Trust Deed is
available upon request from the Department, 1600 State Street, Salem,
Oregon, 97310.
4. The debt evidenced by the Note is further secured by the following
written agreements made by and between Original Borrower and the
Department:
a. Two Security Agreements dated May 30, 1984, hereinafter referred
to as "Security Agreements";
b. A Regulatory Agreement dated May 30, 1984, as amended by (i) that
certain Agreement Amending the Regulatory Agreement (Project
Lease), dated May 30, 1984, by and among Original Borrower, as
borrower, Beaulieu-Draper, Limited, an Oregon corporation
("Beaulieu-Draper"), and Department and (ii) the Crossings'
Assumption Agreement (as amended, the "Regulatory Agreement");
c. An Assignment of Rents and Leases dated May 30, 1984, as amended
by the Crossings' Assumption Agreement (as amended, the
"Assignment of Rents and Leases"); and
d. A Management Agreement dated July 12, 1983 (the "Original
Management Agreement").
5. On or about July 23, 1990, Original Borrower sold the Development to
Crossings. Pursuant to the terms and conditions of that certain
Assumption Agreement dated July 23, 1990, by and among Original
Borrower and Beaulieu-Draper, collectively, as seller, Crossings, as
purchaser, and Department (the "Crossings' Assumption Agreement"),
Crossings agreed to pay the Note in installments at the times, in the
manner, and in all other respects as therein provided, to perform all of
the obligations provided in the Note, Trust Deed, Security Agreements,
Assignment of Rents and Leases, Regulatory Agreement and Original
Management Agreement, to be performed by Original Borrower at the times,
in the manner, and in all respects as therein provided; and to be bound
by all of the terms of the Note, Trust Deed, Security Agreements,
Regulatory Agreement, Assignment of Rents and Leases, Original
Management Agreement and Crossings' Assumption Agreement. A true and
accurate copy of the Crossings' Assumption Agreement is attached hereto
as Exhibit "B" and is by this reference incorporated herein.
6. As a condition to entering in the Crossings' Assumption Agreement, and
pursuant to Section 6 of the Regulatory Agreement, Crossings and
Department entered into a Management Agreement, dated August 3, 1990
(the "Second
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 2 -
<PAGE> 3
Management Agreement"), wherein Crossings agreed to perform the
management duties relating to the Development.
7. The Trust Deed, Security Agreements, Regulatory Agreement and the
Crossings' Assumption Agreement provide that Crossings shall not sell,
convey or otherwise transfer any of the Development or other property
described in the Trust Deed without the express written approval of the
Department.
8. Concurrently herewith, (i) Crossings is selling and conveying the
Development and all of the property described in the Trust Deed to NHP
(the "Sale Transaction") pursuant to that certain Purchase and Sale
Agreement dated as of December 15, 1995, by and among Crossings, as
seller, New Crossings, as lessee, and NHP, as buyer (the "Purchase
Agreement"), and (ii) immediately thereafter, NHP is leasing the
Development and all of the property described in the Trust Deed to New
Crossings, pursuant to that certain Lease and Security Agreement dated
as of December 15, 1995, between NHP, as landlord, and New Crossings, as
tenant.
9. Crossings and NHP have now requested that the Department consent to: (a)
the Sale Transaction; and (b) the assignment by Crossings to NHP and the
assumption by NHP of the Note, the Trust Deed, the Regulatory Agreement,
the Security Agreements, the Second Management Agreement, and the
Assignment of Rents and Leases (the Note, Trust Deed, Regulatory
Agreement, Security Agreements, Second Management Agreement and
Assignment of Rents and Leases are collectively referred to herein as
the "Loan Documents" and are incorporated herein by reference).
10. NHP, Crossings, New Crossings and the Department have entered into a
side letter agreement, dated of even date herewith (the "Side Letter
Agreement"), relating to certain matters in connection with this
Agreement.
11. Initially capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Regulatory Agreement.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 3 -
<PAGE> 4
I.
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Two Million One Hundred Twenty Eight Thousand
Seven Hundred Eighty Six and 02/100 dollars (U.S. $2,128,786.02) as of December
14, 1995.
II.
ASSIGNMENT OF LOAN
Crossings hereby grants, conveys, transfers and assigns unto NHP, subject to
the provisions of this Agreement, the Loan Documents and all of the right,
title, interest, benefits, burdens and obligations of Crossings in, to and
under the Loan Documents, as amended and modified pursuant to the terms hereof.
III.
NHP'S ASSUMPTION OF LIABILITY AND DUTIES
NHP agrees to pay the Note in installments at the times, in the manner, and in
all other respects as therein provided; to perform all of the obligations
provided in the Loan Documents to be performed by Original Borrower or
Crossings at the times, in the manner, and in all respects as therein provided,
as amended and modified pursuant to the terms hereof, and to be bound by all of
the terms of the Loan Documents, as amended, including, without limitation, the
obligation to comply with the Regulatory Agreement, without limiting the
agreements set forth in the Side Letter Agreement.
IV.
DEPARTMENT'S CONSENT TO SALE OF DEVELOPMENT
The Department hereby consents to the Sale Transaction and to NHP's assumption
of the obligations of the Original Borrower and Crossings under the Loan
Documents.
V.
MANAGEMENT OF THE DEVELOPMENT
New Crossings, as tenant under the Lease, agrees to be fully responsible for
the management and maintenance of the Development, and in connection therewith
shall file with the Department a Management Agreement (the "Third Management
Agreement") in form and content satisfactory to the Department which provides
for the management and maintenance of the Development. Any management
agreement shall be subject to the terms and conditions of the Loan Documents,
including without limitation, the Regulatory Agreement. Except as provided in
the Side Letter Agreement, no change may be made in the management of the
Development without the prior approval of the Department.
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 4 -
<PAGE> 5
VI.
DISCLOSURE OF FINANCIAL INFORMATION
Crossings hereby covenants and agrees to furnish to the Department on or before
90 days from closing, a complete financial statement audited by an independent
certified public accountant, in a form acceptable to the Department, setting
forth the results of operations of the Development for the fiscal period from
January 1, 1995 to the date of sale, and such other financial information as
the Department may reasonably request. Crossings further agrees that violation
of this provision shall constitute a violation of the Regulatory Agreement by
Crossings.
VII.
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed shall remain subject to the
liens, charges and encumbrances of the Trust Deed, and nothing contained herein
or done pursuant hereto shall affect or be construed to affect the liens,
charges and encumbrances of the Trust Deed, or the priority thereof over other
liens, charges or encumbrances, or to release or affect the liability of any
party or parties whosoever would now or may hereafter be liable under or on
account of the Note or Trust Deed.
VIII.
TRANSFER OF DEVELOPMENT PROPERTY
NHP covenants and agrees that, except as provided in the Side Letter Agreement,
it shall not, without the express prior written approval of the Department,
sell, lease, assign, dispose of, convey or otherwise transfer or encumber any
of the Development or the real or personal property, including rents, covered
by the Trust Deed or Regulatory Agreement. Nothing in the foregoing shall
prevent or limit the right of NHP, without obtaining the prior consent or
approval of the Department, from entering into any general corporate financing,
such as bond financing or bank debt financing (including in any case NHP's
interest in the Development) covering all, substantially all or any portion of
NHP's assets, or from executing any bond, indenture or other instrument of
hypothecation in connection therewith; provided, however, that any such general
corporate financing shall be subject to the Loan Documents and provided
further, that the lien relating to the Development or the Property, if any,
which is created by such general corporate financing, shall be subordinate to
the lien of the Trust Deed.
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 5 -
<PAGE> 6
IX.
CONSENT TO FUTURE MODIFICATIONS
Crossings, NHP, and any person or persons at any time obligated for the
performance of the terms of the Loan Documents, hereby waive notice and consent
to any and all extensions and modifications of any said instruments, deeds and
agreements granted at any time by the Department to NHP, Crossings, Original
Borrower, or any person or persons now or hereafter obligated or liable under
any of said instruments, deeds or agreements. Nothing in the foregoing shall
increase or modify in any material respect the obligations of NHP under the
Loan Documents.
X.
INTERPRETATION
In this Agreement, the singular number includes the plural and the plural
number includes the singular. If this Agreement is executed by more than one
person, firm or corporation as purchaser or seller, the obligations of each
such person, firm or corporation hereunder shall be joint and several.
XI.
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, the Side Letter
Agreement and the Loan Documents shall govern and control notwithstanding any
conflicting provision in any existing or future agreement between Crossings and
NHP.
XII.
LIMITATIONS
The right to plead any statute of limitations as a defense to any obligation or
demand secured by or mentioned in the Loan Documents is hereby waived by
Crossings and NHP to the full extent permissible by law.
XIII.
APPLICATION OF AGREEMENT
This Assumption Agreement applies to, inures to the benefit of, and binds all
parties hereto and their respective heirs, devisees, and administrators,
executors, successors, and assigns.
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 6 -
<PAGE> 7
XIII.
GOVERNING LAW
This Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws of
the State of Oregon.
XIV.
NHP AS PUBLIC REIT
The Department recognizes that NHP is a publicly traded real estate investment
trust and, as such, is subject to regulation under the Internal Revenue Code
and the Federal securities laws. Therefore, any other provisions of the Loan
Documents notwithstanding, any provisions of the Loan Documents dealing with
the following shall have no applicability to NHP and shall not require any
consent or approval of the Department:
(1) Any provisions of the Loan Documents limiting the free issuance or
transferability of shares of stock in or the debt securities of NHP;
(2) Any provisions of the Loan Documents restricting the business or
businesses in which NHP may engage, provided that NHP hereby agrees to conduct
its business consistent with its qualification as a real estate investment
trust under the Internal Revenue Code; or
(3) Any provisions of the Loan Documents which grant the Department the
right to appoint officers of NHP or any members of the Board of Directors of
NHP.
XV.
CONFIRMATION
(1) The Department is not aware of any breaches or defaults or events
or circumstances that upon passage of time or giving of notice would
constitute a breach or default under any of the Loan Documents. Without
limiting the foregoing, Department acknowledges and agrees that to its
knowledge, the Development complies with Sections 6 and 7 of the Trust Deed.
(2) According to the Department's records, the Loan is not
cross-collateralized or cross-defaulted with any other loan.
(3) According to the Department's records, the unpaid principal balance
of the Loan is Two Million One Hundred Twenty Eight Thousand Seven Hundred
Eighty Six and 02/100 dollars (U.S. $2,128,786.02) as of December 14, 1995.
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 7 -
<PAGE> 8
(4) According to the Department's records, the amount of accrued and
unpaid interest under the Note and all other sums due and payable under the
Loan is Nineteen Thousand Three Hundred Thirty Six and 47/100 (U.S. $19,336.47)
as of December 14, 1995.
(5) According to the Department's records, the balance of the escrow
account held by Department for real estate taxes and insurance premiums is
Twenty Thousand Seven Hundred Nineteen and 10/100 Dollars (U.S. $20,719.10) as
of December 14, 1995.
(6) According to the Department's records, the balance of the
Replacement Cost Reserve Account (as such term is described in Section 2 of the
Regulatory Agreement) is Thirty Thousand Five Hundred Twenty Seven and 22/100
Dollars (U.S. $30,527.22) as of December 14, 1995.
(7) Any requirements that the Borrower maintain a Contingency Escrow
Reserve Account or an unconditional and irrevocable letter of Credit under
Section 3 of the Regulatory Agreement are of no further force or effect.
XVI.
COUNTERPARTS
This Agreement may be signed in any number of counterparts, each of which shall
be considered to be an original but all of which shall be considered to be one
and the same instrument.
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
OREGON HOUSING & COMMUNITY PURCHASER
SERVICES DEPARTMENT NATIONWIDE HEALTH PROPERTIES,
INC., a Maryland corporation
By: /s/ Pauline Phillips By: /s/ T. Andrew Stokes
------------------------------ -------------------------------
Pauline Phillips, Manager Its: Vice President
Asset And Property Management -------------------------------
By:
-------------------------------
Its:
-------------------------------
SELLER
CROSSINGS INTERNATIONAL
CORPORATION, a Washington
corporation
By: /s/
-------------------------------
Its: President
-------------------------------
NEW CROSSINGS CORPORATION, a
Nevada corporation
By: /s/
--------------------------------
Its: President
-------------------------------
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year forst above written.
OREGON HOUSING & COMMUNITY PURCHASER
SERVICES DEPARTMENT NATIONWIDE HEALTH PROPERTIES,
INC., a Maryland corporation
By: By: /s/ ?
----------------------- -------------------------
Its: Vice President
------------------------
By:
-------------------------
Its:
------------------------
SELLER
CROSSINGS INTERNATIONAL
CORPORATION, a Washington
corporation
By:
-------------------------
Its:
------------------------
NEW CROSSINGS CORPORATION, a
Nevada corporation
By:
-------------------------
Its:
------------------------
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
-9-
<PAGE> 11
STATE OF CALIFORNIA )
) SS
COUNTY OF ORANGE )
On December 15, 1995, before me, Linn Pearce, a Notary Public
in and for said State, personally appeared T. Andrew Stokes, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they execute the same in his/her/their
authorized capacity(ies), and that by his/her/their signatures(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Linn Pearce (Seal)
-----------------------------
<PAGE> 12
STATE OF OREGON )
) Ss
COUNTY OF MARION )
December 18, , 1995
--------------- --
Personally appeared who, being first duly sworn, did say that (he/she; circle
one) is authorized to execute such instrument in behalf of the Oregon Housing
and Community Services Department, STATE OF OREGON, and acknowledged said
instrument to be its voluntary act and deed.
Before me: /s/ Timothy A. Marshall
------------------------------------
[SEAL] Notary Public for Oregon
My Commission expires: 11-21-98
-----------
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 10 -
<PAGE> 13
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 13th day of December, 1995, before me personally appeared Richard
W. Boehlke, to me known to be the President of CROSSINGS INTERNATIONAL
CORPORATION, a Washington corporation, the corporation that executed the within
and foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument
and that the seal, if any, affixed is the corporate seal of said corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Wendy Goff
----------------------------------
(Signature)
[SEAL]
Wendy Goff
----------------------------------
(Name legibly printed or stamped)
Notary Public in and for the State
of Washington, residing at Seattle
My appointment expires 2/9/97
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
- 12 -
<PAGE> 14
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 13th day of December, 1995, before me personally appeared
Richard W. Boehlke, to me known to be the President of NEW CROSSINGS
INTERNATIONAL CORPORATION, a Nevada corporation, the corporation that executed
the within and foregoing instrument, and acknowledged said instrument to be the
free and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument and that the seal, if any, affixed is the corporate seal of said
corporation.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Wendy S. Goffe
--------------------------------------
(Signature)
[SEAL]
WENDY S. GOFFE
---------------------------------------
(Name legibly printed or stamped)
Notary Public in and for the State
of Washington, residing at Seattle
My appointment expires 2/9/97
ASSUMPTION AGREEMENT - ALBANY RESIDENTIAL CENTER
-13-
<PAGE> 15
EXHIBIT A
Beginning at a point which is on the North right-of-way line of 16th Avenue in
the City of Albany, Linn County, Oregon, said point being 1899.48 feet North
88(degrees) 51' East, 390.16 feet North 1(degree) 25' 10" West and 70.00 feet
North 89(degrees) 48' 05" West of the Southeast corner of the Abram Hackleman
Donation Land Claim No. 62 in Section 8, Township 11 South, Range 3 West,
Willamette Meridian, Linn County, Oregon; thence along said Northerly line of
16th Avenue, North 89(degrees) 48' 05" West, 1.97 feet; thence along said
Northerly line on a 250 foot radius curve to the right, the long chord of which
bears North 65(degrees) 49' 13" West, 203.22 feet; thence along said Northerly
line on a 250 foot radius curve to the left, the long chord of which bears
North 56(degrees) 06' 27" West, 123.23 feet; thence North 1(degree) 25' 10"
West, 189.79 feet; thence North 88(degrees) 34' 50" East, 324.73 feet to the
Westerly right-of-way line of Davidson Street; thence along said Westerly line
on a 375 foot radius curve to the right, the long chord of which bears South
9(degrees) 40' 05" West, 51.20 feet; thence along said Westerly line on a 430
foot radius curve to the left, the long chord of which bears South 7(degrees)
31' 44" West, 90.70 feet; thence along said Westerly line, South 1(degree) 28'
29" West, 198.05 feet and South 22(degrees) 29' 06" West, 12.29 feet to the
place of beginning.
<PAGE> 16
EXHIBIT "B"
(General)
ASSUMPTION AGREEMENT
This AGREEMENT is made this 23 day of July, 1990, by and between Albany
Residential Center, an Oregon General Partnership and Beaulieu-Draper Limited,
an Oregon Corporation, hereinafter referred to as "Seller," the Oregon Housing
Agency, State of Oregon, having its principal office at 1600 State Street,
Suite 100, Salem, Oregon, 97310, hereinafter referred to as the "Agency," and
Crossings International Corporation, hereinafter referred to as "Purchaser."
RECITALS
1. On May 30, 1984, Seller received a loan from the Agency in the amount
of Two Million Two Hundred Thousand dollars (U.S. $2,200,000),
hereinafter referred to as the "Loan," to aid Seller in the
construction and financing of a housing development located in the
area commonly known as Albany, Oregon, and legally described as
follows:
See Exhibit A
2. The Loan is evidenced by a Promissory Note in the sum of Two Million
Two Hundred Thousand dollars (U.S. $2,200,000), dated May 30, 1984,
and executed by Seller, which Promissory Note is hereinafter referred
to as the "Note." The Note is, by this reference, incorporated
herein. A true and accurate copy of the Note is available upon
request from the Agency, 1600 State Street, Suite 100, Salem, OR
97310.
3. The debt evidenced by the Note is secured by a Trust Deed covering the
Development and real property upon which the Development is located.
Said Trust Deed, dated May 30, 1984, executed by Seller, as grantor,
and in which the Agency is named as beneficiary and Safeco Title
Insurance Co., as trustee, was recorded on June 4, 1984, in the office
of the county clerk of the County of Linn, State of Oregon, Vol.
MF361, Page 71, and is hereinafter referred to as "Trust Deed." The
Trust Deed is, by this reference, incorporated herein. A true and
accurate copy of the Trust Deed is available upon request from the
Agency, 1600 State Street, Suite 100, Salem, OR 97310.
4. The debt evidenced by the Note is further secured by the following
written agreements made by and between Seller and the Agency:
a. two Security Agreements dated May 30, 1984, hereinafter
referred to as "Security Agreements";
b. a Regulatory Agreement dated May 30, 1984, hereinafter
referred to as "Regulatory Agreement";
c. an Assignment of Rents and Leases dated May 30, 1984,
hereinafter referred to as Rents and Leases";
d. a Management Agreement dated July 12, 1983, hereinafter
referred to as "Management Agreement".
CERTIFIED TO BE A
TRUE AND CORRECT COPY
CHICAGO TITLE INS. CO.
By: /s/
-------------------
<PAGE> 17
The Security Agreements, Regulatory Agreement, Rents and Leases, and
Management Agreement are, by this reference, incorporated herein.
True and accurate copies of these documents are available upon request
from the Agency, 1600 State Street, Suite 100, Salem, OR 97310.
5. The Trust Deed, Security Agreements and Regulatory Agreement provide
that Seller shall not sell, convey or otherwise transfer any of the
Development or property described in the Trust Deed or Security
Agreements without the express written approval of the Agency.
6. The Seller has sold and conveyed, or is to sell and convey, the
Development and all of the property described in the Trust Deed and
Security Agreements to Purchaser, and both Seller and Purchaser have
requested the Agency to approve the sale.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
I
UNPAID BALANCE OF SECURED OBLIGATION
The unpaid balance of the Loan is Two Million One Hundred Seventy Three
Thousand Eight Hundred Forty-Seven 06/100 dollars (U.S. $2,173,847.06) as of
May 15, 1990.
II
PURCHASER'S ASSUMPTION OF LIABILITY
Purchaser agrees to pay the Note in installments at the times, in the manner,
and in all other respects as therein provided; to perform all of the
obligations provided in the Note, Trust Deed, Security Agreements, Regulatory
Agreements, Rents and Leases, and Management Agreement to be performed by
Seller at the times, in the manner, and in all respects as therein provided;
and to be bound by all of the terms of the Note, Trust Deed, Security
Agreements, Regulatory Agreements, Rents and Leases, and Management Agreement.
III
AGENCY'S CONSENT TO SALE OF DEVELOPMENT
The Agency hereby consents to the above-mentioned sale of the Development by
Seller to Purchaser, and to Purchaser's assumption of the obligations of Seller
under the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents
and Leases, and Management Agreement.
-2-
<PAGE> 18
IV
SELLER'S LIABILITY
Seller agrees that Purchaser's assumption of the obligations of Seller under
the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and
Leases, and Management Agreement, and the Agency's consent to said assumption,
does not release or discharge Seller or any other party from liability under
the Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and
Leases, or Management Agreement.
V
DISCLOSURE OF FINANCIAL INFORMATION
Seller and Purchaser hereby covenant and agree to furnish to the Agency on or
before 90 days from closing, a complete financial statement audited by an
Independent Certified Public Accountant, in a form acceptable to the Agency and
the Secretary of the U.S. Department of Housing and Urban Development, setting
forth the results of operation of the Development for the fiscal year beginning
July 1, 1989 and ending as of the date of closing, and such other financial
information as the Agency may reasonably request. Seller and Purchaser further
agree that violation of this provision shall constitute a violation of the
Regulatory Agreement and HAP Contract by Seller and Purchaser, who shall be
jointly and severally liable for performance of the obligations described in
this paragraph V.
VI
NO IMPAIRMENT OF LIEN
All of the property described in the Trust Deed and Security Agreements shall
remain subject to the liens, charges, and encumbrances of the Trust Deed and
Security Agreements, and nothing contained herein or done pursuant hereto shall
affect or be construed to affect the liens, charges, and encumbrances of the
Trust Deed and Security Agreements, or the priority thereof over other liens,
charges, or encumbrances, or to release or affect the liability of any party or
parties whomsoever would now or may hereafter be liable under or on account of
the Note, Trust Deed, or Security Agreements.
VII
TRANSFER OF DEVELOPMENT PROPERTY
Purchaser covenants and agrees that it shall not, without the express prior
written approval of the Agency, sell, lease, assign, dispose of, convey or
otherwise transfer or encumber any of the Development or the real or personal
property, including rents, covered by the Trust Deed or Security Agreements.
-3-
<PAGE> 19
VIII
CONSENT TO FUTURE MODIFICATIONS
Seller, Purchaser, and any person or persons at any time obligated for the
performance of the terms of the Note, Trust Deed, Security Agreements,
Regulatory Agreement, Rents and Leases, or Management Agreement, hereby waive
notice and consent to any and all extensions and modifications of any of said
instruments, deeds and agreements granted at any time by the Agency to Seller,
Purchaser, or any person or persons now or hereafter obligated or liable under
any of the said instruments, deeds or agreements.
IX
INTERPRETATION
In this Agreement, the singular number includes the plural and the plural
number includes the singular. If this Agreement is executed by more than one
person, firm or corporation as Purchaser, or Seller, the obligations of each
such person, firm, or corporation hereinunder shall be joint and several.
X
CONFLICTING PROVISIONS
The parties hereto agree that the provisions of this Agreement, and of the
Note, Trust Deed, Security Agreements, Regulatory Agreement, Rents and Leases,
and Management Agreement, shall govern and control notwithstanding any
conflicting provision in any existing or future agreement between Seller and
Purchaser.
XI
LIMITATIONS
The right to plead any statute of limitations as a defense to any obligations
or demands secured by or mentioned in the Note, Trust Deed, Security
Agreements, Regulatory Agreement, Rents and Leases, or Management Agreement is
hereby waived by Seller and Purchaser to the full extent permissible by law.
XII
APPLICATION OF AGREEMENT
This Agreement applies to, inures to the benefit of, and binds all parties
hereto and their respective heirs, legatees, devisees, and administrators,
executors, successors and assigns.
XIII
GOVERNING LAW
This Agreement shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect, and in all other respects, by the laws of
the State of Oregon.
-4-
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement at Portland, OR,
the day and year first above written.
OREGON HOUSING AGENCY PURCHASER: Crossings International
Corporation, a Washington
corporation
STATE OF OREGON
By: /s/ Larry Dowd By: /s/
--------------------------- ----------------------------------
Larry Dowd, Manager
Rental Programs Title: President
-------------------------------
By:
---------------------------------
Title:
-------------------------------
SELLER: Albany Residential Center
------------------------------
By: /s/
---------------------------------
Title: General Partner
------------------------------
By: /s/
---------------------------------
Title: General Partner
------------------------------
STATE OF OREGON )
) ss.
County of Marion ) July 5, 1990
Personally appeared LARRY DOWD who, being first duly sworn, did say that she is
authorized to execute such instrument in behalf of the OREGON HOUSING AGENCY,
STATE OF OREGON, and acknowledged said instrument to be its voluntary act and
deed.
Before me: /s/ Kari Petersen
------------------------------------
Notary Public for Oregon
My Commission expires: 11-26-91
STATE OF OREGON )
) ss.
County of Multnomah )
Personally appeared Richard Boehlke, President of Crossings International
Corporation (Purchaser) this 2 day of Aug., 1990, and acknowledged the
foregoing instrument to be his voluntary act and deed.
/s/ M. Kimball
------------------------------
Notary Public for Oregon
My Commission expires: 3/9/93
-5-
<PAGE> 21
STATE OF OREGON )
) ss.
County of Multnomah )
Personally appeared Larry H. Draper & Christine Beaulieu, general partners of
Albany Residential Center (Seller) this 23 day of July, 1990, and acknowledged
the foregoing instrument to be his voluntary act and deed.
/s/ M. Kimball
------------------------------
Notary Public for Oregon
My Commission expires: 3/9/93
DG:dg
1976g
-6-
<PAGE> 22
Exhibit A
Beginning at a point which is on the North right-of-way line of 16th Avenue in
the City of Albany, Linn County, Oregon, said point being 1899.48 feet North
88(degrees) 51' East, 390.16 feet North 1(degree) 25' 10" West and 70.00 feet
North 89(degrees) 48' 05" West of the Southeast corner of the Abram Hackleman
Donation Land Claim No. 62 in Section 8, Township 11 South, Range 3 West,
Willamette Meridian, Linn County, Oregon; thence along said Northerly line of
16th Avenue, North 89(degrees) 48' 05" West, 1.97 feet; thence along said
Northerly line on a 250 foot radius curve to the right, the long chord of which
bears North 65(degrees) 49' 13" West, 203.22 feet; thence along said Northerly
line on a 250 foot radius curve to the left, the long chord of which bears
North 56(degrees) 06' 27" West, 123.23 feet; thence North 1(degree) 25' 10"
West, 189.79 feet; thence North 88(degrees) 34' 50" East, 324.73 feet to the
Westerly right-of-way line of Davidson Street; thence along said Westerly line
on a 375 foot radius curve to the right, the long chord of which bears South
9(degrees) 40' 05" West, 51.20 feet; thence along said Westerly line on a 430
foot radius curve to the left, the long chord of which bears South 7(degrees)
31' 44" West, 90.70 feet; thence along said Westerly line, South 1(degree) 28'
29" West, 198.05 feet and South 22(degrees) 29' 06" West, 12.29 feet to the
place of beginning.
STATE OF OREGON
County of Linn
I hereby certify that the attached was
received and duly recorded by me in
Linn County records.
STEVE DRUCKENMILLER
Linn County Clerk
By: PA, Deputy
<PAGE> 1
EXHIBIT 10.54
The following Documents are substantially similar to Exhibit 10.53 herewith.
Assumption Agreement dated July 23, 1990, by and among Albany Residential,
Beaulieu-Draper, the Division and Crossings, and recorded on August 3, 1990 in
the Official Records in Volume 538. (Albany Residential) VI.A.2
Assumption Agreement dated as of December 18, 1995, by and among Crossings, New
Crossings, Oregon Housing and NHP, and recorded on December 20, 1995 in the
Official Records as Instrument No. _________. (Albany Residential) VI.A.2
Assumption Agreement dated August 30, 1990, by and among Forest Grove, Robert
Cook, Larry Draper, the Division and Crossings, and recorded on October 15, 1990
in the Official Records as Instrument No. 90-56887. (Forest Grove) VI.A.14
Assumption Agreement dated as of December 18, 1995 by and among Crossings, New
Crossings, Oregon Housing and NHP, and recorded on December 20, 1995, in the
Official Record as Instrument No. __________. (Forest Grove) VI.A.14
Assumption Agreement dated July 29, 1991, by and among Original Borrower, the
Division and McMinnville, L.P. and recorded on July 31, 1991 in the Official
Records in Film Volume 257, page 1517. (McMinnville Residential) VI.A.23
Assumption Agreement dated as of December 18, 1995, by and among McMinnville
L.P., Crossings, New Crossings, Oregon Housing and NHP, and recorded on
December 20, 1995 in the Official Record as Instrument No. ___________.
<PAGE> 1
EXHIBIT 10.55
LEASE APPROVAL AGREEMENT
DATED: December 18, 1995
AMONG: NEW CROSSINGS INTERNATIONAL CORPORATION, a Nevada corporation
("Lessee")
AND: NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation ("Lessor")
AND: The State of Oregon, by and through its
Housing and Community Services Department
(the "Department")
1600 State Street, Suite 100
Salem, Oregon 97310-0161
RECITALS
A. Lessor is the owner of a housing development in Albany, Oregon
known as the Albany Residential Center, located at 1560 Davidson Street, S.E.,
Albany, Oregon, and legally described as follows:
See Exhibit "A" attached hereto and incorporated herein by
reference.
The housing development is hereinafter referred to as the "Development." The
Development and the real property upon which the Development is located are
encumbered by and subject to certain loan documents, including a Trust Deed and
a Regulatory Agreement, which were assumed by Lessor pursuant to that certain
Assumption Agreement, dated December 18, 1995 (the "Assumption Agreement"), by
and among Crossings International Corporation, Lessor, Lessee and the
Department. In connection therewith, Lessor, Lessee, the Department and
Crossings International Corporation entered into a side letter agreement (the
"Side Letter Agreement") of approximate even date of the Assumption Agreement.
Initially capitalized terms that are used herein and not defined herein are
used herein as defined in the Assumption Agreement. The Assumption Agreement,
the Side Letter Agreement and the Loan Documents are incorporated herein by
reference and made a part of this Lease Approval Agreement.
B. Lessee is a Nevada corporation which will lease and operate
the Development.
C. Lessor and Lessee desire the Department's approval of that
certain Lease and Security Agreement dated as of December
-1-
<PAGE> 2
15, 1995 (the "Lease"), between Lessor and Lessee, regarding the lease of the
Development.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, including the
mutual covenants and agreements of the parties herein contained, the parties
agree as follows:
1. Lessor and Lessee hereby agree that their lease shall be, and
is hereby amended to incorporate by reference and be subordinate to the Loan
Documents.
2. Lessee does hereby assume jointly and severally with Lessor
all of Lessor's (the "Borrower's") covenants, commitments and obligations to
the Department undertaken in the Loan Documents other than the obligation in
the Trust Deed and Loan Agreement to make principal and interest payments due
under the Note.
3. Lessee hereby does further agree that except as provided in
the Side Letter Agreement, the Department may, in the event of a default by
Lessor under the Loan Documents, revoke its approval of the Lease upon 30 days'
written notice. The inclusion or exercise of this revocation right by the
Department does not limit the Department's right to exercise any other right or
remedy available to the Department under this Lease Approval Agreement, any of
the Loan Documents, or otherwise.
4. Lessee hereby does further agree not to assign or to encumber
any interest in the Lease or the leasehold estate without prior written consent
by the Department.
5. Lessor hereby does agree to take all reasonable action to
facilitate Lessee's compliance with this Agreement.
6. The Department hereby approves the case dated December 15,
1995, a copy of which is attached hereto and incorporated by reference.
7. This Agreement shall be governed by the laws of the State of
Oregon.
8. No waiver, amendment, modification, or termination of this
Agreement or any provision hereof shall be effective unless all applicable
requirements have been satisfied and the amendment, modification, or
termination is in writing and signed by the parties hereto, except as otherwise
provided herein.
9. In the event that any term, covenant or condition of this
Agreement shall be finally determined by a court of
-2-
<PAGE> 3
competent jurisdiction to be invalid, the term, covenant or condition so
determined to be invalid is hereby declared severable and shall not effect the
validity of the remaining portions of this Agreement.
10. This Agrement may be signed in any number of counterparts, each of
which shall be considered an original but all of which shall be considered to
be one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
LESSOR:
NATIONWIDE HEALTH PROPERTIES,
INC., a Maryland corporation
By:
--------------------------------
Its:
--------------------------------
LESSEE:
NEW CROSSINGS INTERNATIONAL
CORPORATION, a Nevada corporation
By: ??????
--------------------------------
Its: Pres.
--------------------------------
STATE OF OREGON, acting by and
through its HOUSING AND
COMMUNITY SERVICES DEPARTMENT
By: /s/ Pauline Phillips
--------------------------------
Pauline Phillips
--------------------------------
Manager, Asset & Property
Management Section
-3-
<PAGE> 4
competent jurisdiction to be invalid, the term, covenant or condition so
determined to be invalid is hereby declared severable and shall not effect the
validity of the remaining portions of this Agreement.
10. This Agreement may be signed in any number of counterparts,
each of which shall be considered an original but all of which shall be
considered to be one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
LESSOR:
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: /s/ J. Andrew Stokes
--------------------------------
Its:Vice President
--------------------------------
LESSEE:
NEW CROSSINGS INTERNATIONAL
CORPORATION, a Nevada corporation
By: /s/
--------------------------------
Its:President
--------------------------------
STATE OF OREGON, acting by and
through its HOUSING AND
COMMUNITY SERVICES DEPARTMENT
By: /s/ Pauline Phillips
--------------------------------
Manager, Asset & Property
Management Section
-3-
<PAGE> 5
EXHIBIT A
Beginning at a point which is on the North right-of-way line of 16th Avenue in
the City of Albany, Linn County, Oregon, said point being 1899.48 feet North
88[degree] 51' East, 390.16 feet North l[degree] 25' 10" West and 70.00 feet
North 89[degree] 48' 05" West of the Southeast corner of the Abram Hackleman
Donation Land Claim No. 62 in Section 8, Township 11 South, Range 3 West,
Willamette Meridian, Linn County, Oregon; thence along said Northerly line of
16th Avenue, North 89[degree] 48' 05" West, 1.97 feet; thence along said
Northerly line on a 250 foot radius curve to the right, the long chord of which
bears North 65[degree] 49' 13" West, 203.22 feet; thence along said Northerly
line on a 250 foot radius curve to the left, the long chord of which bears
North 56[degree] 06' 27" West, 123.23 feet; thence North 1[degree] 25' 10"
West, 189.79 feet; thence North 88[degree] 34' 50" East, 324.73 feet to the
Westerly right-of-way line of Davidson Street; thence along said Westerly line
on a 375 foot radius curve to the right, the long chord of which bears South
9[degree] 40' 05" West, 51.20 feet; thence along said Westerly line on a 430
foot radius curve to the left, the long chord of which bears South 7[degree]
31' 44" West, 90.70 feet; thence along said Westerly line, South 1[degree] 28'
29" West, 198.05 feet and South 22[degree] 29' 06" West, 12.29 feet to the
place of beginning.
<PAGE> 1
EXHIBIT 10.56
The following documents are substantially similar to Exhibit 10.55 filed
herewith.
Lease Approval Agreement dated December 18, 1995, by and among NHP, New
Crossings and Oregon Housing. (Albany Residential) VI.A.2
Lease Approval Agreement dated December 18, 1995, by and among NHP, New
Crossings and Oregon Housing. (Forest Grove) VI.A.14
Lease Approval Agreement dated December 18, 1995, by and among NHP, New
Crossings and Oregon Housing. (McMinnville Residential) VI.A.24
<PAGE> 1
EXHIBIT 10.57
OREGON
HOUSING AND
COMMUNITY
SERVICES
December 18, 1995 DEPARTMENT
Nationwide Health Properties, Inc.
4675 MacArthur Court
Suite 1170
Newport Beach, California 92660
Attention: Mr. T. Andrew Stokes
Crossings International Corporation
1201 Pacific Avenue, Suite 1800
Tacoma, Washington 98402
Attention: Mr. Richard W. Boehlke
New Crossings International Corporation
1201 Pacific Avenue, Suite 1800
Tacoma, Washington 98402
Attention: Mr. Richard W. Boehlke
Re: Albany Residential Center Facility
Dear Messrs. Stokes and Boehlke:
This letter agreement dated December 18, 1995 (this "Agreement") is
made in reference to that certain Assumption Agreement dated December 18, 1995
(the "Assumption Agreement"), by and among Crossings International Corporation,
a Washington corporation, New Crossings International Corporation, a Nevada
corporation ("New Crossings"), the Oregon Housing and Community Services
Department, State of Oregon (the "Department"), and Nationwide Health
Properties, Inc., a Maryland corporation ("NHP"), relating to the Albany
Residential facility (the "Development"). Initially capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Assumption Agreement.
In connection with: (a) the sale and conveyance by Crossings of the
Development to NHP pursuant to that certain Purchase and Sale Agreement dated
as of December 15, 1995, by and among Crossings, as seller, New Crossings, as
lessee, and NHP, as
[STATE OF OREGON SEAL]
Side Letter Agreement - Albany Residential Center Facility
______________________________________________________
1600 State Street, Salem, Oregon 97310-0302
(503) 986-2000 FAX (503) 986-2020 TTY (503) 986-2100
<PAGE> 2
Page 2
buyer; (b) the lease by NHP of the Development to New Crossings (the "Lease
Transaction") pursuant to that certain Lease and Security Agreement dated as of
December 15, 1995, between NHP, as landlord, and New Crossings, as tenant (the
"Lease"); and (c) the terms and conditions of the Assumption Agreement, the
Department, Crossings, New Crossings and NHP hereby agree as follows:
(1) The Department hereby consents to the Lease Transaction and
agrees to accept performance by New Crossings, as tenant under the Lease, of
the management and maintenance of the Development, and the performance of all
non-monetary obligations of NHP under the Loan Documents.
(2) In the event of any default by New Crossings with respect to
the non-monetary obligations under the Loan Documents, the Department shall
deliver written notice thereof to NHP. Provided that NHP is diligently pursuing
its remedies under the Lease to cause New Crossings to cure such default (which
remedies may include commencement of eviction or lease termination
proceedings), and provided that NHP remains current on all obligations under
the Loan Documents which can be fully performed by the payment of money, NHP
shall have a 90 day period within which to complete such cure and/or terminate
the Lease and relet the Development or contract for the management of the
Development with another operator. Such 90 day period shall be subject to
extension by reason of delays beyond the reasonable control of NHP, such as
(but not limited to) bankruptcy or other legal proceedings involving Crossings.
During such cure period, as a condition to maintaining such cure period, NHP
shall maintain the Development in a manner designed to protect the Development
and its inhabitants. In the event NHP shall fail to cure any maintenance
problem within 30 days of receiving notice thereof from the Department, the
Department shall be entitled to exercise its remedies under the Loan Documents.
Any such new tenant or manager shall be subject to the approval of the
Department. Upon approval by the Department of such new tenant or manager, such
new tenant or manager shall file with the Department a Management Agreement in
form and content satisfactory to the Department, and the performance of the new
tenant or manager shall be substituted for New Crossings.
(3) Notwithstanding any provision in the Assumption Agreement to
the contrary, NHP and New Crossings shall be free to amend the Lease without
the approval of the Department so long as any such amendment does not modify
the terms of the Loan Documents.
(4) NHP shall copy the Department on any and all notices relating
to the initiation of the termination of the Lease. In the event NHP terminates
the Lease in the exercise of
Side Letter Agreement - Albany Residential Center Facility
<PAGE> 3
Page 3
its remedies under the Lease, the Third Management Agreement shall be deemed
terminated and, upon approval by the Department of a new tenant or manager
pursuant to Paragraph (2) above, such new tenant or manager shall file with the
Department a Management Agreement in form and content satisfactory to the
Department, and the performance of the new tenant or manager shall thereupon be
substituted for New Crossings.
(5) Notwithstanding any provision of Article V of the Assumption
Agreement to the contrary, in the event the Department exercises its right to
terminate the Third Management Agreement, NHP shall have the same cure period
and rights as provided in Paragraph (2) above to relet the Development to or
contract with a new tenant or manager for the management of the Development,
which new tenant or manager shall be subject to the approval of the
Department.
(6) Any failure by Crossings to furnish the Department financial
statements in accordance with Section IV of the Assumption Agreement shall
constitute a default of a non-monetary obligation within the contemplation of
Paragraph (2) above and shall give rise to the cure rights of NHP as provided
in Paragraph (2).
(7) In the event of a default under the Loan Documents by NHP,
which default continues without cure following all applicable cure periods: (a)
the Department, in the exercise of its rights and remedies under the Loan
Documents, shall not seek a deficiency judgment against Crossings or New
Crossings following a foreclosure and sale of the Development; and (b) the
Department may terminate the Lease.
(8) The Department acknowledges that it has been advised of the
appointment of a receiver with respect to The Palms, a facility owned by
Crossings, and the Department hereby waves any default under the Loan Documents
which may result from such appointment of a receiver.
(9) The Department acknowledges that any provisions of the Loan
Documents dealing with the following shall have no applicability to Crossings
or New Crossings: (a) limitations on the transferability of their respective
shares of stock; (b) restrictions on the business or businesses in which they
may respectively engage; or (c) granting the Department the right to appoint
officers of Crossings or New Crossings, or any members of their respective
Boards of Directors.
(10) This Agreement may be signed in any number of counterparts,
each of which shall be considered an original but
Side Letter Agreement - Albany Residential Center Facility
<PAGE> 4
Page 4
all of which shall be considered to be one and the same instrument.
Sincerely,
OREGON HOUSING & COMMUNITY
SERVICES DEPARTMENT
/s/ Pauline Phillips
--------------------------------------
Manager, Asset and Property Management
Side Letter Agreement - Albany Residential Center Facility
<PAGE> 5
Page 5
Accepted and agreed as of December __, 1995, by:
Nationwide Health Properties, Inc.
By /s/ J. Andrew Stokes
----------------------------
Its Vice President
-----------------------
Accepted and agreed as of December 13, 1995, by:
Crossings International Corporation, Inc.
By /s/
----------------------------
Its President
-----------------------
Accepted and accepted as of December 13, 1995, by:
New Crossings International Corporation, Inc.
By /s/
----------------------------
Its President
-----------------------
Side Letter Agreement - Albany Residential Center Facility
<PAGE> 1
EXHIBIT 10.58
The following documents are substantially similar to Exhibit 10.57 filed
herewith.
Side Letter Agreement dated December 18, 1995, by Oregon Housing, and Accepted
and Agreed to by NHP, Crossings and New Crossings. (Albany Residential) VI.A.2
Side Letter Agreement dated December 19, 1995 between Crossings and New
Crossings, and Acknowledged by NHP, relating to driveway located on the
facility. (Canterbury Gardens) VI.A.8
Side Letter Agreement by and between Crossings and New Crossings relating to
Zoning Endorsements. (Canterbury Gardens) VI.A.8
Side Letter Agreement by and between NHP and New Crossings relating to Expansion
Funds. (Courtyard Village) VI.A.12
Side Letter Agreement dated December 18, 1995, by Oregon Housing, and Accepted
and Agreed to by NHP and Crossings and New Crossings. (Forest Grove) VI.A.14
Side Letter Agreement dated December 19, 1995 between Crossings and New
Crossings, and Acknowledged by NHP, relating to sink hole located on the
property. (Heritage, Mt. Hood) VI.A.18
Side Letter Agreement dated December 18, 1995 by Oregon Housing, and Accepted
and Agreed to by NHP, Crossings, New Crossings and McMinnville LP. (McMinnville)
VI.A.23
Side Letter Agreement by and between New Crossings and NHP, relating to
Expansion Funds. (11 Facilities) VI.A.30
Side Letter to New Crossings, by NHP, relating to cure rights by Capital
Consultants, Inc. with respect to defaults by New Crossings under the leases.
(11 facilities) VA.A.30
<PAGE> 1
EXHIBIT 10.59
OREGON HOUSING AGENCY
STATE OF OREGON
MULTI-FAMILY HOUSING PROGRAMS
MANAGEMENT AGREEMENT
THIS AGREEMENT, made this 3 day of August, 1990, between Crossings
International Corporation (hereinafter referred to as "Owner") and the Oregon
Housing Agency, State of Oregon (hereinafter referred to as "the Agency").
WHEREAS, the Agency has agreed to an assumption of an existing Mortgage loan
for the long-term financing of a development known as Albany Residential
Center, in Albany, Oregon, (hereinafter "the Development") and
WHEREAS, one of the conditions of the assumption is the execution of a
Management Agreement satisfactory to the Agency; and
WHEREAS, the Owner is performing the duties of the management agent for the
Development;
NOW, THEREFORE, the Owner and the Agency hereby agree as follows:
1. DEFINITIONS: As used in this Agreement, the terms below shall have the
following definitions unless the context otherwise requires:
1.1 "Gross Collections" shall mean all amounts actually collected by the
Owner, as rents, vending and laundry machine income, income from
commercial space, but excluding (i) income derived from interest on
investments, (ii) discounts and dividends on insurance, and (iii)
security deposits.
1.2 "Lease" shall mean the form of the Agency-approved agreement between
the Owner and a Resident under the terms of which said Resident is
entitled to enjoy possession of a dwelling unit.
1.3 "Rent" shall mean that monthly amount which a Resident is obligated to
pay the Owner pursuant to the terms of a Lease.
1.4 "Resident" shall mean a person occupying a dwelling unit in the
Development pursuant to a Lease.
1.5 "Act" shall mean the Housing Finance Act, ORS Chapter 456, as amended.
1.6 "HUD" shall mean the U.S. Department of Housing and Urban Development.
2. Employees of Owner. The Owner shall investigate, hire, pay, supervise
and discharge all administrative and maintenance personnel as follows:
<PAGE> 2
Page 2
<TABLE>
<CAPTION>
Number Position Title
<S> <C>
1 Manager
1 Assistant Manager
1 Part-Time Maintenance Person
4 Cooks/Helpers
2 Housekeepers
1 Part-Time Activities Person
</TABLE>
No less than 1 responsible managerial person(s) of the Owner shall be
physically present at the Development not less than 24 hours per day,
7 days per week.
Compensation for the services of such employees (as evidenced by
certified payrolls) shall be considered an operating expense of the
Development. One rent-free two-bedroom apartment shall be provided
for such personnel. If at all possible, on-site personnel shall
be paid a salary in lieu of a rent-free apartment. If the manager's
unit is subsidized, the household must qualify for the unit under
HUD section 8 requirements.
3. Services. The Owner shall (i) retain such maintenance personnel as
necessary for the Development; (ii) provide training opportunities for
on-site management and maintenance personnel, including attendance at
conferences and seminars on housing management; (iii) establish Rules
for the Development as required in the Agency Lease and in accordance
with Section 8 Program Standards; (iv) establish a bookkeeping and
accounting system in accordance with the Agency requirements; (v)
provide for insurance coverage in accordance with the Agency
requirements; (vi) secure all necessary equipment and supplies; and
(vii) participate in preoccupancy conferences and training sessions as
required by the Agency.
4. Preventive Maintenance. The Owner shall develop a preventive
maintenance schedule including, but not limited to, periodic
inspections of the units, residency commencement and termination check
lists; inventory control; common area maintenance; equipment
maintenance; exterior maintenance on a seasonal basis; and painting,
decorating and replacement timetables, as necessary.
5. Emergencies. The Owner shall make provisions for receipt of emergency
calls from Residents on a 24-hour basis.
6. Inspection of Units. As part of a continuing program to secure full
performance by the Residents of all obligations and maintenance for
which they are responsible, the Owner shall make an annual inspection
of all dwelling units and report its findings in writing to the
Agency.
7. Records and Reports.
a. The Owner will prepare a quarterly income statement which
compares actual and budgeted income and expenses for the
quarter and for the "year-to-date", and will submit each
statement to the Agency within fifteen (15) days after the end
of the quarter covered.
-2-
<PAGE> 3
Page 3
b. If relevant, the Owner will prepare and complete, on a monthly
basis, such forms as may be required in the Housing Assistance
Payments Contract (Section 8 program), and will submit the
same to HUD or the Agency, as appropriate, within ten (10)
days after the end of each month or as required. Any payments
made pursuant to the Housing Assistance Payments Contracts
will be deposited to the Operating Receipts and Expense
Account of the Development.
8. Operating Budget. At least sixty (60) days before the beginning of
each new fiscal year for the Development, the Owner shall prepare and
submit to the Agency an operating budget, in such form as may be
prescribed by the Agency, setting forth an itemized statement of the
anticipated receipts and disbursements for the Development.
9. Compliance of Residents.
a. The Owner shall at all times during the term of this Agreement
operate and maintain the Development according to the highest
standard achievable. The Owner shall secure full compliance
by the Residents with the terms and conditions of their
respective Leases and Rules of the Development.
b. Voluntary compliance shall be emphasized, and the Owner shall
counsel residents and make referrals to social service
agencies in cases of financial hardship or under other
circumstances deemed appropriate by the Owner, so that
involuntary termination of tenancies may be avoided to the
maximum extent consistent with sound management of the
Development. The Owner will not, however, tolerate willful
evasion of payment of rent.
c. The Owner may lawfully terminate any tenancy when, in the
Owner's judgment, sufficient cause occurs under the terms of
the Resident's Lease. Statements explaining evictions shall
be filed promptly with the Agency.
d. i. Certification of Tenants. Agent shall require
tenants to certify their gross income at the time
they apply for a unit in the Development. Twenty
percent (20%) of the Development units will be
occupied at all times, or held for, low-income
tenants as defined by the U.S. Department of Housing
and Urban Development. However, not more than five
percent of the dwelling units that initially become
available for occupancy under Annual Contributions
Contracts and Section 8 HAP Contracts on or after
October 1, 1981 shall be available for leasing by
Lower Income Families other than Very Low-Income
Family other than a Very Low-Income Family shall,
after July 1, 1984, be approved for admission to any
unit assisted under the Section 8 New Construction
Substantial Rehabilitation program for which the
effective date of the HAP Contract is October 1, 1981
or later. All units shall be rented to eligible
tenants as defined by the U.S. Department of Housing
and Urban Development for the Section 8 Housing
Assistance Payments Program.
-3-
<PAGE> 4
Page 4
ii. Recertification of Income. The Agent shall take such
steps as are required by the Agency or HUD to
recertify incomes of residents receiving the benefits
of federal subsidy payments.
10. Other Acts. The Owner shall perform such other acts and deeds
requested by the Agency or HUD as are reasonable, necessary and proper
in the discharge of the Owner's duties under this Agreement.
11. Operating Receipts and Expense Account. The Owner shall establish and
maintain, in a bank whose deposits are insured by the Federal Deposit
Insurance Corporation (FDIC), in accordance with the provisions of the
Regulatory Agreement, a separate bank account for the deposit of the
monies of the Owner. This account shall be designated of record as
"Albany Residential Center Operating Receipts and Expense Account."
12. Security Deposit Account. The Owner shall collect, deposit and
disburse residents' security deposits in accordance with the terms of
the respective leases. Residents' security deposits shall be
deposited by the Owner in an interest-bearing account, separate from
all other accounts and funds, with a bank or other financial
institution whose deposits are insured by the FDIC. The Owner shall
be responsible for any loss incurred by the Development for its
failure to comply with refunding of security deposits to residents as
required in the Regulatory Agreement. This account shall be carried
in the Owner's name and shall be designated of record as "Albany
Residential Center Conditionally Refundable Security Deposit Account."
The Owner shall cause the amount of the Security Deposit Account to
equal or exceed at all times the aggregate amount of all outstanding
obligations of the Owner with respect to security deposits.
13. Management Fee. The compensation which the Owner shall be entitled to
receive for all services performed under this Agreement shall be a fee
of Five percent (5%) of Gross Collections. Such fees shall be
computed and paid monthly based upon the Gross Collections for the
preceding month.
14. Termination by the Agency. It is expressly understood and agreed that
the Agency shall have the right to terminate this Agreement with
cause, on ten (10) days' written notice to the Owner; except that in
the event of a default by the Owner under its Trust Deed to the Agency
or the Regulatory Agreement, the Agency shall have the right to
terminate this Agreement immediately without notice, but prompt advice
of such action shall be given to the Owner. It is further understood
and agreed that no liability shall attach to the Agency in the event
of termination of this Agreement pursuant to this Section.
15. Assignments. This Agreement shall inure to the benefit of and
constitute a binding obligation upon the Owner, and its respective
successors and assigns, however, the Owner cannot assign this
Agreement or any of its duties hereunder without the prior written
consent of the Agency.
-4-
<PAGE> 5
Page 5
OREGON HOUSING AGENCY OWNER: Crossings International
Corporation, a
STATE OF OREGON Washington corporation
By: /s/ Kathryn Eustrom
----------------------- By: /s/
Kathryn Eustrom, Manager --------------------------------
Housing Finance Section
Its: President
-------------------------------
By:
---------------------------------
Its: President
-------------------------------
DG:dg
1977g
-5-
<PAGE> 6
AMENDMENT TO MANAGEMENT AGREEMENT
DATED JULY 12, 1983
10. Operating Receipts and Expense Account. The Lessee shall establish
and maintain, in a bank whose deposits are insured by the Federal
Deposit Insurance Corporation (FDIC), in accordance with the
provisions of the Regulatory Agreement, a separate bank account for
the deposit of the monies of the Lessee. This account shall be
designated of record as "Albany Residential Center Operating Receipts
and Expense Account."
11. Security Deposit Account. The Lessee shall collect, deposit, and
disburse residents' security deposits in accordance with the terms of
their respective leases. Residents' security deposits shall be
deposited by the Lessee in an account, separate from all other
accounts and funds, with a bank or other financial institution whose
deposits are insured by the FDIC. The Lessee shall be responsible for
any loss incurred by the Development for its failure to comply with
refunding of security deposits to residents as required in the
Regulatory Agreement. This account shall be carried in the Lessee's
name and shall be designated of record as "Albany Residential Center
Security Deposit Account." The Lessee shall cause the amount of the
Security Deposit Account to equal or exceed at all times the aggregate
of all outstanding obligations of the Lessee with respect to the
security deposits.
OREGON HOUSING AGENCY BEAULIEU-DRAPER LTD.
STATE OF OREGON LESSEE
By: /s/ Larry Dowd By: /s/ Chris Beaulieu-Barta
------------------------ ----------------------------
For Maynard E. Hammer Chris Beaulieu
Administrator President
By: /s/ Kerry L. Draper
-----------------------------
Kerry L. Draper
Vice President
By: /s/ Larry H. Draper
-----------------------------
Larry H. Draper
Secretary
<PAGE> 7
ELDERLY HOUSING
FINANCE PROGRAM
(LESSEE/MANAGER)
Exhibit I
STATE OF OREGON
HOUSING DIVISION
MANAGEMENT AGREEMENT
This agreement, made this 12 day of July, 1983, between BEAULIEU-DRAPER, LTD.
(hereinafter the "Lessee") and the State of Oregon, Housing Division,
(hereinafter the "Division").
WHEREAS, the Division has executed a commitment to make a mortgage loan to
Albany Residential Center (hereinafter referred to as the "Owner") for the long
term financing of a development to be known as Albany Residential Center in
Albany, Oregon (hereinafter referred to as the "Development"); and
WHEREAS, the Division has agreed to allow the Owner to lease the Development to
the Lessee under a long term lease agreement. A copy of the lease is attached
hereto as Exhibit A, and a copy of the Division's approval is attached hereto
as Exhibit B. The lease agreement specified that the Lessee will have sole
responsibility for the operation and management of the Development; and
WHEREAS, the Lessee and the Owner will execute a Regulatory Agreement with the
Division containing provisions regarding the operation and management of the
Development; and
WHEREAS, this Agreement is made between the Lessee and the Division to regulate
the operation and management of the Development pursuant to the terms of the
Regulatory Agreement, and any breach in the terms of this Agreement shall be an
event of default under the Regulatory Agreement; and
WHEREAS, the Lessee is and will be performing the duties of the management
agent for the Development;
NOW, THEREFORE, in consideration for the mortgage loan commitment made by the
Division to the Owner and in consideration for the approval of Lessee as Lessee
of the Development, and other good and valuable consideration the parties
hereto agree as follows:
1. Employees of Lessee. On the basis of wage rates previously approved
by the Division, the Lessee shall investigate, hire, pay, supervise and
discharge all administrative and maintenance personnel as follows:
<TABLE>
<CAPTION>
No. Position Title
<S> <C>
1 Manager
1 Assistant Manager
1 Part-Time Maintenance Person
4 Cooks/Helpers
2 Housekeepers
1 Part-Time Activities Person
</TABLE>
No less than 1 responsible managerial person(s) of the Lessee shall be
physically present at the Development not less than 7 days per week.
Compensation for the services of such employees (as evidenced by certified
payrolls) shall be considered an operating expense of the Development. One
rent free 2 bedroom apartment(s) shall be provided for such personnel. If at
all possible, on-site personnel shall be paid a salary in lieu of a rent free
apartment.
-1-
<PAGE> 8
2. Services During Construction. Before completion of construction and
before occupancy of the Development the Lessee shall (i) retain such
maintenance personnel as necessary for the Development no later than 60 days
prior to occupancy; (ii) provide training opportunities for on-site management
and maintenance personnel, including attendance at conferences and seminars on
housing management; (iii) establish "Rules and Regulations" for the
Development; (iv) establish a bookkeeping and accounting system in accordance
with the Division requirements; (v) provide for insurance coverage in
accordance with the Division requirements; (vi) secure all necessary equipment
and supplies; (vii) participate in preoccupancy conferences and training
sessions as required by the Division; and (viii) provide an accounting for all
expenses to be paid from interim income in accordance with the Division
standards and requirements for cost certification.
3. Preventive Maintenance. The Lessee shall develop a preventative
maintenance schedule including, but not limited to, periodic inspections of the
units, residency commencement and termination check lists; inventory control;
common area maintenance; equipment maintenance; exterior maintenance on a
seasonal basis; and painting, decorating and replacement timetables, as
necessary.
4. Emergency Calls. The Lessee shall make provisions for receipt of
emergency calls from Residents on a 24-hour basis.
5. Inspection of Units. As part of a continuing program to secure full
performance by the Residents of all obligations and maintenance for which they
are responsible, the Lessee shall make an annual inspection of all dwelling
units and report its findings in writing to the Division.
6. Records and Reports. The Lessee will prepare a quarterly income
statement which compares actual and budgeted income and expenses for the
quarter and for the "year to date", and will submit each statement to the
Division within thirty (30) days after the end of the quarter covered.
7. Operating Budget. At least sixty (60) days before the beginning of
each new fiscal year for the Development, the Lessee shall prepare and submit
to the Division an operating budget, in such form as may be prescribed by the
Division, setting forth an itemized statement of the anticipated receipts and
disbursements for the Development.
8. Compliance of Residents.
(a) The Lessee shall at all times during the term of this
Agreement operate and maintain the Development according to the
highest standards achievable. The Lessee shall secure full compliance
by the Residents with the terms and conditions of their respective
leases and the Rules and Regulations.
(b) Voluntary compliance shall be emphasized, and the Lessee shall
counsel residents and make referrals to social service agencies in
cases of financial hardship or under other circumstances deemed
appropriate by the Lessee, so that involuntary termination of
tenancies may be avoided to the maximum extent consistent with sound
management of the Development. The Lessee will not, however, tolerate
willful evasion of payment of rent.
(c) The Lessee may lawfully terminate any tenancy when, in the
Lessee's judgment, sufficient cause occurs under the terms of the
Resident's lease. Statements explaining evictions shall be filed
promptly with the Division.
(d) The Lessee shall take such steps as are required by the
Division to recertify incomes of residents when requested to do so by
the Division.
-2-
<PAGE> 9
9. Certification of Residents. The Lessee shall require tenants to
certify that they are at least 58 years of age at the time that they move into
the Development. Lessee shall also require tenants to certify their gross
income at the time they apply for a unit in the Development. 20% of the
Development units will be occupied at all times, or held for low income tenants
as defined by the U.S. Department of Housing and Urban Development. Applicants
whose income is at or below the median household income in Oregon will be given
priority in allocating apartments units.
10. Operating Receipts and Expense Accounts. The Lessee shall establish
and maintain, in a bank whose deposits are insured by the Federal Deposit
Insurance Corporation (FDIC), in accordance with the provisions of the
Regulatory Agreement, a separate bank account for the deposit of the monies of
the Lessee. This account shall be designated of record as "BEAULIEU-DRAPER,
LTD. Operating Receipts and Expense Account".
11. Security Deposit Account. The Lessee shall collect, deposit and
disburse residents' security deposits in accordance with the terms of their
respective leases. Residents' security deposits shall be deposited by the
Lessee in an account, separate from all other accounts and funds, with a bank
or other financial institution whose deposits are insured by the FDIC. The
Lessee shall be responsible for any loss incurred by the Development for its
failure to comply with refunding of security deposits to residents as required
in the Regulatory Agreement. This account shall be carried in the Lessee's
name and shall be designated of record as "BEAULIEU-DRAPER, LTD. Security
Deposit Account". The Lessee shall cause the amount of the Security Deposit
Account to equal or exceed at all times the aggregate of all outstanding
obligations of the Lessee with respect to security deposits.
12. Termination by the Division. It is expressly understood and agreed
that the Division shall have the right to terminate this Agreement, with cause,
on ten (10) days' written notice to the Lessee; except that in the event of a
default by the Lessee under the Regulatory Agreement, the Division shall have
the right to terminate this Agreement immediately without notice, but prompt
advice of such action shall be given to the Lessee. It is further understood
and agreed that no liability shall attach to the Division in the event of
termination of this Agreement pursuant to this Section.
13. ASSIGNMENTS: This Agreement shall inure to the benefit and constitute
a binding obligation upon the Lessee, and its respective successors and
assigns; however, the Lessee cannot assign this Agreement or any of its duties
hereunder without the prior written consent of the Division.
HOUSING DIVISION, STATE OF OREGON BEAULIEU-DRAPER LTD.
LESSEE
By: /s/ William F. Gwinn By: /s/ Chris Beaulieu
----------------------------------- --------------------------------
William F. Gwinn Chris Beaulieu
Administrator Its: President
--------------------------------
By: /s/ Kerry L. Draper
--------------------------------
Kerry L. Draper
Its: Vice-President
--------------------------------
By: /s/ Larry H. Draper
--------------------------------
Larry H. Draper
Its: Secretary
--------------------------------
-3-
<PAGE> 10
ALBANY RESIDENTIAL CENTER
Lessor
By: /s/ Christine Beaulieu
----------------------------------------------
Christine Beaulieu
Its: General Partner
---------------------------------------------
By: /s/ Larry H. Draper Kerry L. Draper
----------------------------------------------
Larry H. Draper and Kerry L. Draper
Its: General Partner
---------------------------------------------
By: /s/ Hugh C. Minter
----------------------------------------------
Hugh C. Minter
Its: General Partner
---------------------------------------------
By: /s/ Allyn R. Staley
----------------------------------------------
Allyn R. Staley
Its: General Partner
---------------------------------------------
By: /s/ Stephen M. Ariens
----------------------------------------------
Stephen M. Ariens
Its: General Partner
---------------------------------------------
By: /s/ Paul J. Shapiro
----------------------------------------------
Paul J. Shapiro
Its: General Partner
---------------------------------------------
By: /s/ Donald A. Hofmann / Jane R. Hofmann
----------------------------------------------
Donald A. Hofmann and Jane R. Hofmann
Its: General Partner
---------------------------------------------
By: /s/ I. David McDonald
----------------------------------------------
I. David McDonald
Its: General Partner
---------------------------------------------
<PAGE> 11
EXHIBIT A
LEASE AGREEMENT
THIS LEASE AGREEMENT (referred to herein as "Lease") is executed by and
between Albany Residential Center, an Oregon partnership with an assumed
business name (hereinafter referred to as "Lessor"), and Beaulieu-Draper
Limited, (hereinafter referred to as "Lessee"), on this 12th day of July 1983.
1. DEMISED PREMISES
(a) Lease. Lessor hereby leases to Lessee and Lessee leases from
Lessor all of the real property described in Exhibit "A", attached hereto and
incorporated herein as though fully set forth at this point, and the
improvements to be constructed thereon as hereinafter provided, (hereinafter
called "Premises").
(b) Use. The premises are leased to Lessee only for the purposes
of the operation of a facility designed for residential care, including such
other activities as may be related to or functionally necessary for the
successful operation of a residential care facility.
(c) Obligation to diligently use. Lessee covenants to use said
Premises for the above specified purposes, to diligently pursue said purposes
throughout the term of this Lease, and to keep the premises open for business
and cause business to be conducted there every business day generally observed
by like businesses, except for acts of God, labor disputes, or other causes
beyond Lessee's reasonable control.
2. TERM OF AGREEMENT
(a) Commencement and termination. The term of this Lease shall be
ten (10) years commencing with the closing, by
- 1 -
<PAGE> 12
Lessor, of the permanent mortgage financing of the premises with the state of
Oregon.
(b) Option to Renew. Lessor hereby grants to Lessee an option to
renew this lease for a period of five (5) years subsequent to the term
granted in subparagraph (a) hereof, and hereby grants an additional option to
renew this lease for five (5) years subsequent to the first renewal period.
Therefore, this lease term is for ten (10) years plus two (2) five-year
renewable options for a total of twenty (20) years.
3. RENT
(a) Monthly Rent. Monthly rent shall be $20,550.00, except as
determined pursuant to subsection (b) of this section. Rent shall commence to
accrue at the earlier of four months from the commencement date of the lease
or upon the Lessee succeeding in renting 75% of the available units.
Thereafter, rent shall be payable on the fifth day of each month, and continue
through any rebuilding or repair period due to damage to the improvement.
(b) Escalation of Rents. The contract rent shall be subject to
escalation, as follows:
(1) Three years after the date rent first becomes payable
hereunder, monthly rental shall be increased by the sum of $1,200 per month.
(2) Five years from the date rent first becomes payable
hereunder, monthly rental shall be increased by an additional $1,200 per month.
(3) Six years from the date rent first becomes payable
hereunder, monthly rental shall be increased by an additional $800 per month.
(4) In addition to the increases above-stated,
- 2 -
<PAGE> 13
rental for each option period shall be negotiated between the parties. If the
parties are unable to agree on the amount of rental, either increase or
decrease, it shall be decided by binding arbitration with the American
Arbitration Association.
(c) Late Payment of Rent. Rental payments paid more than ten days
after the due date shall be subject to a penalty in the amount of 2% of the
amount due for each delinquent month.
4. CONSTRUCTION OBLIGATION
(a) Construction. Lessor covenants and agrees to develop the
premises in conformance with this Lease and to build upon the Premises, a
facility designed for residential care in conformance with all applicable
statutes and codes, including zoning, building and other safety codes.
(b) Payment by Lessor. The Lessor covenants and agrees that the
building or buildings will be constructed or paid for wholly at the expense of
Lessor.
(c) Financing. The Lessor covenants and agrees that before
commencing the building, it will have arranged for financing, so that at all
times there will be available to the Lessor, sufficient funds to pay for the
cost of construction of the proposed building or buildings in their entirety.
(d) Joint Applications. The Lessee agrees that, within ten (10)
days after receipt of written request from Lessor, it will join in any and all
applications for permits, licenses or other authorizations required by any
governmental or other body claiming jurisdiction in connection with any work
which the Lessor may do hereunder, and will also join in any grants for
easements for electric, telephone, gas, water, sewer and such other public
utilities and facilities as may be
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<PAGE> 14
reasonably necessary in the operation of the premises or of any improvements
that may be erected thereon; and if, at the expiration of such ten (10) days'
period, the Lessee shall not have joined in any such application, or grants for
easements, the Lessor shall have the right to execute such application and
grants in the name of the Lessor, and, for that purpose, the Lessee hereby
irrevocably appoints the Lessor as its Attorney-in Fact to execute such papers
on behalf of the Lessee.
5. MAINTAIN MORTGAGE-MORTGAGE FINANCING
Lessor covenants and agrees to maintain any mortgage placed on the
leased premises by Lessor or Lessor's predecessor in good standing and to
timely cure any defaults in said mortgage, and in the event that Lessor fails
to keep any mortgage in good standing and timely cure any defaults, the Lessee
may, without waiving any other rights under this Lease, make any payments and
do any other act necessary to keep said mortgages in good standing and cure any
defaults, including assuming such mortgage.
(a) Lessee and Lessor recognize that the premises are covered by a
Trust Deed given to secure a loan from the Housing Division, Commerce
Department, state of Oregon ("the Division"), and by a Regulatory Agreement
between the Lessor and the Division.
(b) The provisions of the Regulatory Agreement and Trust Deed are
controlling and will supersede any inconsistent provisions of this lease. All
insurance policies covering the premises will be payable to the Division as
mortgagee according to the terms of the Regulatory Agreement and the insurance
policies.
(c) The Lessee and Lessor have signed a Management
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<PAGE> 15
Agreement approved by the Division. The terms of the Management Agreement shall
supersede any inconsistent provisions of this lease.
(d) This lease shall not be assigned or sublet without the written
consent of the Division, in addition to the provisions required in paragraph 16
of this lease. Any consent to assignment or sublease shall not be a waiver of
the further rights of the Division to withhold its consent to any further
assignment or sublease, and will not release Lessee of its obligations
hereunder.
(e) Lessor and Lessee have certain obligations under the terms of
Management and Regulatory Agreements with the Housing Division. Lessee hereby
agrees to perform all its obligations under such agreements and all joint
obligations of Lessee an Lessor contained in such agreements.
6. PAYMENT OF TAXES
(a) Generally. The Lessee covenants and agrees with Lessor that
the Lessee shall pay, all real property taxes, assessments, rates and charges,
excises and levies, of any kind and nature whatsoever, which at any time during
the terms of this lease, may be assessed, levied, imposed upon, or become due
and payable out of or in respect of or become a lien on the Premises or any
improvement thereon, or any part thereof or any appurtenances thereto. If,
however, the Lessee desires to contest the validity of any tax or tax claim,
the Lessee may do so without being in default hereunder.
(b) Lessee. Lessee covenants and agrees with Lessor that the
Lessee shall pay, indemnify and hold Lessor harmless therefrom all water and
sewer rent, charges for public utilities,
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<PAGE> 16
licenses and permit fees and other governmental charges, general and special,
ordinary and extra ordinary, unforeseen and foreseen of any kind and nature
whatsoever which at any time during the terms of this lease, may be assessed,
levied, closed upon, or become due and payable out of or in respect of or
become a lien on the premises or any improvement thereon, or any part thereof
or any appurtenances thereto.
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<PAGE> 17
(c) Payments of amount due. In the event that the Lessee shall
fail, refuse, or neglect to make any of the payments in this section required,
then the Lessor may, at its option, pay the same, and the amount or amounts of
money so paid, including reasonable attorneys' fees and expenses which have
been reasonably incurred because of or in connection with such payments
together with interest on all such amounts at the rate of 12% per annum shall
be repaid by the Lessee upon the demand of the Lessor and the payment thereof
may be collected or enforced by the Lessor in the same manner as though such
amount were an installment of rents specifically required by the terms of this
lease to be paid by the Lessee to Lessor upon the day Lessor demands repayment
or reimbursement from the Lessee. The election of either party to pay such
amount shall not waive the default thus committed by the other.
7. LIENS AND ADVERSE INTERESTS
Lessee covenants and agrees with Lessor that Lessee will not permit nor
suffer any liens or claims of any kind to be filed or claimed against the
interests of Lessor in the demised Premises. During the continuance of this
Lease if any lien or claim of any kind, except those affirmatively permitted by
Lessor in writing, is claimed or filed, it shall be the duty of Lessee within
30 days after Lessor shall have been given written notice of such a claim
having been filed among the public records of Linn County, state of Oregon or
within 30 days after Lessor shall have been given written notice of such claim
and shall have transmitted written notice of the receipt of such claim to the
Lessee, whichever 30 day period expires earlier, to cause the Premises to be
released from such claim, either by payment or the posting of bond or payment
into the court of the amount necessary
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<PAGE> 18
to relieve and release the Premises from such claim or in any other manner,
which, as a matter of law, will result within such period of 30 days in
releasing Lessor and the title of Lessor from such claim. The Lessee covenants
and agrees within such period of 30 days, to cause the premises and Lessor's
interest therein to be released from legal effect of such claim.
8. INSURANCE
(a) Covenant. The Lessee covenants and agrees with Lessor that
from and after the commencement date, Lessee will keep insured any and all
buildings and improvements upon the premises against all loss or damage by fire
and windstorm and what is generally termed in the insurance trade as extended
coverage. The insurance will be maintained in an amount which will be
sufficient to protect any party in interest from being or becoming a co-insurer
on any part of the risk and in no event less than the full insurable value.
All of the policies of insurance shall include the name of Lessor as one of the
parties insured thereby and shall fully protect both the Lessee, Lessor and
Lessor's mortgage holder as their respective interests may appear. In the event
of the destruction of the buildings or improvements by fire, windstorm or other
casualty for which insurance shall be payable and so long as such insurance
monies shall not have been paid to Lessor and the Lessee, said sums so paid
shall be deposited in a joint account of Lessor and the Lessee in a bank
approved by the Lessor located in Linn County, Oregon and shall be made
available to the Lessee for the construction and repair, as the case may be, of
any building or buildings damaged or destroyed by fire, windstorm, or other
casualty for which insurance monies shall be payable and shall be
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<PAGE> 19
paid out by Lessor and the Lessee from said joint account from time to time on
the estimate of any reliable architect licensed in the state of Oregon approved
by the Lessor having jurisdiction for such reconstruction and repair,
certifying that the amount of such estimate is being applied to the payment of
the reconstruction or repair and at a reasonable cost therefrom; provided, that
it first be made to appear to the satisfaction of Lessor that the total amount
of money necessary to provide for the reconstruction and repair of any building
or buildings destroyed or injured, as aforesaid, according to the plan adopted
therefore, has been provided by the Lessee for the purpose and its application
for the purpose assured. The Lessee covenants and agrees that in the event of
the destruction or damage of the buildings and improvements or any part
thereof, and as often as any building or improvement on said Premises shall be
destroyed or damaged by fire, windstorm, or other casualty, the Lessee shall
rebuild and repair so long as it is the Lessors desire in the same and such
manner that the building or improvements are rebuilt and repaired and the
personal property so replaced or repaired shall be of the same or higher value
as the said building or improvement and the personal property upon the Premises
prior to such damage or destruction and shall have the same rebuilt and ready
for occupancy within 15 months of the time when the loss or destruction
occurred. The 15 month period for reconstruction shall be enlarged by delays
caused without fault or neglect on the fault of the Lessee by act of God,
strikes, lockouts, or other conditions (other than matters of finance) beyond
the Lessee's control.
(b) Delivery of Policies. The originals of all such
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<PAGE> 20
policies shall be delivered to Lessor by the Lessee along with the receipted
bills evidencing the fact that the premiums are paid. Nothing contained in
this lease shall be construed as prohibiting the Lessee from financing the
premiums when the terms of the policies are for three years or more, and in the
event that the premiums are so financed the receipt shall evidence it to be the
fact that the installment premium payment or payments are paid at or before
their respective maturities.
(c) Payments to Mortgagee. All of the provisions contained herein
relative to the disposition of payments from insurance companies are subject to
the fact that if any mortgagee holding a mortgage elects, in accordance with
the terms of such mortgage, to require that the proceeds of the insurance be
paid to the mortgagee on account of such mortgage, then the payments shall be
made, but in such event, it shall be obligatory upon the Lessee to create the
complete fund in the manner set forth in this section to insure the payment for
the work of reconstruction and repair.
(d) Excess Funds. It is agreed that any excess of money received
from insurance remaining in the joint bank account after the reconstruction or
repair of such building or buildings, if there be no default on the part of the
Lessee in the performance of the covenants in this Lease, shall be paid to the
Lessee, but in case the Lessee does not enter into the reconstruction or repair
of the building or buildings within a period of 6 months from the date of the
payment of loss, after damage or destruction occasioned by fire, windstorm, or
other cause for which insurance monies shall be payable, and does not prosecute
the same thereafter with dispatch as may be necessary to complete the same
within 15 months after the occurrence of
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<PAGE> 21
such damage or destruction occasioned as aforesaid, then the amount so
collected or the balance thereof remaining in the joint account, as the case
may be, shall be paid to Lessor, and it will be at Lessor's option to terminate
the Lease and retain such amount as liquidated and agreed upon damages
resulting from the failure of the Lessee to promptly, within the time
specified, complete such work of reconstruction and repair. It is agreed by
the parties that Lessor's actual damages in the event of Lessee's failure to
rebuild include the value of the interest of the public in the operation of the
facility to be built, that this value is extremely difficult to ascertain, and
that the insurance proceeds in the amount of the actual property loss are a
reasonable estimate of the sum of money which can satisfy the public for the
loss, being approximately equal to the amount necessary to reestablish these
services for the benefit of the public. The 15 month period herein provided
for reconstruction shall be enlarged by delays caused without fault or neglect
on the part of the Lessee by act of God, strikes, lockout, or other conditions,
(other than matters of finance) beyond the control of Lessee.
(e) Small Losses. The foregoing notwithstanding, in the event the
insurance proceeds are the sum of $12,500 or less, then such proceeds shall be
paid directly to Lessee without the necessity of creating the joint bank
account as hereinabove set forth, and Lessee shall use such funds to make
replacements or repairs as required hereunder.
(f) Notwithstanding any other provision contained herein, if such
loss or damage shall occur during the last (two) years of the Lease, and
further if the loss or damage which occurs during said (two) year period is such
that the cost of
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<PAGE> 22
repair, rebuilding, or restoration of the property damaged or destroyed exceeds
fifty percent (50%) of the fair market value of the improvements upon the
leased premises immediately prior to such damage or destruction, Lessee shall
have the option and shall within sixty (60) days from the days from the damage
or destruction, notify Lessor in writing whether or not Lessee elects to
repair, rebuild, restore in accordance with sub paragraph (a) above or to
terminate this Lease. Upon giving such notice to terminate, this Lease shall
terminate on the date specified in the notice and Lessor shall be entitled to
the net proceeds of insurance.
(g) Renewals. The Lessee covenants and agrees with Lessor that
the Lessee will pay premiums for all of the insurance policies which the Lessee
is obligated to carry under the terms of this Lease and will deliver to Lessor
evidence of such payment before the payment of any such premiums become in
default, and Lessee will cause renewals of expiring policies to be written and
the policies or copies thereof, as the Lease may expire to be delivered to
Lessor at least 10 days before the expiration date of expiring policies.
9. INDEMNIFICATION
The Lessee covenants and agrees with Lessor that during the entire term
of the Lease, the Lessee will indemnify and save harmless Lessor against any
and all claims, debts, demands, or obligations which may be made against Lessor
or against Lessor's title to the Premises, arising by reason of or in
connection with, any alleged act or omission of the Lessee or any person
claiming under, by or through the Lessee; and if it becomes necessary for
Lessor to defend any, action to oppose any
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<PAGE> 23
such liability, then Lessee will pay the Lessor all costs of court and
attorneys' fees incurred by Lessor in effecting such defense, in addition to
any other sums which Lessor may be called upon to pay by reason of the entry of
a judgment against Lessor in the litigation in which such claim is asserted.
From the time when the Lessee makes actual use of and occupies the demised
Premises, or any parts thereof, the Lessee will cause to be written a policy or
policies of insurance in the form generally known as Public Liability and/or
owners, landlord and tenant policies and boiler insurance policies and elevator
insurance policies, when there be boilers and elevators included in any
improvements located on the demised Premises, insuring the Lessor against any
and all claims and demands made by any person or persons whomsoever for
injuries received in connection with the operation and maintenance of the
Premises, improvements, and buildings located on the demised Premises, or for
any risk insured against by such policies, each class of which policies shall
have been written within limits of not less than $300,000, for damages incurred
or claimed by any one person for bodily injury, or otherwise, plus $50,000
damages to property and for not less than $1,000,000 dollars for damages
incurred or claimed by more than one person for bodily injury or otherwise plus
$100,000 for damages to property. All such policies shall name the Lessee and
Lessor as their respective interests may appear, as the persons insured by such
policies; and the original or duplicate original of such policy or policies
shall be delivered by the Lessee to the Lessor promptly upon the writing of
such policies, together with adequate evidence of the fact that the premiums
have been paid unless required to be delivered to some
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other person by the terms of a mortgage assented to by the Lessor, in which
case duplicate copies may be delivered to the Lessor.
10. EMINENT DOMAIN
In the event the leased premises or any part thereof shall be taken for
public purposes by condemnation as a result of any action or proceeding in
eminent domain (it being understood and agreed that neither party shall be
under any obligation to the other to controvert the allegations of any such
suit), then the interest of Lessor and Lessee (or Beneficiary or Mortgagee if
there is a Trust Deed or Mortgagee then in effect), in the award and the effect
of the taking upon this Lease agreement shall be as follows:
(a) Partial Taking. In the event of such taking of only a part of the
leased premises, leaving the remainder of said premises in such location and in
such form, shape and size as to be used effectively and practicably in the
opinion of Lessor for the conduct thereon of the operations permitted
hereunder, this lease shall terminate and end as to the portion of the leased
premises so taken as of the date title to such portion vests in the condemning
authority, but shall continue in full force and effect as to the portion of the
leased premises not so taken and from and after such date the contract rent
required by this lease to be paid by Lessee to Lessor shall be reduced in the
proportion to which the value of the leased premises so taken bears to the
total value of the demised premises; provided, however, Lessor shall have the
right, with the consent of Lessee, to substitute like adjacent property and
maintain the rent schedule without diminution.
(b) Total Taking. In the event the entire leased premises are so
taken, this lease and all of the right, title and interest
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<PAGE> 25
thereunder shall cease on the date title to said premises so taken vests in the
condemning authority.
(c) Right to Sell. Notwithstanding the foregoing provisions of
this section, Lessor may, in its discretion and without affecting the validity
and existence of this lease, transfer the Lessor's interests in said premises
in lieu of condemnation to any authority entitled to exercise the power of
eminent domain.
11. REPAIRS AND MAINTENANCE
(a) Generally. Lessee covenants and agrees with Lessor that during
the continuance of this lease, Lessee will keep in good state of repair and in
first class condition, any and all buildings, furnishings, fixtures and
equipment which are brought or constructed or placed upon the demised Premises
by the Lessor and the Lessee will not suffer or permit any strip, waste, or
neglect of any buildings or any other property to be committed and that the
Lessee will repair, replace and renovate as often as it may be necessary in
order to keep the buildings and other property which is the subject matter of
this Lease in first class repair and condition and in compliance with all
applicable statutes and codes; that Lessee will keep the entire Premises,
including sidewalks, driveways, parking lots, sidings, and side yards free and
clear of ice, snow, rubbish, debris, produce refuse and obstruction and in
strict compliance with all applicable health and sanitary codes; that Lessee
will provide sufficient proper containers for such debris and produce refuse as
is necessary to so maintain the Premises; and that Lessee will maintain
sidewalks, driveways, parking strips and landscaping and will repair, replace
and renovate as often as may be necessary.
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<PAGE> 26
12. DEMOLITION
(a) Definition. Work will be deemed to be a "demolition" or
"major repair" so as to bring it within the terms of this paragraph of the lease
if it constitutes either the actual destruction of a building or a substantial
part thereof or if it constitutes a remodeling which, in substance, requires
the tearing down of a substantial part of a building. The changing of
openings, or the removal and/or relocating of partition walls, or other work
inside the building designed to accommodate the building to better occupancy,
shall not be deemed to be demolition or major repair and construction within
the meaning of this paragraph. The provisions of this paragraph shall not be
applicable to the removal of any building or structure on the Premises at the
commencement date.
(b) Demolition Prohibited. Although it is the Lessee's duty under
the terms hereof to keep and maintain any buildings and improvements on the
Premises in good repair, this shall not be construed as empowering the Lessee
to tear down and demolish any buildings now existing or to be constructed on
the demised Premises or any substantial part thereof or to cause any item of
major repair or construction to be made and Lessee covenants and agrees that it
will not tear down or demolish any building now existing or to be constructed
on the demised Premises or any substantial part thereof or cause any item of
major repair or construction to be made without the approval of the Lessor.
13. RIGHT TO MAKE PAYMENTS
In the event that the Lessee shall fail to make any payments for
insurance premium, taxes, or any other payments required by this lease, Lessor
shall have the right to make such payments on behalf of the Lessee. Such
payments by Lessor shall become
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as between the Lessor and Lessee, rent due as of the date of the payment by
Lessor. Any such payment by Lessor shall not be a waiver of any default under
this lease.
14. RIGHT OF ENTRY
Lessor and its agents shall have the right to entry upon the
Premises at all reasonable times to examine the condition and use thereof,
provided only that such right shall be exercised in such manner so as not to
interfere with the conduct of the Lessee's business on the Premises, and if the
Premises are damaged by fire, windstorm, or by any other casualty, which causes
the Premises to be exposed to the elements, then the Lessor may enter upon the
Premises to make emergency repairs, but if the Lessor exercises its option to
make emergency repairs, such act or acts shall not be deemed to excuse the
Lessee from its obligation to keep the Premises in repair and the Lessee
shall, upon demand of Lessor, immediately reimburse the Lessor, for the costs
and expenses of such emergency repairs, and payment for such emergency repairs
shall be due as if it were rent.
15. REMEDIES OF LESSOR
(a) Default by Lessee. It is covenanted and agreed by the Lessee that
the breach of any covenant by Lessee is a default and if
(1) Lessee shall fail in the performance of fulfillment of any
covenant or condition herein required to be performed or fulfilled by Lessee
and shall fail to cure said default within thirty days following the service on
Lessee of a written notice from Lessor specifying the default complained of; or
(2) Lessee shall voluntarily file or have involuntarily
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<PAGE> 28
filed against him any petition under any bankruptcy or insolvency act or law;
or
(3) Lessee shall make a general assignment for the benefit of
creditors;
then Lessor may, at its option, without further notice or demand upon Lessee or
upon any person claiming through Lessee, immediately terminate this lease and
all rights of Lessee and of all persons claiming rights through Lessee in or to
the said Premises or in or to further possession thereof and Lessor may
thereupon enter and take possession of said premises and expel Lessee and all
persons so claiming rights thereto. Provided, however, in the event that any
default described in subparagraph (a)(1) of this section is not curable within
thirty days after the service of a written notice upon Lessee, Lessor shall not
terminate this lease pursuant to said default if Lessee immediately commences
to cure said default and diligently pursues such cure to completion.
(b) Abandonment by Lessee. Even though Lessee has breached the lease
and abandoned the property, this lease shall continue in effect for so long as
Lessor does not terminate Lessee's right to possession, and Lessor may enforce
all its rights and remedies under said Lease, including, but not limited to,
the right to recover the rent as it becomes due under the lease. For purposes of
this section, the acts by Lessor of maintenance, or preservation, or efforts to
relet the property do not constitute a termination of Lessee's right to
possession.
(c) Damages. Damages which Lessor may recover in the event of default
under this lease include the worth, at the time of award, of the amount by
which the unpaid rent for the balance
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<PAGE> 29
of the term after the date of award, or for any shorter period of time
specified in this lease, exceeds the amount of such rental loss for the same
period that the Lessee proves could be reasonably avoided. The remedies
provided by this section are not exclusive and shall be cumulative to all other
rights and remedies possessed by Lessor and nothing contained herein shall be
construed so as to defeat any other rights or remedies to which Lessor may be
entitled.
16. ASSIGNMENT AND SUBLEASES
(a) Assignment. This lease shall not be assigned or sublet without the
written consent of Lessor. Any consent to assignment or sublease shall not be
a waiver of the further rights of Lessor to withhold its consent to any future
assignment or sublease, and will not release Lessee of its obligations
hereunder.
17. QUIET ENJOYMENT
Lessor covenants and agrees with Lessee so long as the Lessee keeps and
performs all of the covenants and conditions by the Lessee to be kept and
performed, Lessee shall have quiet and undisturbed and continued possession,
free from any claims against Lessor and all persons claiming by or through
Lessor; subject only to Lessor's right to enter upon the premises for purposes
of inspection during ordinary business hours at times to be mutually agreed
upon.
18. CUMULATIVE REMEDIES
All of Lessor's remedies under the Lease and as provided by any of the
law or statutes shall be cumulative and assertion of any shall not be a waiver
of any other.
19. NOTICE
All notices, demands and requests required by this lease
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<PAGE> 30
or modifications shall be in writing and be sent;
(1) To the Lessor, at the following address:
Albany Residential Center
c/o Lawrence E. Sherris
Attorney at Law
101 S.W. Main, Suite 1580
Portland, Oregon 97204
(2) To the Lessee, at the following address:
Beaulieu-Draper, Ltd.
c/o Larry H. Draper
3508 Red Cedar Way
Lake Oswego, Oregon 97034
by registered or certified mail, postage prepaid, unless a notification of
change of address has been sent to the party giving the notice by registered or
certified mail prior to the time when such notice is given.
20. MISCELLANEOUS
(a) Legal Purposes. Lessee covenants and agrees that it shall use the
Premises solely for legal purposes.
(b) Law of Oregon. The rights and obligations of the parties under this
lease shall be constructed and determined pursuant to the law of the state of
Oregon.
(c) Entire Agreement. This Agreement is the entire agreement between the
parties. There is no other oral or written agreement between the parties with
regard to this subject matter.
(d) Obligations Due. All obligations of Lessee to Lessor shall be due
at the date specified by this Agreement, including liquidated damages and
interest shall accrue immediately from the date of arrearage at the rate of 12%
per annum.
(e) Time of Essence. It is mutually agreed that time is of the essence
in the performance of all covenants, agreements and conditions to be kept and
performed pursuant to the lease.
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<PAGE> 31
(f) Modifications. Any modifications to this lease agreement shall be
made in writing and assented to by both Lessee and Lessor.
(g) Attorneys' Fees. If Lessee or Lessor shall be required to retain an
attorney to enforce any portion of this agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees from the other as
determined by a court of competent jurisdiction, such reasonable attorneys'
fees to include attorneys' fees upon appeal if necessary.
(h) Non Discrimination. The Lessee covenants and agrees for itself, its
successors and assigns, that, the Lessee and such successors and assigns shall
not discriminate on the basis of race, color, creed, sex, national origin, or
ancestory in the use or occupancy of the premises or any improvements erected
or to be erected thereon or any part thereof.
(i) Number, Gender, Captions. In construing this lease, it is
understood that the Lessor or the Lessee may be more than one person; that if
the context so requires, the singular pronoun shall be taken to mean and
include the plural, the masculine, the feminine and the neuter, and that
generally all grammatical changes shall be made, assumed and implied to make
the provisions hereof apply equally to corporations and to individuals.
DATED this 12 day of July, 1983.
ALBANY RESIDENTIAL CENTER
BEAULIEU-DRAPER, LTD.
By:
By: -------------------------------------
---------------------------- Lessor Title
Larry H. Draper, Secretary
Lessee
Managing
By: Christine Beaulieu By: /s/ Christine Beaulieu, Partner
---------------------------- -------------------------------------
Christine Beaulieu, Lessor Title
Lessee President
RECORDED this day of , 1983.
------ ----------------
<PAGE> 32
DESCRIPTION SHEET
Beginning at a point which is on the North right-of-way line of 16th Avenue in
the City of Albany, Linn County, Oregon, said point being 1899.48 feet North
88(degrees) 51' East, 390.16 feet North 1(degree) 25' 10" West and 70.00 feet
North 89(degrees) 48' 05" West of the Southeast corner of the Abram Hackleman
Donation Land Clam No. 62 in Section 8, Township 11 South, Range 3 West,
Willamette Meridian, Linn County, Oregon; thence along said Northerly line of
16th Avenue, North 89(degrees) 48' 05" West 1.97 feet; thence along said
Northerly line on a 250 foot radius curve to the right, the long chord of which
bears North 65(degrees) 49' 13" West 203.22 feet; thence along said Northerly
line, on a 250 foot radius curve to the left, the long chord of which bears
North 56(degrees) 06' 27" West 123.23 feet; thence North 1(degree) 25' 10" West
189.79 feet; thence North 88(degrees) 34' 50" East 324.73 feet to the Westerly
right-of-way line of Davidson Street; thence along said Westerly line on a 375
foot radius curve to the right, the long chord of which bears South 9(degrees)
40' 05" West 51.20 feet; thence along said Westerly line on a 430 foot radius
curve to the left, the long chord of which bears South 7(degrees) 31' 44" West
90.70 feet; thence along said Westerly line, South 1' 28' 29" West 198.05 feet
and South 22(degrees) 29' 06" West 12.29 feet to the point of beginning.
EXHIBIT "A"
<PAGE> 1
EXHIBIT 10.60
OREGON HOUSING AGENCY
STATE OF OREGON
ELDERLY HOUSING PROGRAM
MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 29 day of July, 1991, between McMinnville
Residential Center Limited Partnership (hereinafter referred to as "Owner"),
and Crossings Corporation (hereinafter referred to as "Agent") and will become
effective only after all parties have signed and dated this Agreement,
(including the Oregon Housing Agency), and such effective date will be not
sooner than July 29, 1991.
In consideration of the terms, conditions and covenants hereinafter set forth,
the Owner and Agent mutually agree as follows:
SECTION 101. DEFINITIONS:
As used in this Agreement the terms below shall have the following definitions
unless the context otherwise requires:
101.1 "Agency" shall mean the Oregon Housing Agency, State of Oregon, as
established under the provisions of ORS Chapter 456, as amended.
101.2 "Development" shall mean the land, improvements, buildings,
appurtenances and equipment thereon of the owner known as McMinnville
Residential Estates, located in the City of McMinnville, County of
Yamhill, State of Oregon. The real property is more particularly
described in the attached Exhibit "A" which by reference are hereby
incorporated in this Agreement.
101.3 "Gross Collections" shall mean all amounts actually collected by the
Agent, as rents, vending and laundry machine income, income from
commercial space, but excluding (i) income derived from interest on
investments, (ii) discounts and dividends on insurance, and (iii)
security deposits.
101.4 "Lease" shall mean the form of the Agency-approved agreement
between the Owner and a Resident under the terms of which said
Resident is entitled to enjoy possession of a dwelling unit.
101.5 "Rent" shall mean that monthly amount which a Resident is obligated
to pay the Owner pursuant to the terms of a Lease.
101.6 "Resident" shall mean a person occupying a dwelling unit in the
Development pursuant to a Lease.
101.7 "Act" shall mean the Housing Finance Act, ORS Chapter 456, as
amended.
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SECTION 201. APPOINTMENT OF AGENT:
The Owner hereby appoints the Agent, and the Agent hereby accepts appointment,
on the terms and conditions hereinafter provided, as exclusive management agent
of the Development and will manage the development in a reasonable and a
prudent business manner as well as perform all specific duties set forth below.
SECTION 301. REGULATION BY THE AGENCY:
The Agent fully understands that the Owner has assumed or is assuming a loan
from the Agency and is required to comply with the Act and rules of the Agency.
The Agent further full understands that the operation of the Development is
subject to a Regulatory Agreement, dated March 22, 1991, between the Owner and
the Agency. The Agent also understands that the Owner is or will be providing
accommodations in the Development to persons of low and moderate income
principally for residential use. In the performance of its duties hereunder,
the Agent agrees to comply with the provisions of the Act, the policies,
procedures, and rules of the Agency, and the Regulatory Agreement and the terms
of this Agreement. The Agent agrees that in the event of a conflict between the
Management Agreement and the Regulatory Agreement, the Regulatory Agreement
shall control.
SECTION 401. CONFER WITH OWNER AND THE AGENCY:
The Agent agrees to keep itself informed on the policies of the Agency and,
notwithstanding the authority given to the Agent in this Agreement, to confer
fully and freely with the Owner and the Agency in the performance of its duties
hereunder.
SECTION 501. MEETING WITH THE OWNER AND AGENT:
The Agent agrees to cause an officer of the Agent to attend meetings with the
Owner and Marketing Agent at any time or times requested by the Owner or the
Agency.
SECTION 601. PERSONNEL OF AGENT:
601.1 Employees of Agent - General. The Agent is approved to act as Agent
based on the experience represented to the Agency of two of its staff
to the Agency, (Richard W. Boehlke and Brett Freshwaters). The Agent
has further represented that these individuals will be directly
involved in the oversight of the day to day operations and accounting
functions of McMinnville Residential Estates. Because the Agency is
giving its approval of the Agent based on the experience of these
individuals, if the Agent causes or experiences a loss of one or more
of these individuals in their positions as initially represented to the
Agency, the Agent shall promptly replace said individual(s) with
qualified individuals acceptable to the Agency. Replacement(s) may not
occur unless the Agency gives its approval in writing. Such approval
shall not be unreasonably withheld.
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Compensation (including fringe benefits) payable to the bookkeeping,
clerical and other managerial personnel, plus all local, state, and
federal taxes and assessments incidental to the employment of such
personnel will be borne solely by the Agent, and will be paid out of
the Agent's fee. See Section 1201.
601.2 Employees of Agent -- On site. The agent shall investigate, hire,
pay, supervise and discharge all Development administrative and
maintenance personnel and all managerial personnel necessary for the
full and efficient performance of its duties under this Agreement,
including the physical presence of a responsible person at such
times as may reasonably be requested by the Agency. Such personnel
shall include but are not limited to:
Number Position Title
1 Full-time cook
1 Part-time cook
1 Full-time cook's helper
1 Part-time cook's helper
2 Dishwashers
1 Full-time housekeeper
1 Part-time housekeeper
1 Activities Director
1 Assistant Manager
1 Manager
No less than one responsible managerial person of the Agent shall
be physically present at the Development not less than 24 hours per
day seven days per week. Two (2) rent-free one (l)-bedroom
apartment(s) may be provided for the on-site manager.
Such personnel shall in every instance be in the Agent's and not in
the Owner's employ. Compensation for the services of such
employees (as evidenced by certified payroll(s)) shall be
considered an operating expense of the Development.
SECTION 701. SERVICES OF AGENT:
701.1 Structure and Warranties. The Agent shall obtain from the Owner a
complete set of plans and specifications as approved by the Agency
and copies of all guarantees and warranties pertinent to
construction, fixtures and equipment. With the aid of this
information and inspection by competent personnel, the Agent shall
thoroughly familiarize itself with the character, location,
construction, layout, plan and operation of the Development and
especially of the electrical, heating, plumbing, air conditioning
and ventilating systems, and all other mechanical equipment.
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701.2 Maintenance and Repairs. The Agent shall cause the buildings,
appurtenances, equipment and grounds of the Development to be
maintained and repaired according to standards acceptable to the
Owner and the Agency.
(i) Special attention will be given to preventive maintenance,
and to the greatest extent feasible, the services of regular
maintenance employees will be used.
(ii) The Agent will contract with qualified independent contractors
for the maintenance and repair of heating, ventilation and
air-conditioning systems and elevators, and for extraordinary
repairs beyond the capability of regular maintenance
employees.
701.3 Preventive Maintenance. The Agent shall develop a preventive
maintenance schedule including, but not limited to, periodic
inspections of the units; residency commencement and termination
check lists; inventory control; common area maintenance; equipment
maintenance; exterior maintenance on a seasonal basis; and painting,
decorating and replacement timetables, as necessary.
701.4 Service Requests of Residents. The Agent shall maintain businesslike
relations with Residents whose service requests shall be received,
considered, and recorded on a systematic, written basis to show the
action taken with respect to each such request. Complaints of a
serious nature and all written complaints shall, after thorough
investigation, be reported to the Owner with appropriate
recommendations.
The Agent shall make provisions for receipt of emergency calls from
Residents on a 24-hour basis.
701.5 Inspection of Units. As part of a continuing program to secure full
performance by the Residents of all obligations and maintenance for
which they are responsible, the Agent shall make an annual inspection
of all dwelling units and report its findings in writing to the Owner
and the Agency.
701.6 Property Insurance. In accordance with 701.11(i), the Agent shall
obtain recommendations for, and cause to be placed in force, all
forms of insurance needed to adequately protect the Owner and the
Development (or as required by law), including, where appropriate,
comprehensive general liability insurance, boiler insurance, fire and
extended coverage insurance, burglary and theft insurance and
business income insurance. All of the various types of insurance
coverage required for the benefit of the Agency, Owner and the
Development shall be placed with such companies, in such amounts, and
with such beneficial interest appearing therein as shall be
acceptable to the Owner and the Agency.
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The Agent shall promptly investigate and make a full written report
to the Owner and the Agency within five (5) working days of
receiving knowledge of any accident or claim for damage relating to
the ownership, operation and maintenance of the Development,
including any damage or destruction of the Development and the
estimated cost of repair, and shall cooperate and make any and all
reports required by any insurance company in connection therewith.
701.7 Development Automobile Insurance. The Agent shall obtain automobile
liability coverage on the project vehicle(s). This will be a
project operating cost. Minimum coverage shall be $500,000 combined
single limit with the owner named as an additional insured party.
Agent shall only allow persons properly licensed and insured to
operate the vehicle(s).
701.8 Notice of Authority. In addition to its authority to manage the
premises as specified herein, the Agent is authorized by the Owner
to accept service of process and to receive and give receipt for
notices and demands. A notice containing such information shall be
posted in a conspicuous place on the premises.
701.9 Review of Operations. The Agent shall permit the Agency to conduct
on-site evaluations of the performance of any or all management
services which the Agent has agreed to provide as required by this
Agreement, and the Management Plan, if any. An authorized
representative of the Agent shall be available during on-site
evaluations. The Agency will render to the Owner and Agent written
reports based on such evaluations. The Agent shall correct any
deficiencies noted in these evaluations within 30 days of the
receipt of the report from the Agency. In the event such correction
cannot be made within 30 days, the Agent shall provide the Agency
with written plan for such correction, including a timetable of
proposed actions.
701.10 Collections and Delinquencies. The Agent shall collect and deposit
in the account established pursuant to Section 1001 hereof all rents
and other charges due from Residents and all rents or other payments
due the Owner from lessees of other nondwelling areas of the
Development. The Agent agrees, and the Owner hereby authorizes the
Agent, to request, demand, collect, receive, and give receipts for
any and all charges or rents which may at any time be or become
payable to Owner. Rents and other charges shall not be accepted in
cash by the Agent unless a receipt is given to the payee and a copy
is retained in the Development records. The Agent agrees to take
such action, including legal action, with respect to delinquencies
in payments due the Owner as the Owner may from time to time
authorize. The Agent shall furnish the Owner with an itemized list
of all Residents with delinquent accounts as of the tenth (10th) day
of each month on or before the fifteenth (15th) day of the same
month.
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701.11 Payments and Expenses. From the funds collected and deposited in
the account established pursuant to Section 1001 hereof, the Agent
shall cause to be disbursed regularly and punctually in accordance
with the provisions of the Regulatory Agreement the following:
(i) All of the real estate tax and insurance premium escrow
payments required of the Owner, which payments shall be
deemed to be part of the "operating expenses" of the
Development as the same are defined in the Regulatory
Agreement, and
(ii) all of the principal and interest required to be paid to
the Agency by the Trust Deed Note and Trust Deed, and
(iii) all remaining operating expenses of the Development
including administrative, food service, housekeeping,
maintenance and utility expenses as set forth in Schedule
D of Agency Form 102 (Feasibility Analysis), and
(iv) all amounts required to be deposited with the Agency or
its designated depository in the Replacement Cost Reserve
Account, as set forth in the Regulatory Agreement, and
(v) the fees of the Development's Management Agreement
including the fee of the Agent as provided in Section
1201.
With the exception of payments provided in this section and payments for
utilities services, the Agent shall make no disbursements in excess of $1,000
unless specifically authorized by the Owner and approved by the Agency; provided
that emergency repairs, involving manifest danger to life and property, or
immediately necessary for the preservation and safety of the Development, or for
the safety of the Residents, or required to avoid the suspension of any
necessary services to the Development, may be made by the Agent without regard
to the cost limitation imposed by this Section with the understanding that the
Agent will, if at all possible, confer immediately with the Owner regarding
every such expenditure, and will submit the request for the required Agency
approval promptly following the emergency. The Agent shall not incur
liabilities to Owner (direct or contingent) which, in the aggregate, will exceed
at any time $2,500 or which require payment more than one year from the creation
thereof, unless specifically authorized by the Owner and approved by the Agency.
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701.12 Governmental Orders. The Agent shall take such action as may be
necessary to comply promptly with any and all orders or
requirements affecting the Development placed thereon by any
federal, state, county or municipal authority having jurisdiction
thereover, and orders of the Board of Fire Underwriters or other
similar bodies. The Agent shall not take any action under this
Section unless the Agency so directs so long as the Owner is
contesting or has affirmed its intention to contest any such order
or requirement and promptly institutes proceedings contesting any
such order or requirement. The Agent shall promptly, and in no
event later than 48 hours from the time of their receipt, notify the
Owner and the Agency in writing of all such orders and notices of
requirements.
701.13 Utility Service and Purchases. Subject to the approval of the Owner
and in accordance with the rules of the Agency, the Agent shall make
contracts for garbage and trash removal, fuel oil, extermination,
snow removal, elevator maintenance and other necessary services.
Further, the Agent shall place orders for such equipment, tools,
appliances, food, materials and supplies as are necessary to operate,
maintain and repair the Development properly. When taking bids or
issuing purchase orders, the Agent shall act at all times in the best
interest of the Owner and shall be under duty to secure for and
credit to the Owner any discounts, commissions or rebates obtainable
as a result of such purchases.
701.14 Records and Reports
(i) The Agent shall establish and maintain a comprehensive system
of records, books and accounts in a manner satisfactory to the
Owner and the Agency. All records, books and accounts will be
subject to examination at reasonable hours by any authorized
representative of the Owner or the Agency.
(ii) With respect to each fiscal year ending during the term
of this Agreement, the Agent will have an annual financial
report prepared by an independent Certified Public Accountant
acceptable to the Agency based upon the preparer's examination
of the books and records of the Owner and the Agent. The
report will be prepared in accordance with the Agency's
requirements, an opinion will be rendered by the preparer and
the Agent will complete a representation letter. The Agent
will submit all these to the Owner within sixty (60) days after
the end of the fiscal year, for the Owner's further
certification and submission to the Agency. Compensation for
the preparer's services will be considered an operating expense
of the Development.
(iii) The Agent will prepare a semi-annual income statement
which compares actual and budgeted income and expenses for the
six (6) month period and for the "year to date", and will
submit each statement to the Owner and the Agency within
fifteen (15) days after the end of each six (6) mouth period
ending June and December.
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(iv) The Agent will furnish such information (including occupancy
reports) as may be requested by the Owner or the Agency from
time to time with respect to the financial, physical or
operational condition of the Development.
(v) By the fifteenth (15th) day of each month, the Agent will
furnish the Owner with an attorney list of all rent
delinquencies as of the tenth (10th) day of the same month.
The list shall include amounts due on leases of other
non-dwelling areas of the development
(vi) By the twentieth (20th) of each month, the Agent will furnish
the Owner with a statement of receipts and disbursements
during the previous month, and with a schedule of accounts
equivalent and payable, and reconciled bank statements for the
Account as of the end of the previous month.
(vii) The Agent shall Prepare, execute and file all forms, reports
and returns required by law in connection with the employment
of personnel, including unemployment insurance, workers'
compensation insurance, disability benefits, social security
act other similar insurance, benefits or taxes now in effect
or hereafter imposed.
701.15 Operating Budget. At least forty-five (45) days before the beginning
of each new fiscal year for the Development, the Agent shall prepare
and submit to the Owner and the Agency an operating budget, ln such
form as may be prescribed by the Agency, setting forth an itemized
statement of the anticipated receipts and disbursements for the
Development.
701.16 Marketing Duties. The Agent shall immediately assume responsibility
for all functions and services of the initial and/or continued rental
of the units. All leases of other non-dwelling areas of the Development
as well as changes, alterations, assignments, revisions, and renewals
of such leases are subject to written review and approval of the Agency
and Owner.
701.17 Compliance of Residents.
(i) The Agent shall at all times during the term of this Agreement
operate and maintain the Development according to the highest
standards achievable. The Agent shall secure full compliance
by the Residents with the terms and conditions of their
respective Leases and Rules of the Oregon Housing Agency. The
Agent shall also secure full compliance by lessees and users
of other non-dwelling areas of the Development with the terms
and conditions of their respective leases and use agreements.
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(ii) Voluntary compliance shall be emphasized, and the Agent shall
counsel residents and make referrals to social service
agencies in cases of financial hardship or under other
circumstances deemed appropriate by the Agent, so that
involuntary termination of tenancies may be avoided to the
maximum extent consistent with sound management of the
Development. The Agent will not, however, tolerate willful
evasion of payment of rent.
(iii) The Agent may lawfully terminate any tenancy when, in the
Agent's judgment, sufficient cause occurs under the terms of
the Resident's Lease or the lease of other non-dwelling areas
of the Development. Statements explaining evictions shall be
filed promptly with the Owner and the Agency.
(iv) The Agent is authorized to consult with legal counsel
designated by the Owner to bring actions for eviction and to
execute notices to vacate and to commence appropriate
judicial proceedings; provided, however, that the Agent shall
keep the Owner informed of such actions and shall follow such
instructions as the Owner has prescribed. Subject to the
Owner's approval, costs incurred in connection with such
actions shall be considered as operating expenses.
701.18 Certification of Residents. The Agent shall require residents to
certify that they are at least 58 years of age at the time they move
into the Development. Agent shall also require residents to certify
their gross income at the time they apply for a unit in the
Development. All resident's household gross income must be equal to or
below the income limit that is set by the Agency unless a waiver is
granted for a particular resident in compliance with the Act. Twenty
(20) percent of the Development units will be occupied at all times by,
or held for, occupancy by low-income residents as defined by the U.S.
Department of Housing and Urban Development.
701.19 Services to Residents. The Agent will be responsible for providing
the following services to residents (list all below):
- Three meals daily provided to the Congregate and Residential
Care Facility residents in separate dining rooms; project
van to take residents to doctors, shopping, and social
activities; exercise and craft classes, and a barber and
beauty shop will be located in the project. Housekeeping and
linen service provided to the Congregate and Residential Care
Facility residents. Health care provided to the Residential
Care Facility residents as authorized by the RCF license.
SECTION 801. OTHER ACTS:
The Agent shall perform such other acts and deeds requested by the Owner, or
the Agency, as are reasonable, necessary and proper in the discharge of Agent's
duties under this Agreement.
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SECTION 901. LIABILITY OF AGENT:
Everything done by the Agent under the provisions of this Agreement shall be
done as Agent of the Owner, and all obligations or expenses incurred thereunder
shall be for the account of and on behalf of the Owner. Any payments to be
made by the Agent hereunder shall be made out of such sums as are available
in the Operating Receipts and Expense Account established pursuant to Section
1001-1. The Agent shall not be obliged to make any advance to, or for the
account of, the Owner or to pay any sum, except out of funds held or provided
as aforesaid, nor shall the Agent be obliged to incur any liability or
obligation for the account of the Owner without assurance that the necessary
funds for the discharge thereof will be provided by the Owner.
SECTION 1001. BANK ACCOUNTS:
1001.1 Operating Receipts and Expense Account. The Agent shall establish
and maintain, in a depository whose deposits are insured by the
Federal Deposit Insurance Corporation (FDIC), in accordance with the
provisions of the Regulatory Agreement, a separate depository account
as Agent of the Owner for the deposit of the monies of the Owner, with
authority to draw thereon for any payments to be made by the Agent to
discharge any liabilities or obligations of the Owner incurred in
accordance with this Agreement. This account shall be carried in the
Agent's name and shall be designated of record as "McMinnville
Residential Estates Operating Receipts and Expense Client Trust
Account." The Agent shall also establish such other special
depository accounts as may be required by the Owner or the Agency.
Any and all interest which may accrue on deposits contained in any
accounts established in accordance with this paragraph shall be used
by the Agent to discharge any liabilities or obligations of the Owner
in the same manner as the Agent uses other monies of the Owner.
1001.2 Security Deposit Account. The Agent shall collect, deposit and
disburse Residents' security deposits in accordance with the terms of
the respective Leases. Residents' security deposits shall be
deposited by the Agent in an interest-bearing account, separate from
all other accounts and funds, with a depository whose deposits are
insured by the FDIC. The Agent shall be responsible for any loss
incurred by the Development for its failure to comply with refunding
of security deposits to Residents as required in the Regulatory
Agreement. This account shall be carried in the Agent's name and
shall be designated of record as "McMinnville Residential Estates
Conditionally Refundable Security Deposit Client Trust Account". The
Agent shall cause the amount of the security deposit account to equal
or exceed at all times the aggregate of all outstanding obligations by
the Owner with respect to security deposits.
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SECTION 1101. OFFICE IN DEVELOPMENT:
The Owner shall furnish the Resident Manager with suitable office space and
office furniture on the site of the Development and with electricity, heat,
water and janitorial service therein, as prescribed by the Agency. Office
expenses, including but not limited to telephone, postage, stationery, office
equipment and supplies shall be considered an operating expense of the
Development.
SECTION 1201. COMPENSATION OF AGENT:
The sole compensation which the Agent shall be entitled to receive for all
services performed under this Agreement shall be a fee of five percent (5%) of
Gross Collections as defined in Section 101.3. Such fees shall be computed and
paid monthly based upon the Gross Collections for the preceding month.
All supervisory, bookkeeping-accounting and clerical expenses (including fringe
benefits), along with all of the Agent's overhead expenses will be borne by the
Agent out of its own funds and will not be treated as an operating expense of
the Development.
SECTION 1301. NONDISCRIMINATION:
In the performance of its obligations under this Agreement, the Agent will
comply with the provisions of any federal, state or local law prohibiting
discrimination in housing on the grounds of race, color, sex, religion or
national origin, as stated in ORS 659.
This Agreement may be terminated or suspended, in whole or in part, by the
Owner or the Agency upon the basis of a finding by the Owner or the Agency that
the Agent has not complied with nondiscrimination provisions.
SECTION 1401. EXPIRATION AND TERMINATION:
1401.1 Expiration. Unless sooner terminated pursuant to Sections 1401.2,
1401.3, 1401.4, 1401.5 or 1401.6 of this Agreement, this Agreement
shall be in effect from the date of execution hereof until *________.
Unless a written notice to terminate this Agreement is submitted to
the Agency at least 30 days prior to the expiration date of this
Agreement, this Agreement will continue on a month to month basis
until termination by either party as provided in Section 1401.4 below.
Execution shall not be deemed complete unless and until this Agreement
has been approved in writing by the Agency.
*(To be determined by Owner and Agent at execution of Agreement.)
1401.2 Termination by Mutual Consent. This Agreement may be terminated by
the mutual written consent of the Owner and the Agent only with the
prior written consent of the Agency. Owner and Agent shall submit
their written request to terminate this Agreement to the Agency at
least 30 days prior to the date specified for termination. A suitable
Management Agent must be submitted and approved by the Agency prior to
the termination of this agreement.
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1401.3 Termination by Owner for Cause. In the event that the Agent shall
fail to perform any of its duties hereunder or comply with any of the
provisions hereof, the Owner shall notify Agent and the Agency of
Owner's intent to terminate this Agreement by delivering to Agent
written notice to remedy such default. If such default is not
remedied within 30 days from the date of notice to Agent, Owner may
terminate this Agreement. Owner must notify the Agency in advance of
his/her intent to terminate this Agreement. A suitable Management
Agent must be submitted and approved by the Agency prior to
termination of this Agreement.
1401.4 Termination by the Owner/Agent. This agreement may be terminated by
the Owner/Agent only with the prior written notice of the Agency. The
Owner/Agent shall submit his or her written notice to terminate this
Agreement to the Agency with a coy to the Owner/Agent at least 30 days
prior to the date specified for termination. Unless termination is
for cause or by the Agency as provided for in Section 1401.6, the
minimum term of this agreement shall be *________. The Owner/Agent
may not terminate this Agreement under this Section unless the minimum
term has expired. The Agency will only give its approval of such
termination if a suitable Management Agent has been submitted to the
Agency and approved prior to the date listed in the termination
notice.
*(To be determined by Owner and Agent at execution of Agreement.)
1401.5 Termination Because of Bankruptcy. In the event that Owner or the
Agent shall become insolvent, however defined; shall be dissolved;
shall commit an act of bankruptcy under the United States Bankruptcy
Act (as now or hereafter amended); shall file or have filed against
it, voluntarily or involuntarily, a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the United
States Bankruptcy Act (as now or hereafter amended); shall make an
assignment for the benefit of creditors; shall procure, permit or
suffer, voluntarily or involuntarily, the appointment of a receiver or
trustee to take charge of any of the mortgaged property or any other
properties owned by Owner or the Agent, or shall have initiated
against either the Owner or the Agent, voluntarily or involuntary, any
act, process or proceeding under any insolvency law or other statute
or law providing for the modification or adjustment of the rights of
creditors, either party hereto may immediately terminate this
Agreement without notice to the other party provided that the Agency
has given its written consent to such termination and further provided
that prompt advice of such action be given to the other party.
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1401.6 Termination by the Agency. It is expressly understood and agreed by
and between and Owner and the Agent that the Agency shall have the
right to terminate this Agreement, with cause, on ten (10) days'
written notice to the Owner and the Agent; except that in the event of
a default by the Owner under its Trust Deed to the Agency or the
Regulatory Agreement, the Agency shall have the right to terminate
this Agreement immediately without notice, but prompt advice of such
action shall be given to the Owner and the Agent. It is further
understood and agreed that no liability shall attach to the Agency in
the event of termination of this Agreement pursuant to this Section.
1401.7 Accounting Upon Terminating. Within ten (10) days after the
termination of this Agreement, the Owner and Agent shall account to
each other with respect to all matters outstanding as of the date of
termination, the Owner shall furnish the Agent security against any
outstanding obligations or liabilities which the Agent may have
incurred hereunder, and the Agent shall turn over to the Owner all
records, documents or other instruments, waiting lists and any and all
other files and papers in its possession pertaining to the Agent's
performance under this Agreement.
SECTION 1501. ASSIGNMENTS:
This Agreement shall inure to the benefit of and constitute a binding obligation
upon the Owner and Agent, and their respective successor and assigns, provided
that the Agent cannot assign this Agreement or any of its duties hereunder
without the prior written consent of the Owner and the Agency.
SECTION 1601. AMENDMENT:
This Agreement constitutes the entire agreement between the Owner and the
Agent, and no amendment or modification thereof shall be valid and enforceable
except by supplemental agreement in writing, executed, and approved in the same
manner as this Agreement.
SECTION 1701. EXECUTION OF COUNTERPARTS:
For the convenience of the parties, this Agreement has been executed in
counterpart copies, which are in all respects similar and each of which shall
be deemed to be complete in itself so that any one may be introduced in
evidence or used for any other purpose without the production of the other
counterparts.
SECTION 1801. MISCELLANEOUS:
Wherever used in this Agreement, the singular number shall include the plural,
and the plural shall include the singular; and the use of any gender shall
apply to all genders. The captions and the headings of the sections of this
Agreement are for convenience only and are not to be used to interpret or
define the provisions hereof.
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SECTION 1901. WAIVER
No waiver of a breach of any of the agreements or provisions contained in this
Agreement shall be construed to be a waiver of any subsequent breach of the
same or of any other provisions of this Agreement.
SECTION 2001. SEVERABILITY:
If any clause, sentence, section, paragraph, provision or part of this
Agreement is judged to be invalid or unenforceable, such adjudication shall not
affect or invalidate the remainder of this Agreement, it being understood and
agreed that such invalid or unenforceable clause, sentence, section, paragraph,
provision or part is and shall be severable from the remainder of this
Agreement.
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SECTION 2101. NOTICE:
Whenever any notice is required to be given herein, Notice shall be deemed to
have been given when sent by certified mail to the parties to this Agreement at
the following addresses:
OWNER: McMINNVILLE RESIDENTIAL CENTER AGENT: CROSSINGS
LIMITED PARTNERSHIP INTERNATIONAL CORPORATION
c/o Crossings Corporation 4303 Ruston Way
4303 Ruston Way Tacoma, WA 98402
Tacoma, WA 98402
AGENCY: Oregon Housing Agency
1600 State Street, Suite 100
Salem, Oregon 97310
SECTION 2201. EXECUTION OF AGREEMENT:
This Agreement is not completed until it has been approved in writing by the
Agency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
OWNER: McMINNVILLE RESIDENTIAL CENTER AGENT: CROSSINGS INTERNATIONAL
LIMITED PARTNERSHIP CORPORATION,
By: CROSSINGS INTERNATIONAL a Washington corporation
CORPORATION, General Partner
By: /s/ Richard ???? By: /s/ Richard ????
---------------------------------- ---------------------------
Its: President President
---------------------------------- ---------------------------
Date: July 29, 1991 July 29, 1991
---------------------------------- ---------------------------
The Oregon Housing Agency, State of Oregon, hereby approves and consents to the
foregoing Management Agreement and Agent appointed therein.
Date: By:
------------------------------------- ------------------------------
Manager,
Asset & Property Management
McMinnville Residential Center Limited Partnership
-15-
<PAGE> 1
EXHIBIT 10.61
CONSENT AGREEMENT
THIS AGREEMENT dated as of ___________________, 1995, is made by and
between LEGACY HEALTH SYSTEM, a ________________________, formerly known as
HEALTHLINK, an Oregon nonprofit charitable corporation ("Landlord"), CROSSINGS
INTERNATIONAL CORPORATION, a Washington corporation ("Assignor"), and NATIONWIDE
HEALTH PROPERTIES, INC., a Maryland corporation ("Assignee"), with reference to
the following facts:
A. Landlord and Assignor have entered into a Ground Lease, dated
March 6, 1989 (the "Lease"), pursuant to which Landlord leased to Assignor
certain real property in the County of Multnomah, Oregon, legally described in
Exhibit A attached hereto (the "Property"). Capitalized terms used herein and
not otherwise defined herein are used herein as defined in the Lease.
B. Far West Federal Bank, S.B., a United States corporation ("Far
West Bank") and Assignor have entered into a Construction Loan Agreement, dated
March 31, 1989, pursuant to which Far West Bank made a loan to Assignor in the
original principal sum of $3,115,200.00 (the "Far West Loan"). As security for
the Far West Loan, Assignor executed and delivered to Far West Bank a
Commercial Trust Deed, dated March 31, 1989 (the "Trust Deed"), recorded on
April 4, 1989, under number book 2191, at page 289, in the real property
records of Multnomah County, State of Oregon, affecting Assignor's leasehold
interest in the Property.
C. As a condition of the Far West Loan and as additional security
therefor, Landlord joined Assignor in the execution of the Trust Deed and
therein granted to Far West Bank a security interest in Landlord's fee simple
interest in the Property.
D. Capital Consultants, Inc., as agent for certain lenders ("Capital
Consultants"), made a loan to Assignor on or about March 28, 1988, in the
original principal sum of $400,000.00. In connection therewith, Assignor
executed and delivered to Capital Consultants a promissory note, dated March 28,
1988, in favor of Capital Consultants, which was amended and restated by: (i)
that certain Promissory Note dated March 31, 1989; (ii) that certain Agreement
Amending Promissory Note, dated August 13, 1990; and (iii) that certain Third
Amendment to Loan Documents, dated July 1, 1992, the original principal sum of
which was amended to $600,000.00 (the "Capital Consultants' Loan").
1
<PAGE> 2
E. To secure payment of the Capital Consultants' Loan, Assignor
executed and delivered to Capital Consultants a Deed of Trust, Assignment of
Rents and Security Agreement, dated March 31, 1989, recorded on April 4, 1989,
in Book 2191, at Page 333, in the real property records of Multnomah County,
Oregon, affecting Assignor's leasehold interest in the Property.
F. Assignor and Assignee now wish to enter into an agreement pursuant
to which Assignee will purchase from Assignor all Assignor's interest in the
Property and the improvements thereon, and Assignee will simultaneously sublease
the Property and the improvements thereon to New Crossings Corporation,
Washington corporation ("New Crossings") (the "Transaction"). In connection with
the Transaction, Assignor intends to use a portion of the proceeds from the
Transaction to prepay in full the Far West Loan and the Capital Consultants'
Loan.
G. As of the close of this transaction, or shortly thereafter,
assignor will be a wholly owned subsidiary of New Crossings.
H. Assignor has now requested that Landlord enter into this Agreement
to evidence Landlord's consent to Assignor's assignment to Assignee of
Assignor's leasehold interest in the Property, Assignee's assumption of
Assignor's obligations under the Lease, and Assignee's simultaneous sublease of
the leasehold interest to New Crossings, all upon the terms and conditions of
this Agreement.
I. Landlord acknowledges that it will benefit from the prepayment of
the Far West Loan and the Capital Consultants' Loan and therefore is willing to
grant the request of Assignor as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Consent to Assignment and Assumption. Landlord hereby
acknowledges notice of, and hereby consents to the assignment by Assignor to
Assignee of all of Assignor's right, title and interest in, to and under, the
Lease, and to the assumption by Assignee of all of Assignor's obligations and
liabilities under the Lease (the "Assignment").
2. Consent to Sublease of Property. Landlord hereby acknowledges
notice of, and hereby consents to the sublease by Assignee to New Crossings of
all of Assignee's right, title and interest in, to and under, the Lease, which
sublease shall occur simultaneously with the Assignment.
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<PAGE> 3
3. Release of Liability. Landlord hereby releases the Assignor from
all duties, obligations and liabilities arising under or by reason of the Lease
on and after the date of the Assignment.
4. Payment of Deferred Rent. In satisfaction of Assignor's
obligations under, and in accordance with the terms of, Section 3.04 of the
Lease, Assignor agrees to pay Landlord on the date of the Assignment, the unpaid
balance of Deferred Rent A and Deferred Rent B as of the date of the Assignment.
As of November 30, 1995, Deferred Rent in the amount of $89,203.71 was due and
owing Landlord. The per diem Deferred Rent is $23.83. At the closing of the
transaction by and between Assignor and Assignee, Assignor shall pay Landlord
the total unpaid balance of Deferred Rent A and Deferred Rent B.
5. Amendment of Lease. Upon the execution of this Agreement, the
parties hereto agree to enter into an amendment of the Lease, substantially in
the form of Exhibit B (the "Lease Amendment"), which shall be effective upon the
Assignment and which, among other things, amends the Lease so that as of the
date of the Assignment, rent will no longer be deferred.
6. Waiver of Right of First Refusal. Landlord hereby unconditionally
waives any and all rights of first refusal it may have, including without
limitation the right of first refusal granted in Section 22 of the Lease,
specifically relating to the sale of Assignor's interest in the Property and the
improvements thereon to Assignee. Landlord's waiver of its right of first
refusal with respect to the transaction between Assignor and Assignee shall in
no way be deemed to be a waiver of its right of first refusal granted in Section
22 of the Lease with respect to any subsequent transaction.
7. Successors and Assigns. This Agreement shall inure to the benefit
of and shall be binding upon the parties and their respective successors and
assigns, but no party may assign or delegate any of its rights or obligations
under this Agreement without the prior written consent of the other party.
8. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington.
9. Entire Agreement; Amendment. This Agreement and the Lease
Amendment constitute the entire agreement and supersedes all prior agreements
and understandings, written or oral, between the parties, with respect to their
subject matter. This Agreement may be amended only by a written instrument
signed by all parties hereto.
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10. Counterparts. This Agreement may be signed in several
counterparts, each of which shall be an original, but all of which together
shall constitute the same instrument.
11. Captions. The captions in this Agreement are for convenience only
and shall not affect the meaning or interpretation of this Agreement.
12. Memorandum of Lease. Landlord and Assignee shall, promptly upon
the request of either, enter into a short form memorandum of the Lease, in form
suitable for recording under the laws of the state of Oregon, in which reference
to the Lease shall be made. The party requesting such recordation shall pay all
costs and expenses of preparing and recording such memorandum of the Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
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<PAGE> 5
LEGACY HEALTH SYSTEM, a
___________________, formerly known
as HEALTHLINK, an Oregon nonprofit
charitable corporation
By ________________________________
Its ____________________________
STATE OF OREGON )
) ss.
COUNTY OF _________ )
This document was acknowledged before me on _____________________, 1995,
by ___________________________ as _______________________ of LEGACY HEALTH
SYSTEM.
___________________________________________
Notary Public for the State of Oregon.
(SEAL) My Commission expires ____________________.
5
<PAGE> 6
CROSSINGS INTERNATIONAL
CORPORATION, a Washington
corporation
By ________________________________
Its ____________________________
STATE OF WASHINGTON )
) ss.
COUNTY OF _________ )
This document was acknowledged before me on _____________________, 1995,
by ___________________________ as _______________________ of CROSSINGS
INTERNATIONAL CORPORATION.
___________________________________________
Notary Public for the State of Washington.
(SEAL) My Commission expires ____________________.
6
<PAGE> 7
NATIONWIDE HEALTH PROPERTIES, INC.
a Maryland corporation
By /s/ T. Andrew Stokes
--------------------------------
Its Vice President
----------------------------
STATE OF __________ )
) ss.
COUNTY OF _________ )
This document was acknowledged before me on _____________________, 1995,
by ___________________________ as _______________________ of NATIONWIDE HEALTH
PROPERTIES, INC.
___________________________________________
Notary Public for the State of ___________.
(SEAL) My Commission expires ____________________.
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<PAGE> 8
STATE OF CALIFORNIA )
) ss.
COUNTY OF ORANGE )
On December 15, 1995, before me, the undersigned personally appeared T.
ANDREW STOKES, personally known to me - OR - ___ proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
/s/ Linn Pearce
---------------------------
Signature of Notary
[SEAL LINN PEARCE
COMM. #1007450
Notary Public - California
ORANGE COUNTY
My Comm. Expires OCT 24, 1997]
<PAGE> 9
AFTER RECORDING RETURN TO:
O'Melveny & Myers
610 Newport Center Drive, Suite 1700
Newport Beach, CA 92660
Attention: Tracy D. Johnson, Esq.
(614,055-78)
8
<PAGE> 1
EXHIBIT 10.63
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 3rd day of
July, 1996, by and between THOMAS E. KOMULA, an individual resident of Wisconsin
(the "Executive"), and ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS, the Company and the Executive each desire to enter into this
Agreement pursuant to which the Executive will be employed by the Company on
the terms and conditions hereinafter set forth, and to make certain other
agreements; and
WHEREAS, the covenants and agreements of the Company and the Executive
herein are made as an inducement to the Executive and the Company, respectively.
NOW THEREFORE, in consideration of the premises and of the promises and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, do hereby agree as follows:
SECTION 1. EMPLOYMENT; EFFECTIVE DATE.
Subject to the terms and conditions hereof, the Company hereby agrees to
employ the Executive, and the Executive hereby accepts such employment,
commencing as of July 8, 1996 (hereinafter referred to as the "Effective Time").
SECTION 2. POSITION.
2.1. Title. The Executive shall serve as an executive officer of the
Company with the title of Senior Vice President and, as such, the Executive
shall report directly to the President of the Company. The parties acknowledge
that it is anticipated that, at a mutually agreed upon time subsequent to the
Effective Time, Executive also will be appointed to the position of Chief
Financial Officer of the Company.
2.2. Responsibilities. The Executive's responsibilities shall be as
directed by the President of the Company. The Executive agrees to devote his
full business time during normal business hours to the business and affairs of
the Company (except as otherwise provided herein) and to use his best efforts to
promote the interests of the Company and to perform faithfully and efficiently
the responsibilities assigned to him in accordance with the terms of this
Agreement, to the extent necessary to discharge such responsibilities. This
shall not preclude the Executive from (i) performing services on civic or
charitable boards or committees not significantly
<PAGE> 2
interfering with the performance of his responsibilities under this Agreement,
and (ii) taking periods of vacation and sick leave to which the Executive is
entitled.
SECTION 3. TERM.
3.1. Term. The term of employment of the Executive (the "Term")
hereunder shall commence on the Effective Time and shall continue until the
earlier of: (a) the first anniversary date of the Effective Time; or (c) the
occurrence of any of the following events:
(i) the death or disability of the Executive (disability meaning a
physical illness or incapacity that prevents the Executive from
performing the substantial and material duties of his then current
position of employment with the Company; provided, however, that a
disability shall be considered to exist only if the Executive is
prevented for a period of three (3) consecutive months following the date
such condition commenced and at the end of such three (3) month period he
remained so prevented, or if, prior to the expiration of such three (3)
month period, the Executive's attending physician provides the Company
with a written prognosis that the illness, injury or other incapacity
that results in the Executive's current disabled condition may be
reasonably expected to prevent the Executive from performing all of the
substantial and material duties of his then current position of
employment with the Company for a period of at least six (6) consecutive
months);
(ii) the mutual written agreement of the parties hereto to terminate the
Executive's employment hereunder;
(iii) the Company's termination of the Executive's employment hereunder
for "cause." For the purposes of this Agreement, "cause" for termination
of the Executive's employment shall exist (A) if the Executive is
convicted of, or pleads guilty to, any act of fraud, misappropriation or
embezzlement, or any felony; (B) if the Executive has engaged in conduct
or activities materially damaging to the Company, monetarily or otherwise
(it being understood, however, that neither conduct nor activities
pursuant to the Executive's exercise of his good faith business judgment
nor unintentional physical damage to any property of the Company by the
Executive shall be a ground for such a determination by the Company); or
(C) if the Executive has willfully and continuously failed to
substantially perform his duties hereunder (other than any such failure
resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the Executive
that specifically identifies the manner in which the Company believes
that the Executive has not substantially performed those duties, and the
Executive has failed to resume substantial performance of such duties on
a continuous basis within fourteen (14) days after receiving such demand.
Termination for cause shall be made only upon vote of not less than a
majority of the directors then in office, after reasonable notice to the
Executive and an opportunity for the Executive; together with counsel, to
be heard before a duly called meeting of the Board; or
(iv) the Executive's termination of his employment with the Company for
"good reason" upon reasonable notice to the Company. For purposes of
this Agreement, "good reason"
<PAGE> 3
shall exist if the Company materially fails to comply with any of the
provisions of this Agreement, other than isolated, insubstantial or
inadvertent failures not occurring in bad faith and which are remedied by
the Company promptly after receipt of notice thereof given by the
Executive.
The failure to set forth any fact or circumstance in a notice of termination
hereunder shall not constitute a waiver of the right to assert such fact or
circumstance by the party giving notice. The Term hereof, and any renewal term,
shall be automatically renewed for an additional one (1) year period unless
either the Executive or the Company gives notice to the other party that it does
not wish to renew this Agreement at least ninety (90) days prior to the
expiration of such Term or renewal term, as the case may be.
3.2. Payments Upon Termination. If the Executive's employment is
terminated by the Company for cause or by the Executive for any reason other
than "good reason", the Company shall pay the Executive the Base Salary (as
hereinafter defined) through the effective date of termination at the rate in
effect at the time a notice of termination is given. The Company shall have no
further obligations to the Executive under this Agreement, subject to the rights
and benefits the Executive may have under employee benefits plans and programs
of the Company in existence as of the effective date of such termination, if
any, which shall be determined in accordance therewith. If the Executive's
employment is terminated by the Company for any reason other than for cause or
by the Executive for "good reason", the Company shall continue to pay the
Executive the Base Salary at the rate in effect at the time a notice of
termination is given, together with any applicable bonuses and rights and
benefits the Executive may have under employee benefits plans and programs of
the Company in existence as of the date of such termination for six months after
such termination (such period, as applicable, the "Extended Period"); provided,
however, such payments of Base Salary and provision of bonuses, rights and
benefits hereunder during the Extended Period shall not be due and payable by
the Company to the Executive if the Executive (i) shall violate the provisions
of Section 5 hereof; or (ii) during the Extended Period shall engage in or
render any services to or be employed by any Competing Business (as hereinafter
defined) in the Area (as hereinafter defined) in the capacity of officer,
managerial or executive employee, director, consultant or shareholder (other
than as the owner of less than one (1%) percent of the shares of a
publicly-owned corporation whose shares are traded on a national securities
exchange or in the NASDAQ National Market System).
SECTION 4. COMPENSATION.
4.1. Base Salary. For the Term of his employment hereunder, the
Executive shall be paid a salary (the "Base Salary") at the annual rate of One
Hundred Seventy Thousand Dollars ($170,000), payable in equal installments in
accordance with the payroll payment practices from time to time adopted by the
Company, subject to required withholding provisions. The Executive's Base
Salary shall be reviewed annually by the Board of Directors of the Company, a
committee thereof or the President, but shall in no event be reduced to less
than the Executive's initial Base Salary as provided above without the consent
of the Employee.
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<PAGE> 4
4.2. Incentive Bonuses. As additional compensation hereunder, the
Company may, in the sole discretion of the Board of Directors, pay the Executive
an annual bonus (the "Annual Bonus") for each fiscal year during the term of the
Executive's employment hereunder. Subject to the terms and conditions of
subsection 3.2 of this Agreement, if the Executive's employment hereunder is
terminated pursuant to the terms of this Agreement prior to the end of a
calendar year, the Executive's Annual Bonus with respect to that year shall be
prorated for such portion of that year as he was employed by the Company. The
Executive shall be eligible to receive an Annual Bonus of up to twenty-five
percent (25%) of the Executive's Base Salary if the Company achieves financial
targets determined by the Board of Directors for such purpose in the applicable
annual business plan as approved by the Board of Directors. Such bonus shall be
due and payable solely in the discretion of the Board of Directors based upon
the Company's annual financial statements for the applicable bonus period.
4.3. Stock Options. The Board of Directors of the Company shall grant
to the Executive, effective as of the Grant Date (hereinafter defined), options
to purchase shares of common stock, $0.01 par value per share, of the Company
pursuant to the terms of the Company's 1995 Incentive Compensation Plan, which
options shall vest and first become exercisable at the rate of 25% per year on
the first, second, third and fourth anniversary of the Grant Date, such that all
of these options shall have vested and become exercisable by the fourth
anniversary of the Grant Date. The number of shares underlying such options
shall be equal to the quotient obtained by dividing $382,500 by the Exercise
Price (hereinafter defined), rounding to the nearest whole share. The "Exercise
Price" for these options shall be equal to (i) the initial public offering price
for the Company's common stock if the Company consummates an initial public
offering on or before December 31, 1996 and (ii) if no such initial public
offering is consummated by the Company prior thereto, the fair market value of
such common stock on December 31, 1996 as determined by the Board of Directors
of the Company for such purpose. The Grant Date shall refer to the first to
occur of the date that the initial public offering is consummated or December
31, 1996. Such options that have not previously been exercised shall no longer
be exercisable as of and following the tenth (10th) anniversary of the date of
Grant Date of such options.
4.4. Insurance.
(a) Life and Other Insurance. The Company shall provide to the
Executive such term life and group travel, accidental death and
dismemberment insurance and long and short term disability
insurance, or their equivalents, as is provided from time to time
for other executive officers of the Company of comparable stature
and title. The Company shall be entitled, at its sole option and
expense, to arrange for and keep in effect, during the term of the
Executive's employment hereunder, so long as he is insurable, key
man insurance on the Executive in an amount determined by the
Board of Directors, such policy or policies to name the Company or
its designee as the beneficiary under such policy or policies.
The Executive shall reasonably cooperate with the Company in
procuring such key man insurance as the Company shall elect to
purchase.
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<PAGE> 5
(b) Medical Insurance. During the Term of the Executive's
employment hereunder, the Company shall, at its expense, provide
or arrange for and keep in effect, hospitalization, major medical
and similar medical and health insurance for the Executive and his
family, to the same extent as is provided from time to time for
other executive officers of the Company.
4.5. Vacation. The Executive shall be entitled to paid vacation during
each year of his employment hereunder in accordance with the Company's vacation
policy for executive employees.
4.6. Retirement Benefits. During the Term of his employment hereunder,
the Executive shall have the same rights as other executive officers of the
Company of comparable statute and title to participate in all profit-sharing,
pension and other retirement plans as are now, or as may hereafter be,
established by the Company.
4.7. Out-of-Pocket Expenses. The Company shall reimburse the Executive
for all reasonable out-of-pocket expenses incurred by the Executive in
connection with the performance of his duties hereunder upon presentation to the
Company of appropriate vouchers therefor.
4.8. Automobile Expense Allowance. During the term of the Executive's
employment hereunder, the Company shall pay to the Executive an automobile
allowance of $600 per month.
SECTION 5. RESTRICTIVE COVENANTS.
(a) The Executive acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (iii)
at the Effective Time the Company will have bargained and paid adequate
and sufficient consideration for the restrictive covenants herein; and
(iv) the Company is employing the Executive in reliance on the covenants
of this Section 5 in view of the unique and essential nature of the
services the Executive is to perform hereunder and the irreparable injury
that would befall the Company should the Executive breach such covenants.
(b) The Executive further acknowledges that his services hereunder are
of a special, unique and extraordinary character and that his position
with the Company will place him in a position of confidence and trust
with the customers and employees of the Company and allow him access to
Confidential Information (as hereinafter defined).
(c) The Executive further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 5 are fair and
reasonable and that such restrictions will not prevent the Executive from
earning a livelihood.
(d) The Executive further acknowledges that, as of the Effective Time
(i) the Company is engaged in the business of developing, owning,
acquiring and operating assisted living facilities, congregate living
communities, and specialty care facilities for
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<PAGE> 6
the treatment of individuals suffering from Alzheimer's disease; (ii) the
Company conducts its business activity in and throughout the Area (as
hereinafter defined); and (iii) Competing Businesses (as hereinafter
defined) are engaged in businesses like and similar to the business of
the Company.
(e) Having acknowledged the foregoing, the Executive covenants and
agrees with the Company that he will not, directly or indirectly:
(i) while he is in the Company's employ and after the
termination of his employment for any reason whatsoever (whether
voluntarily or involuntarily), disclose, use or otherwise exploit,
except as may be necessary in the performance of his duties
hereunder, any Confidential Information disclosed to the Executive
or of which the Executive became aware by reason of his employment
with the Company;
(ii) while he is in the Company's employ and through the period
ending eighteen (18) months after the termination of his
employment for any reason whatsoever (whether voluntarily or
involuntarily), employ or attempt to employ or assist anyone else
in employing in any Competing Business in the Area any managerial
or executive employee of the Company or the Division (whether or
not such employment is full time or is pursuant to a written
contract with the Company); and
(iii) while he is in the Company's employ and through the period
ending twelve (12) months after the termination of his employment
(whether voluntarily or involuntarily) for any reason whatsoever,
except for (a) termination by the Company without cause or (b)
termination by the Executive for "good reason" or (c) expiration
of the Term without renewal pursuant to Section 3.1 hereof by
virtue of notice of nonrenewal given by the Company to the
Executive pursuant to Section 3.1 hereof, engage in or render any
services to or be employed by any Competing Business in the Area
in the capacity of officer, managerial or executive employee,
director, management or strategic consultant or shareholder (other
than as the owner of less than one (1%) percent of the shares of a
publicly-owned corporation whose shares are traded on a national
securities exchange or on the NASDAQ National Market System).
(f) The Executive agrees that upon the termination of his employment
for any reason whatsoever (whether voluntarily or involuntarily), he will
not take with him or retain without written authorization, and he will
promptly deliver to the Company, originals and all copies of all papers,
files or other documents containing any Confidential Information and all
other property belonging to the Company and in his possession or under
his control.
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<PAGE> 7
(g) For purposes of this Section 5, the term (a) "Area" means a
twenty-five (25) mile radius of any congregate living community or
assisted living or specialty care facility owned, managed or operated by
the Company at the time the Executive's employment hereunder is
terminated; (b) "Competing Business" means the business of developing,
owning, acquiring or operating assisted living facilities, specialty
assisted care facilities for the treatment of individuals suffering from
Alzheimer's disease or congregate living communities; and (c)
"Confidential Information" means any and all data, knowledge and
information relating to the business of the Company (whether or not
constituting a trade secret) that is, has been or will be obtained by or
disclosed to the Executive or of which the Executive became or becomes
aware as a consequence of or through his relationship with the Company
and that has value to the Company and is not generally known by its
competitors, provided, however, that no information will be deemed
confidential unless it is known to the Executive to be confidential
information or has been reduced to writing and marked clearly and
conspicuously as confidential information. Confidential Information
shall not include any data or information that has been voluntarily
disclosed to the public by the Company (except where such public
disclosure has been made without authorization by the Company), or that
has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means. Confidential
Information includes, but is not limited to, information relating to the
Company's financial affairs, processes, services, customers, executive
officers or employees, compensation, research, development, purchasing,
accounting or marketing.
(h) The Executive acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained
in this Section 5 and that damages arising out of such breach would be
difficult to ascertain. The Executive hereby agrees that, in addition to
all other remedies provided at law or in equity, the Company may petition
and obtain from a court of law or equity both temporary and permanent
injunctive relief to prevent a breach by the Executive of any covenant
contained in this Section 5. The parties hereto agree that all
references to the Company in this Section 5 shall include, unless the
context otherwise requires, all subsidiaries of the Company.
SECTION 6. MISCELLANEOUS.
6.1. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the Executive, his executor, administrator, heirs,
personal representatives, successors and assigns, and upon the Company and its
successors and assigns; provided, however, that the obligations and duties of
the Executive may not be assigned or delegated.
6.2. Governing Law. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed, enforced and governed by and in
accordance with, the laws of the State of Wisconsin, without giving effect to
any principles of conflicts of laws.
6.3. Invalid Provisions. The parties herein hereto agree that the
agreements, provisions and covenants contained in this Agreement (including,
without limitation, the agreements, provi-
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<PAGE> 8
sions and covenants contained in Section 5 hereof) are severable and divisible,
that none of such agreements, provisions or covenants depends upon any other
provision, agreement or covenant for its enforceability, and that each such
agreement, provision and covenant constitutes an enforceable obligation between
the Company and the Executive. Consequently, the parties hereto agree that
neither the invalidity nor the unenforceability of any agreement, provision or
covenant of this Agreement shall affect the other agreements, provisions or
covenants hereof, and this Agreement shall remain in full force and effect and
be construed in all respects as if such invalid or unenforceable agreement,
provision or covenant were omitted.
6.4. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.5. Notices. All communications provided for hereunder shall be in
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to the Executive, addressed to:
Thomas E. Komula
8848 Ravenswood Circle
Wauwatosa, Wisconsin 53226
Facsimile: (414) 258-6657
(b) If to the Company, addressed to:
Alternative Living Services, Inc.
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attention: President
Facsimile: (414) 789-9592
with a copy to:
Alternative Living Services, Inc.
184 Shuman Boulevard
Suite 200
Naperville, Illinois 60563
Attention: Chairman
Facsimile: (708) 347-4020
8
<PAGE> 9
and a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Alan C. Leet, Esq.
Facsimile: 404/525-2224
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
6.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
6.7. Waiver of Breach. The waiver by the Company or by the Executive of
a breach of any provision, agreement or covenant of this Agreement by the
Executive or by the Company, respectively, shall not operate or be construed as
a waiver of any prior or subsequent breach of the same or any other provision
agreement or covenant.
6.8. Entire Agreement. This Agreement is intended by the parties hereto
to be the final expression of their agreement and is the complete and exclusive
statement thereof notwithstanding any representation or statements to the
contrary heretofore made. This Agreement replaces in its respective entirety
any and all prior agreements, arrangements, understandings or commitments
between the Company and/or any of its predecessors and affiliates and the
Executive relating to the Executive's employment or other services rendered to
or for the benefit of the Company and/or any of its predecessors and affiliates.
This Agreement may be modified only by written instrument signed by each of the
parties hereto.
9
<PAGE> 10
IN WITNESS WHEREOF, the Executive has duly executed, and the Company has
caused this Agreement to be duly executed by its duly authorized officers, and
the parties have caused this Agreement to be delivered, all as of the day and
year first written above.
COMPANY: ALTERNATIVE LIVING SERVICES, INC.
By: /s/ William F. Lasky
-------------------------------
Its: President
-------------------------------
EXECUTIVE: /s/ THOMAS E. KOMULA
------------------------------------
THOMAS E. KOMULA
10
<PAGE> 1
EXHIBIT 11.1
ALTERNATIVE LIVING SERVICES, INC.
EXHIBIT 11 -- COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS THREE MONTHS
DECEMBER 14, 1993 YEAR ENDED YEAR ENDED ENDED ENDED
THROUGH DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net loss, per historical
financial statements........ (14,212) (643,075) (1,745,585) (538,497) (1,803,827)
============= ========== ========== ========== ==========
Weighted average common shares
outstanding................. 1,812,550 1,812,550 4,716,255 1,812,550 6,913,483
Common stock equivalents...... (a) (a) (a) (a) (a)
Effect of common stock and
options since May 1995, at
prices below the anticipated
IPO price................... 1,146,928 1,146,928 1,146,928 1,146,928 1,146,928
----------------- ------------ ------------ ------------ ------------
Weighted average outstanding
shares...................... 2,959,478 2,959,478 5,863,183 2,959,478 8,060,411
============= ========== ========== ========== ==========
Loss per share................ (0.00) (0.22) (0.30) (0.18) (0.22)
============= ========== ========== ========== ==========
</TABLE>
- ---------------
(a) Effect of common stock equivalents (stock options) is antidulutive and
therefore excluded.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alternative Living Services, Inc.:
We consent to the use of our report dated February 12, 1996, except as to note
2(j), which is as of May 17, 1996, included herein and to the references to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
July 5, 1996
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
ALS-Midwest Inc.:
We consent to the use of our report dated April 18, 1996 included herein and to
the references to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
July 5, 1996
<PAGE> 3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
New Crossings International Corporation:
We consent to the use of our report dated February 5, 1996 included herein and
to the references to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
July 5, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 26, 1996 relating to the financial statements of Heartland
Retirement Services, Inc. included in or made a part of this Registration
Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
July 5, 1996
