<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1996
Registration No. 333-04595
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 4
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
for the same offering. / /
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>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH OFFERING PRICE AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE PER 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
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</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) $42,828 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.
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<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
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.
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<PAGE> 4
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"), 456,763 shares of Common Stock to
Care Living Centers, Inc., a Wisconsin corporation, and 380,636 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> 5
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
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<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> 6
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<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>
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<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<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> 8
<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.
10.64* -- Promissory Note made by North Schoenherr Limited Partnership, Twelve/Drake Limited
Partnership and Hamilton House Limited Partnership in the principal amount of
$8,500,000 dated as of June 28, 1996.
10.65* -- Amended and Restated Lease and Security Agreement by and between Nationwide Health
Properties, Inc. and Alternative Living Services, Inc. dated as of June 18, 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).
* Filed herewith.
</TABLE>
- ---------------
(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.
II-6
<PAGE> 9
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 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.
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<PAGE> 10
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 31st 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 31, 1996
- --------------------------------------------- Officer and Director (Principal
William F. Lasky Executive Officer)
/s/ JOHN W. KNEEN Vice President, Treasurer, Chief July 31, 1996
- --------------------------------------------- Financial Officer and Secretary
John W. Kneen (Principal Financial Officer)
* Vice President and Controller July 31, 1995
- --------------------------------------------- (Principal Accounting Officer)
Mary Lou Austin
* Chairman of the Board and July 31, 1996
- --------------------------------------------- Director
William G. Petty, Jr.
* Vice Chairman and Director July 31, 1996
- ---------------------------------------------
Richard W. Boelhke
* Director July 31, 1996
- ---------------------------------------------
Gene E. Burleson
* Director July 31, 1996
- ---------------------------------------------
Robert Haveman
* Director July 31, 1996
- ---------------------------------------------
Ronald G. Kenny
* Director July 31, 1996
- ---------------------------------------------
Jerry L. Tubergen
By: /s/ JOHN W. KNEEN July 31, 1996
-----------------------------------------
John W. Kneen,
as Attorney-in-Fact
</TABLE>
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<PAGE> 11
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>
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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>
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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......................
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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................................................
10.64* -- Promissory Note made by North Schoenherr Limited Partnership,
Twelve/Drake Limited Partnership and Hamilton House Limited Partnership
in the principal amount of $8,500,000 dated as of June 28, 1996.........
10.65* -- Amended and Restated Lease and Security Agreement by and between
Nationwide Health Properties, Inc. and Alternative Living Services, Inc.
dated as of June 18, 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)..............................
* Filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 1
DRAFT OF 7/27/96
6,000,000 Shares
ALTERNATIVE LIVING SERVICES, INC.
Common Stock
UNDERWRITING AGREEMENT
________, 1996
NATWEST SECURITIES LIMITED
McDONALD & COMPANY SECURITIES, INC.
THE CHICAGO CORPORATION
As Representatives of the
several Underwriters
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M 3XT
England
Ladies and Gentlemen:
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation (the
"Company"), and each of the selling stockholders listed on Schedule I hereto
(collectively, the "Selling Stockholders" and each individually, a "Selling
Stockholder") propose to sell to you and the other underwriters named in
Schedule II hereto (collectively, the "Underwriters"), for whom you are acting
as representatives (the "Representatives"), an aggregate of 6,000,000 shares
(the "Firm Shares") of the Company's common stock, $.01 par value (the "Common
Stock"), of which (i) 2,812,500 shares in the aggregate are to be sold by the
Selling Stockholders and (ii) 3,187,500 shares are to be issued and sold by the
Company. The Company and certain Selling Stockholders have also agreed to
grant to you and the other Underwriters an option (the "Option") to purchase up
to an additional 900,000 shares of Common Stock in the aggregate (the "Option
Shares") on the terms and for the purposes set forth in Section 1(b) hereto.
The Firm Shares and the Option Shares are hereinafter collectively referred to
as the "Shares." The Option Shares to be sold by the Selling Stockholders
indicated on Schedule I as being members of ALI (the "ALI Selling
Stockholders") are held of record by Alternative Living Investors, LLC
<PAGE> 2
("ALI"), which will liquidate prior to the Closing and distribute all shares of
Common Stock held by it to its members.
The Company, ALI and the Selling Stockholders hereby confirm as
follows their respective agreements with the Representatives and the several
other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the respective representations,
warranties and agreements of the Company and the Selling Stockholders herein
contained and subject to all the terms and conditions of this Agreement, (i)
the Company agrees to issue and sell to each Underwriter and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a purchase
price of $[_____] per share, the number of Firm Shares set forth opposite the
name of such Underwriter in Column (1) of Schedule II hereto, plus such
additional number of Firm Shares which such Underwriter may become obligated to
purchase pursuant to Section 11 hereof, and (ii) each Selling Stockholder,
severally and not jointly, agrees to sell to each Underwriter and each
Underwriter, severally and not jointly, agrees to purchase from such Selling
Stockholder at the same purchase price per share, the number of Firm Shares set
forth opposite the name of such Underwriter in Column (2) of Schedule II,
multiplied by the number of Firm Shares set forth opposite the name of such
Selling Stockholder in Column (1) of Schedule I and divided by the total number
of Firm Shares to be sold by all Selling Stockholders, in each case subject to
such adjustments to eliminate any fractional shares as the Representatives in
their sole discretion shall make, plus such additional number of Firm Shares
which such Underwriter may become obligated to purchase pursuant to Section 11
hereof.
(b) Subject to all the terms and conditions of this
Agreement, (i) the Company grants the Option to the several Underwriters to
purchase, severally and not jointly, up to ________ Option Shares (the "Company
Option Shares") and (ii) each of the Selling Stockholders indicated on Schedule
I as participating in the Option (the "Option Selling Stockholders") severally
and not jointly, grants the Option to the several Underwriters to purchase,
severally and not jointly, up to the number of Option Shares set forth opposite
the name of such Selling Stockholder in Column (2) of Schedule I; such Option
Shares to be sold at the same price per share as the Underwriters shall pay for
the Firm Shares. The Option may be exercised only to cover over-allotments in
the sale of the Firm Shares by the Underwriters and may be exercised in whole
or in part at any time and from time to time on or before the 30th day after
the date of this Agreement (or on the next business day if the 30th day is not
a business day), upon notice (the "Option Shares Notice") in writing or by
telephone (confirmed in writing) by the Representatives to the Company and the
Selling Stockholders no later than 5:00 p.m., New York City time, at least
three and no more than five business days before the date specified for closing
in the Option Shares Notice (the "Option Closing Date") setting forth the
aggregate number of Option Shares to be purchased and the time and date for
such purchase. On the Option Closing Date, (i) each of the Option Selling
Stockholders will sell to the Underwriters the number of Option Shares set
forth opposite the name of such Selling Stockholder in Column (2) of Schedule I
multiplied by the number of Option Shares set forth in the Option Shares Notice
and divided by the maximum number of Option Shares, (ii) the Company will issue
and sell to the Underwriters the number of Option Shares stated in the
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<PAGE> 3
Option Shares Notice to the extent such number exceeds [768,858] and (iii) each
Underwriter will purchase such percentage of the Option Shares as is equal to
the percentage of Firm Shares that such Underwriter is purchasing, as adjusted
by the Representatives in such manner as they deem advisable, in their sole
discretion, to allocate the Company Option Shares and the Option Shares to be
sold by the Option Selling Stockholders in a manner consistent with Section
1(a) and to avoid fractional shares.
2. Delivery and Payment. Delivery of the Firm Shares shall be
made to the Representatives for the accounts of the Underwriters against
payment of the purchase price by certified or official bank checks payable in
New York Clearing House (next-day) funds to the order of each of the Company
and the Custodian (as defined herein) on behalf of the Selling Stockholders
(the "Closing") at the offices of Jones, Day, Reavis & Pogue, [77 West Wacker,
Chicago, Illinois 60601]. Such payment shall be made at [9:00 a.m., Chicago
time,] on the third full business day following the date of this Agreement, or
at such other time on such other date, not later than seven business days after
the date of this Agreement, as may be agreed upon by the Company, the Selling
Stockholders and the Representatives (such date is hereinafter referred to as
the "Closing Date").
To the extent the Option is exercised, delivery of the Option Shares
shall be made to the Representatives for the accounts of the Underwriters
against payment of the purchase price by the Underwriters (in the manner
specified above) (the "Option Closing") will take place at the offices
specified above for the Closing Date at the time and date (which may be the
Closing Date) specified in the Option Shares Notice (the "Option Closing Date").
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the
Representatives shall request at least two business days prior to the Closing
Date or the Option Closing Date, as the case may be, by written notice to the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection by the Representatives at least 24 hours prior to the
Closing Date or the Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with the
issuance, sale and delivery of Shares by the Company to the respective
Underwriters shall be borne by the Company. The Company and the Selling
Stockholders will pay and save each Underwriter and any subsequent holder of
the Shares harmless from any and all liabilities with respect to or resulting
from any failure or delay in paying Federal or state stamp and other transfer
taxes, if any, which may be payable or determined to be payable in connection
with the original issuance, sale or delivery to such Underwriter of the Shares.
Certificates in negotiable form (endorsed in blank or accompanied by
stock powers in blank, with signatures appropriately guaranteed, and any funds
necessary for the purchase of stock transfer stamps) representing all of the
Shares to be sold by the Selling Stockholders have been placed (or, in the case
of the ALI Selling Stockholders, will be placed in accordance with Section 6(o)
hereof) in custody under a Custody Agreement (the "Custody Agreement") with
American Stock Transfer & Trust Company, as Custodian (the "Custodian"), and
each Selling
-3-
<PAGE> 4
Stockholder has duly executed and delivered a Power of Attorney (each a "Power
of Attorney") appointing William G. Petty, Jr., William F. Lasky and John W.
Kneen, and each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver the Custody
Agreement and this Agreement on behalf of such Selling Stockholder, to
authorize the delivery of the Shares to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement and such
Custody Agreement. Each Selling Stockholder agrees that the shares represented
by the certificates held (or, in the case of ALI Selling Stockholders, to be
held) in custody for such Selling Stockholder under such Custody Agreement are
subject to the interests of the Underwriters hereunder and the arrangements
made by such Selling Stockholder for such custody, as well as the appointment
by such Selling Stockholder of the Attorneys-in-Fact, are irrevocable. Each
Selling Stockholder specifically agrees that its obligations hereunder shall
not be terminated, except as otherwise provided herein, by any act of such
Selling Stockholder, operation of law or otherwise, whether by the death or
incapacity of such Selling Stockholder, if an individual, or by the occurrence
of any other event. If any Selling Stockholder, if an individual, should die
or become incapacitated, or if any other such event should occur, before the
delivery of the Shares hereunder, certificates representing the shares held
(or, in the case of ALI Selling Stockholders,to be held) in custody for such
Selling Stockholder shall be delivered pursuant to the terms and conditions of
this Agreement and such Custody Agreement, and the actions taken by the
Attorneys-in-Fact pursuant to such Power of Attorney shall be as valid as if
such death, incapacity or other event had not occurred, whether or not the
Custodian or the Attorneys-in-Fact shall have received notice of such death,
incapacity or other event.
3. Representations and Warranties of the Company. The Company
represents, warrants and covenants to each Underwriter that:
(a) A registration statement on Form S-1 (Registration
No. 333-04595) relating to the Shares, including a preliminary prospectus
relating to the Shares and such amendments to such registration statement as
may have been made to the date of this Agreement, has been prepared by the
Company under the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (collectively referred to as the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with, and declared effective by the Commission.
The Commission has not issued any order preventing or suspending the use of the
Prospectus (as defined below) or any Preliminary Prospectus (as defined below).
Copies of such registration statement and amendments and of each related
Preliminary Prospectus have been delivered to the Representatives. A final
prospectus relating to the Shares containing information permitted to be
omitted at the time of effectiveness by Rule 430A will be filed by the Company
with the Commission in accordance with Rule 424(b) of the Rules and Regulations
promptly after execution and delivery of this Agreement. The term
"Registration Statement" means the registration statement as amended at the
time it became effective (the "Effective Date"), including all financial
statements and schedules and all exhibits and any information contained in any
final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or in a term sheet described in Rule 434 of the Rules and
Regulations in accordance with Section 6 hereof and deemed to be included
therein as of the Effective Date by Rule 430A of the Rules and Regulations.
The term
-4-
<PAGE> 5
"Preliminary Prospectus" as used herein means a preliminary prospectus relating
to the Shares included at any time as part of the foregoing registration
statement or any amendment thereto before it became effective under the Act and
any prospectus filed with the Commission by the Company pursuant to Rule 424(a)
of the Rules and Regulations. The term "Prospectus" means the prospectus
relating to the Shares as first filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations.
(b) On the Effective Date, the date that any Preliminary
Prospectus was filed with the Commission, the date the Prospectus is first
filed with the Commission pursuant to Rule 424(b), at all times subsequent to
and up to and including the Closing Date and the Option Closing Date and when
any post-effective amendment to the Registration Statement becomes effective or
any amendment or supplement to the Prospectus is filed with the Commission, the
Registration Statement, each Preliminary Prospectus and the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment or supplement thereto), including the financial statements
included in the Prospectus, complied or will comply, as the case may be, with
all applicable provisions of the Act and the Rules and Regulations and
contained or will contain, as the case may be, all statements required to be
stated therein in accordance with the Act and the Rules and Regulations. On
the Effective Date and when any post-effective amendment to the Registration
Statement becomes effective, no part of the Registration Statement or any such
amendment contained or will contain, as the case may be, any untrue statement
of a material fact or omitted or will omit, as the case may be, to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at the Closing Date and the Option Closing Date, the Prospectus
did not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The foregoing representations and warranties in this Section 3(b)
do not apply to any statements or omissions made in reliance on and in
conformity with information relating to any Underwriter furnished in writing to
the Company by the Representatives specifically for inclusion in the
Registration Statement or Prospectus or any amendment or supplement thereto.
The Company has not distributed, and, prior to the later to occur of (i) the
Closing Date or, if later, the Option Closing Date and (ii) completion of the
distribution of the Shares, will not distribute any offering material in
connection with the offering or sale of the Shares other than the Registration
Statement, the Preliminary Prospectus, the Prospectus or any other materials,
if any, permitted by the Act.
(c) The Company's subsidiaries are listed on Schedule III
hereto (the "Existing Subsidiaries"). Except with respect to the Existing
Subsidiaries and except as described in the Registration Statement and
Prospectus, the Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, joint venture, association
or other entity. The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of the Existing
Subsidiaries and each of [the ALS-East entities] (the "ALS-East Entities") and,
together with the Existing Subsidiaries, the "Subsidiaries"), all of the equity
interests of which will be purchased by the Company with the net proceeds to it
of the offering, is duly
-5-
<PAGE> 6
organized, validly existing and in good standing under the laws of the state of
its incorporation or formation. The Company and each of the Subsidiaries has
full corporate or other power and authority to conduct all the activities
conducted by it, to own or lease all the properties and assets owned or leased
by it and to conduct its business as described in the Registration Statement
and the Prospectus. The Company and each of its Subsidiaries is duly licensed
or qualified to do business and in good standing as a foreign corporation or
partnership, as the case may be, in all jurisdictions in which the nature of
the activities conducted by it or the character of the properties and assets
owned or leased by it makes such licensing or qualification necessary, except
where the failure to so qualify would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. The Company beneficially owns
the percentage indicated on Schedule III hereto of the outstanding equity
interests in each of the Subsidiaries, free and clear of all liens, security
interests, restrictions, pledges, encumbrances, charges, equities, claims,
easements, assessments and tenancies (collectively, "Encumbrances") other than
Encumbrances described in the Registration Statement and the Prospectus. All
of the equity interests held (or, in the case of the ALS-East Entities, to be
held after the Closing) by the Company in each of the Subsidiaries have been
duly authorized and are validly issued, fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights. Complete and
correct copies of (i) the Certificate of Incorporation and the Bylaws of the
Company and all amendments thereto and (ii) the organizational documents of
each of the Subsidiaries and all amendments thereto, have been delivered to the
Representatives or Jones, Day, Reavis & Pogue, counsel for the Underwriters,
and no changes therein will be made subsequent to the date hereof and prior to
the Closing Date or the Option Closing Date.
(d) The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights arising by or through the Company. The Shares to be issued and sold by
the Company are duly authorized and, upon such issuance and payment therefor in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and are not the subject of any preemptive or similar rights
arising by or through the Company. The Company has, and upon completion of the
sale of the Shares will have, an authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
The description of the securities of the Company in the Registration Statement
and the Prospectus is complete and accurate in all material respects. Except
as set forth in the Registration Statement and the Prospectus, the Company does
not have outstanding any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into or
exchangeable for, or any contracts or commitments to issue or sell, any shares
of its capital stock or any such warrants, convertible securities or
obligations. Except as set forth in the Registration Statement and the
Prospectus, no person has any right to have any securities of the Company held
by them registered under the Act. All holders of securities of the Company who
had a right to register shares held by them as a result of the filing of the
Registration Statement (i) are Selling Stockholders and are selling the maximum
number of shares subject to such right; (ii) have waived any such rights to the
registration of any securities of the Company or (iii) received proper notice
from the Company in accordance with such rights and have elected not to sell
such shares in the offering.
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<PAGE> 7
(e) The consolidated financial statements and the related
notes of the Company and its subsidiaries set forth in the Registration
Statement and the Prospectus present fairly the financial condition of the
Company and its subsidiaries as of the dates indicated and the consolidated
results of operations, stockholders' equity and cash flows of the Company and
its subsidiaries for the periods covered thereby, all in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the entire period involved. The combined financial statements and
related notes of New Crossings International Corporation ("Crossings") and its
subsidiaries set forth in the Registration Statement and Prospectus present
fairly the financial condition of Crossings and its subsidiaries as of the
dates indicated and the combined results of operations, shareholders' deficit
and cash flows of Crossings and its subsidiaries for the periods covered
thereby, all in conformity with GAAP applied on a consistent basis throughout
the entire period involved. The consolidated financial statements and related
notes of Heartland Retirement Services, Inc. ("Heartland") and its subsidiaries
set forth in the Registration Statement and Prospectus present fairly the
financial condition of Heartland and its subsidiaries as of the dates indicated
and the consolidated results of operations, shareholders' equity and cash flows
of Heartland and its subsidiaries for the periods covered thereby, all in
conformity with GAAP applied on a consistent basis throughout the entire period
involved. The combined financial statements and related notes of Alternative
Living Services - Midwest Inc. ("ALS-Midwest") and its affiliates set forth in
the Registration Statement and Prospectus present fairly the financial
condition of ALS-Midwest and its affiliates as of the dates indicated and the
consolidated results of operations, stockholders' equity and cash flows of
ALS-Midwest and its affiliates for the periods covered thereby, all in
conformity with GAAP applied on a consistent basis throughout the entire
periods involved. The selected historical financial data for the Company and
its subsidiaries set forth under the captions "Prospectus Summary--Summary
Consolidated Financial and Operating Data," "Pro Forma Financial Information"
and "Selected Consolidated Financial Data" in the Prospectus have been prepared
on a basis consistent with the historical consolidated financial statements of
the Company and its Subsidiaries. The pro forma condensed combined financial
information of the Company and the related notes included in the Registration
Statement and the Prospectus under the caption "Pro Forma Financial
Information" comply in all material respects with the applicable requirements
of Rules 11-01 and 11-02 of Regulation S-X of the Commission and present fairly
the information shown therein; and the pro forma adjustments have been properly
applied to the historical amounts in the compilation of such statements. No
other financial statements or schedules of the Company, Heartland, Crossings,
ALS-Midwest or any other entity are required by the Act or the Rules and
Regulations to be included in the Registration Statement, any Preliminary
Prospectus or the Prospectus. KPMG Peat Marwick LLP ("KPMG"), who have
reported on certain of such financial statements and schedules which are
audited, are independent accountants with respect to the Company and its
subsidiaries, Crossings and its subsidiaries and ALS-Midwest and its
affiliates, as required by the Act and the Rules and Regulations. Arthur
Andersen LLP ("Andersen" and, together with KPMG, the "Accountants"), who have
reported on certain of such financial statements and schedules which are
audited, are independent accountants with respect to Heartland and its
subsidiaries, as required by the Act and the Rules and Regulations.
(f) The Company and its Subsidiaries maintain a system of
internal accounting control sufficient to provide reasonable assurance that (i)
transactions are executed in accordance
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<PAGE> 8
with management's general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(g) Except as set forth or described in the Registration
Statement and Prospectus, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, (i)
there has not been, and will not have been, any change in the capitalization of
the Company or any Subsidiary or any material adverse change in the business,
properties, prospects, condition (financial or otherwise), net worth or results
of operations of the Company and its Subsidiaries, taken as a whole, arising
for any reason whatsoever, (ii) neither the Company nor any of its Subsidiaries
has incurred, nor will it have incurred, any material liabilities or
obligations, direct or contingent, (iii) neither the Company nor any of its
Subsidiaries has entered into, nor will it have entered into any material
transactions other than pursuant to this Agreement, and (iv) neither the
Company nor any Subsidiary has, or will have, paid or declared any dividends or
other distributions of any kind on any class of its capital stock.
(h) The Company (either directly or through the
Subsidiaries) has good and indefeasible title to all properties and assets
described in the Registration Statement and Prospectus as owned by it, free and
clear of all Encumbrances other than those described in the Registration
Statement and Prospectus and other than those that do not materially adversely
affect the value of such properties and assets and do not materially interfere
with the use made or proposed to be made of such properties and assets. The
Company (either directly or through its Subsidiaries) has valid and subsisting
leasehold interests in the properties and assets described in the Registration
Statement and Prospectus as leased by it, free and clear of all Encumbrances,
other than those described in the Registration Statement and Prospectus and
those that do not materially adversely affect the value of such properties and
assets and do not interfere with the use made, or proposed to be made, of such
properties and assets. The Company (either directly or through its
Subsidiaries) has valid and subsisting options or other rights to purchase the
properties described as being under development in the "Status" column of the
chart captioned "Residences Under construction/Development" under the caption
in the Registration Statement and the Prospectus. Title insurance in favor of
the Company or its Subsidiaries is in full force and effect with respect to
each parcel of real property and asset thereon described in the Registration
Statement and Prospectus (i) listed as owned or leased by the Company (either
directly or through its Subsidiaries) in the chart captioned "Operating
Residences" under the caption "Business-Residences" and (ii) reflected as being
under construction in the "Status" column of the chart captioned "Residences
Under Construction/Development" under the caption "Business-Residences" in
amounts at least equal to the purchase price paid by the Company or any
Subsidiary for such property and assets thereon. Except as set forth in the
Registration Statement and Prospectus, none of the mortgages encumbering any
property owned by the Company (either directly or through its Subsidiaries) (i)
is convertible into equity interests in the Company, any Subsidiary or any
property owned by the Company or any Subsidiary or (ii) cross-defaulted or
cross-collateralized to any other property.
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<PAGE> 9
(i) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act").
(j) Except as set forth in the Registration Statement and
Prospectus, there are no actions, suits or proceedings pending or, to the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective directors, officers or stockholders in
their capacity as such, or any of the properties or assets owned, leased or
operated by the Company or any of its Subsidiaries, before or by any Federal or
state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign (collectively, a "Governmental Body"),
wherein an unfavorable ruling, decision or finding would have a material
adverse effect on the business, properties, prospects, condition (financial or
otherwise), net worth or results of operations of the Company and its
Subsidiaries, taken as a whole. There is no pending litigation or governmental
proceeding required to be described in the Registration Statement and the
Prospectus that is not described as required.
(k) Each of the Company and its Subsidiaries has all
governmental licenses, permits, consents, orders, approvals, franchises,
certificates and other authorizations (collectively, "Licenses") necessary to
carry on its business and own or lease its properties as contemplated in the
Registration Statement and Prospectus, except such Licenses, the failure to so
have would not have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise), net worth or results of
operations of the Company and its Subsidiaries, taken as a whole. Each of the
Company and its Subsidiaries has complied in all material respects with all
laws, regulations and orders applicable to it or its business, assets and
properties. Each of the Company and its Subsidiaries is not in breach or
default (nor has any event occurred which, with notice or lapse of time or
both, would constitute a default) in the due performance and observation of any
term, covenant or condition of any indenture, mortgage, deed of trust, voting
trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument
(collectively, a "contract or other agreement") to which it is a party or by
which its properties is bound or affected, which default could reasonably be
expected, individually or in the aggregate, to have a material adverse effect
on the business, properties, prospects, condition (financial or otherwise), net
worth or results of operations of the Company and its Subsidiaries, taken as a
whole. To the best knowledge of the Company, no other party under any such
contract or other agreement is in default in any material respect thereunder.
Except as otherwise described in the Registration Statement and Prospectus,
there are no governmental proceedings or actions pending or, to the Company's
knowledge, threatened for the purpose of suspending, modifying or revoking any
License held by the Company or any of its Subsidiaries. The Company is not in
violation of any provision of its Certificate of Incorporation or Bylaws, as
amended. None of the Subsidiaries is in violation of its organizational
documents, as amended.
(l) No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation of the transactions contemplated by this Agreement or in
connection with the issuance and sale of the Shares by the Company, except such
as have been obtained under the Act or the Rules and Regulations and such as
may be required under state securities or Blue Sky laws, any securities laws of
the
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<PAGE> 10
United Kingdom or the bylaws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase and
distribution by the Underwriters of the Shares to be sold by the Company.
(m) The Company has full power and authority to enter
into this Agreement and to carry out all the terms and provisions hereof to be
carried out by it. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company and is enforceable against the Company in accordance with the terms
hereof. The execution, delivery and the performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
creation or imposition of any Encumbrance upon any of the properties or assets
of the Company or any of its Subsidiaries pursuant to the terms or provisions
of, or result in a breach or violation of or conflict with any of the terms or
provisions of, or constitute a default under, or give any other party a right
to terminate any of its obligations under, or result in the acceleration of any
obligation under, (i) the Restated Certificate of Incorporation or Bylaws of
the Company, in each case as amended, (ii) the organizational or charter
documents of any of the Subsidiaries, as amended, or (iii) any contract or
other agreement to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their respective
assets or properties are bound or affected, or (iv) any judgment, ruling,
decree, order, law, statute, rule or regulation of any Governmental Body
applicable to the Company or any of its Subsidiaries or their business or
properties, except, in the case of clauses (iii) and (iv), any violation which
could not reasonably be expected, individually or in the aggregate, to have a
material adverse effect on the business, properties, prospects, condition
(financial or otherwise), net worth or results of operations of the Company and
its Subsidiaries, taken as a whole. The Company has full power and authority
to authorize, issue, offer and sell the Shares to be sold by it, as
contemplated by this Agreement, free of any preemptive or similar rights. The
offer, issuance and sale by the Company of any shares of its capital stock
prior to the date hereof was and is exempt from the registration requirements
of the Act and applicable state securities, real estate syndication and blue
sky laws.
(n) There is no document or contract of a character
required to be described in the Registration Statement or Prospectus, or to be
filed as a exhibit to the Registration Statement which is not described or
filed as required.
(o) No statement, representation, warranty or covenant
made by the Company in this Agreement or made in any certificate or document
required by this Agreement to be delivered to the Representatives is or will
be, when made, inaccurate, untrue or incorrect.
(p) Neither the Company nor any of its directors,
officers or affiliates (within the meaning of the Rules and Regulations) has
taken, nor will he, she or it take, directly or indirectly, any action
designed, or which might reasonably be expected in the future to cause or
result in, under the Act or otherwise, or which has constituted, stabilization
or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares or otherwise.
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<PAGE> 11
(q) The Shares have been approved for listing on the
American Stock Exchange, Inc. (the "AMEX"), subject only to notice of issuance.
(r) Neither the Company nor any of its Subsidiaries is
involved in any labor dispute with its employees which could reasonably be
expected, individually or in the aggregate, to have a material adverse effect
on the business, properties, prospects, condition (financial or otherwise), net
worth or results of operations of the Company and its Subsidiaries, taken as a
whole nor, to the Company's knowledge, is any such dispute threatened or
imminent.
(s) Each of the Company and its Subsidiaries owns, or is
licensed or otherwise has the right to use, all material trademarks and trade
names which are used in or necessary for the conduct of its business as
described in the Registration Statement and Prospectus. To the Company's
knowledge, no claims have been asserted by any person to the use of any such
trademarks or trade names or challenging or questioning the validity or
effectiveness of any such trademark or trade name. The use of such trademarks
and trade names in connection with the business and operations of the Company
and its Subsidiaries does not, to the Company's knowledge, infringe on the
rights of any person.
(t) Neither the Company nor any of its Subsidiaries nor
any employee or agent of the Company or any Subsidiary has made any payment of
funds of the Company or any Subsidiary or received or retained any funds of the
Company or any Subsidiary in violation of any law, rule or regulation or of a
character required to be disclosed in the Registration Statement and
Prospectus.
(u) The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which
they are engaged; and the Company has no reason to believe that it and its
Subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires.
(v) The business, operations and facilities of the
Company and its Subsidiaries have been and are being conducted in compliance in
all material respects with all applicable laws, ordinances, rules, regulations,
Licenses, permits, approvals, plans, authorizations or requirements relating to
occupational safety and health, or pollution, or protection of health or the
environment (including, without limitation, those relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants or
hazardous or toxic substances, materials or wastes into ambient air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
chemical substances, pollutants, contaminants or hazardous or toxic substances,
materials or wastes, whether solid, gaseous or liquid in nature) of any
governmental department, commission, board, bureau, agency or instrumentality
of the United States or any state or political subdivision thereof, and all
applicable judicial or administrative agency or regulatory decrees, awards,
judgments and orders relating thereto; and none of the Company or any of its
Subsidiaries has received any notice from any governmental instrumentality or
any third party alleging any violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances and/or damages to natural
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<PAGE> 12
resources), which violation would have, or could reasonably be expected to
have, a material adverse effect on the business, properties, prospects,
condition (financial or otherwise), net worth or results of operations of the
Company and its Subsidiaries, taken as a whole. The intended use and occupancy
of each of the facilities owned or operated by the Company or any of its
Subsidiaries complies in all material respects with all applicable codes and
zoning laws and regulations and there is no pending or, to the knowledge of the
Company, threatened condemnation, zoning change, environmental or other
proceeding or action that will in any material respect adversely affect the
size of, use of, improvements on, construction on, or access to such
facilities.
(w) The Company and each of its Subsidiaries has filed
all foreign, federal, state and local tax returns that are required to be filed
or has requested extensions thereof and has paid all taxes required to be paid
by it and any other assessment, fine or penalty levied against it, to the
extent due and payable, except where such failure to file or pay could not
reasonably be expected, individually or in the aggregate, to have a material
adverse effect on the business, properties, prospects, condition (financial or
otherwise), net worth or results of operations of the Company and its
subsidiaries, taken as a whole.
(x) Each officer, director and 5% stockholder of the
Company (other than the Selling Stockholders), each member of ALI (other than
the ALI Selling Stockholders) who will, upon liquidation of ALI, become a 5%
stockholder of the Company and each of Assisted Living Equity Investors, Petty
Kneen & Company and [the Damone entities and individuals] has delivered to
NatWest Securities Limited an agreement (the "Lockup Agreement") in the form of
Exhibit D attached hereto.
(y) Each certificate signed by an officer of the Company
and delivered to the Representatives or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter
as to the matters covered thereby.
(z) None of the Company, any Subsidiary or any affiliate
thereof does business with the government of Cuba or with any person or
affiliate located in Cuba and the Company and each Subsidiary has complied to
the extent necessary with the provisions of Florida H.B. 1771.
(aa) The [agreements related to the rollup of the ALS-East
Entities] (the "JV Agreements") have been duly authorized, executed and
delivered by the Company and constitute the valid and binding agreement of the
Company and are enforceable against the Company in accordance with the terms
thereof. The execution, delivery and the performance of the JV Agreements and
the [Meditrust Commitment] and the consummation of the transactions
contemplated thereby have not and will not, as the case may be, result in the
creation or imposition of any Encumbrance upon any of the properties or assets
of the Company or any of its Subsidiaries pursuant to the terms or provisions
of, or result in a breach or violation of or conflict with any of the terms or
provisions of, or constitute a default under, or give any other party a right
to terminate any of its obligations under, or result in the acceleration of any
obligation under, (i) the Restated Certificate of Incorporation or Bylaws of
the Company, in each case as amended, (ii) the organizational or charter
documents of any of the Subsidiaries, as
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<PAGE> 13
amended, or (iii) any contract or other agreement to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective assets or properties are bound or
affected, or (iv) any judgment, ruling, decree, order, law, statute, rule or
regulation of any Governmental Body applicable to the Company or any of its
Subsidiaries or their business or properties, except, in the case of clauses
(iii) and (iv), any violation which could not reasonably be expected,
individually or in the aggregate, to have a material adverse effect on the
business, properties, prospects, condition (financial or otherwise), net worth
or results of operations of the Company and its Subsidiaries, taken as a whole.
4. Representations and Warranties of the Selling Stockholders.
Each of the Selling Stockholders other than Capital Consultants, Inc. ("CCI"),
severally and not jointly, represents, warrants and covenants to each
Underwriter that:
(a) Such Selling Stockholder (if a corporation or other
business entity) is duly organized, validly existing and in good standing (to
the extent such legal status is recognized by the jurisdiction of its
incorporation) under the laws of the jurisdiction of its organization.
(b) Such Selling Stockholder has full power and authority
to enter into this Agreement and to carry out all the terms and provisions
hereof to be carried out by it. All authorizations and consents necessary for
the execution and delivery by such Selling Stockholder of this Agreement have
been given. This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder and constitutes a valid and binding
agreement of such Selling Stockholder and is enforceable against such Selling
Stockholder in accordance with the terms hereof.
(c) Such Selling Stockholder has full power and authority
to enter into the Power of Attorney in the form heretofore furnished to the
Underwriters and the Custody Agreement in the form heretofore furnished to the
Underwriters and to carry out all the terms and provisions thereof to be
carried out by it. All authorizations and consents necessary for the execution
and delivery by or on behalf of such Selling Stockholder of the Power of
Attorney and the Custody Agreement have been given. Each of the Power of
Attorney and the Custody Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and is enforceable
against such Selling Stockholder in accordance with the terms thereof.
(d) Such Selling Stockholder (if other than an ALI
Selling Stockholder) now has, and at the time of delivery thereof hereunder
will have, good and marketable title to the Shares to be sold by such Selling
Stockholder hereunder, free and clear of all Encumbrances. Such ALI Selling
Stockholder (i) now has, and immediately prior to the ALI liquidation will
have, a good and marketable membership interest in ALI, free and clear of all
Encumbrances and (ii) will have, immediately after the ALI liquidation and at
the time of delivery thereof hereunder, good and marketable title to the shares
to be sold by such ALI Selling Stockholder hereunder, free and clear of all
Encumbrances. Such Selling Stockholder (if an ALI Selling Stockholder)
acknowledges that shares of Common Stock issued to such Selling Stockholder
pursuant to the ALI liquidation will be delivered directly to the Custodian to
be held automatically in custody under the Custody Agreement. Such Selling
Stockholder has full legal
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<PAGE> 14
right and power, and all authorizations and approvals required by law, to sell,
transfer and deliver the Shares to be sold by such Selling Stockholder
hereunder to the Underwriters and to make the representations, warranties and
agreements made by such Selling Stockholder herein. Upon the delivery of and
payment for the Shares to be sold by such Selling Stockholder hereunder, the
Underwriters will receive good and marketable title to such Shares, free and
clear of all Encumbrances.
(e) On the Closing Date all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the
sale and transfer of the Shares to be sold by such Selling Stockholder to the
several Underwriters hereunder will have been fully paid or provided for by
such Selling Stockholder and all laws imposing such taxes will have been fully
complied with.
(f) None of the execution, delivery or performance of
this Agreement, the Power of Attorney or the Custody Agreement and the
consummation of the transactions contemplated herein or therein by such Selling
Stockholder conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation or imposition of any
Encumbrance upon, any property or assets of such Selling Stockholder pursuant
to (i) the terms of its organizational documents; (ii) the terms of any
contract or other agreement to which such Selling Stockholder is a party or by
which it is bound or to which any of its properties is subject; (iii) any
statute, rule or regulation of any Governmental Body having jurisdiction over
such Selling Stockholder or any of its activities or properties; or (iv) the
terms of any judgment, decree or order of any arbitration or Governmental Body
having such jurisdiction.
(g) No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation by such Selling Stockholder of the transactions on its part
contemplated herein and in the Custody Agreement or Power of Attorney, except
such as have been obtained under the Act or the Rules and Regulations and such
as may be required under state securities or Blue Sky laws, any securities laws
of the United Kingdom, or the bylaws and rules of the NASD in connection with
the purchase and distribution by the Underwriters of the Shares to be sold by
such Selling Stockholder.
(h) The sale of the Shares to be sold by such Selling
Stockholder is not prompted by such Selling Stockholder's knowledge of any
material adverse information concerning the Company or its Subsidiaries which
is not set forth or described in the Registration Statement and the Prospectus.
(i) Such Selling Stockholder has not distributed and will
not distribute the Registration Statement, any Preliminary Prospectus, the
Prospectus or any other offering material in connection with the offering and
sale of the Shares. Such Selling Stockholder has not taken, directly or
indirectly, any action designed, or which might reasonably be expected, to
cause or result in, under the Act or otherwise, or which has caused or resulted
in,
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<PAGE> 15
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(j) On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no information
regarding such Selling Stockholder included under the caption "Principal and
Selling Stockholders" in the Registration Statement or any such amendment
contained or will contain, as the case may be, any untrue statement of a
material fact or omitted or will omit, as the case may be, to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. At the Effective Date, the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission and at
the Closing Date and the Option Closing Date, the information regarding such
Selling Stockholder included under the caption "Principal and Selling
Stockholders" in the Prospectus did not or will not, as the case may be,
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4A. Representations and Warranties of CCI. CCI, one of the
Selling Stockholders, represents, warrants and covenants to each Underwriter
that:
(a) 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
to enter into this Agreement, the Power of Attorney and the Custody Agreement
and to carry out all the terms and provisions hereof and thereof to be carried
out by it. CCI has a limited power of attorney that authorizes it as agent for
the individuals and entities listed on Schedule IV to this Agreement (the "CCI
Holders") to enter into this Agreement, the Power of Attorney and the Custody
Agreement and has the power and authority to carry out the transactions
contemplated hereby and thereby. All authorizations and consents necessary for
the execution and delivery by CCI of this Agreement, the Power of Attorney and
the Custody Agreement have been given. This Agreement, the Power of Attorney
and the Custody Agreement have been duly authorized, executed and delivered by
CCI and constitute legal, valid and binding agreements of CCI, as agent for the
CCI Holders, enforceable in accordance with their respective terms.
(b) CCI has all necessary power and authority as agent on
behalf of the CCI Holders to sell the Shares to be sold by CCI, as agent for
the CCI Holders, hereunder.
(c) CCI 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 this Agreement.
(d) To the best knowledge of CCI, acting on behalf of the
CCI Holders, each CCI Holder now has, and at the time of delivery thereof
hereunder will have, good and marketable title to the Shares to be sold by such
CCI Holder hereunder, free and clear of all Encumbrances. CCI has full legal
right and power, and all authorizations and approvals required by law, to sell,
transfer and deliver the Shares to be sold by CCI on behalf of such CCI
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<PAGE> 16
Holder hereunder to the Underwriters and to make the representations,
warranties and agreements made by CCI herein on behalf of the CCI Holders.
Upon the delivery of and payment for the Shares to be sold by CCI hereunder,
the Underwriters will receive good and marketable title to such Shares, free
and clear of all Encumbrances.
(e) On the Closing Date all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the
sale and transfer of the Shares to be sold by CCI, as agent for each CCI
Holder, to the several Underwriters hereunder will have been fully paid or
provided for by CCI, as agent for such CCI Holder, and all laws imposing such
taxes will have been fully complied with.
(f) None of the execution, delivery or performance of
this Agreement, the Power of Attorney or the Custody Agreement and the
consummation of the transactions contemplated herein or therein by CCI
conflicts or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the creation or imposition of any Encumbrance upon, any
property or assets of CCI pursuant to (i) the terms of its organizational
documents; (ii) the terms of any contract or other agreement to which CCI is a
party or by which it is bound or to which any of its properties is subject;
(iii) any statute, rule or regulation of any Governmental Body having
jurisdiction over CCI or any of its activities or properties; or (iv) the terms
of any judgment, decree or order of any arbitration or Governmental Body having
such jurisdiction.
(g) No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation by CCI of the transactions on its part, as agent for the CCI
Holders, contemplated herein and in the Custody Agreement or Power of Attorney,
except such as have been obtained under the Act or the Rules and Regulations
and such as may be required under state securities or Blue Sky laws, any
securities laws of the United Kingdom, or the bylaws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of the Shares
to be sold by CCI, as agent for the CCI Holders.
(h) The sale of the Shares to be sold by CCI, as agent
for the CCI Holders, is not prompted by CCI's knowledge of any material adverse
information concerning the Company or its Subsidiaries which is not set forth
or described in the Registration Statement and the Prospectus.
(i) CCI, as agent for the CCI Holders, has not
distributed and will not distribute the Registration Statement, any Preliminary
Prospectus, the Prospectus or any other offering material in connection with
the offering and sale of the Shares. CCI, as agent for the CCI Holders, has
not taken, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, under the Act or otherwise, or
which has caused or resulted in, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares.
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<PAGE> 17
(j) On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no information
regarding CCI included under the caption "Principal and Selling Stockholders"
in the Registration Statement or any such amendment contained or will contain,
as the case may be, any untrue statement of a material fact or omitted or will
omit, as the case may be, to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
At the Effective Date, the date the Prospectus or any amendment or supplement
to the Prospectus is filed with the Commission and at the Closing Date and the
Option Closing Date, the information under the caption "Principal and Selling
Stockholders" regarding CCI included in the Prospectus did not or will not, as
the case may be, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
4B. Representations and Warranties of ALI. ALI is a limited
liability company duly organized, validly existing and is in good-standing,
under the laws of the State of Delaware. ALI has full power and authority to
enter into this Agreement and to carry out all the terms and provisions hereof
to be carried out by it. All authorizations and consents necessary for the
execution and delivery of this Agreement by ALI have been given. This
Agreement has been duly authorized, executed and delivered by or on behalf of
ALI and constitutes a valid and binding agreement of ALI and is enforceable
against ALI in accordance with the terms hereof. Upon the liquidation of ALI,
each ALI Selling Stockholder will receive from ALI at least the number of
shares of Common Stock set forth opposite the name of such ALI Selling
Stockholder in column (2) of Schedule I hereto.
5. Representations and Warranties of the Underwriters. Upon your
authorization of the release of the Firm Shares, the several Underwriters
propose to offer the Firm Shares for sale to the public upon the terms set
forth in the Prospectus. NatWest Securities Limited represents and agrees that
(i) it has not offered or sold and will not offer or sell any Shares 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 which have not resulted 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 "UK Act");
(ii) it has complied and will comply with all applicable provisions of the UK
Act with respect to anything done by it in relation to the Shares in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on, and will only issue or pass on, in the United Kingdom, any document which
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 UK 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 passed on.
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<PAGE> 18
6. Agreements of the Company and the Selling Stockholders. The
Company and, as to subsections (j), (m) and (n) of this Section 6, each Selling
Stockholder, severally and not jointly, and, as to subsection (o) of this
Section, ALI, covenant and agree with each of the several Underwriters as
follows:
(a) The Company will not, either prior to the Effective
Date or thereafter during such period as the Prospectus is required by law to
be delivered in connection with sales of the Shares by an Underwriter or
dealer, file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto.
(b) The Company will notify the Representatives promptly,
and will confirm such advice in writing, (i) of the time the Registration
Statement became effective and when any post-effective amendment thereto
becomes effective, (ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose or the threat thereof, (iv) of the happening
of any event during the period mentioned in the second sentence of Section 6(f)
that in the judgment of the Company makes any statement made in the
Registration Statement or the Prospectus untrue or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make
the statements therein, in light of the circumstances in which they are made,
not misleading and (v) of receipt by the Company or any representative or
attorney of the Company of any other communication from the Commission relating
to the Company, the Registration Statement, any Preliminary Prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will use its best
efforts to obtain the withdrawal of such order at the earliest possible moment.
The Company will prepare the Prospectus in a form approved by the
Representatives and will file such Prospectus pursuant to Rule 424(b) under the
Act not later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement or, if applicable,
such earlier time as may be required by Rule 430A(a)(3) under the Securities
Act. If the Company has omitted any information from the Registration Statement
pursuant to Rule 430A, the Company will use its best efforts to comply with the
provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and to notify the Representatives promptly of all such filings.
(c) If, at any time when a Prospectus relating to the
Shares is required to be delivered under the Act, any event occurs as a result
of which the Prospectus, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, or the Registration Statement, as then
amended or supplemented, would include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein not
misleading, or if for any other reason it is necessary at any time to amend or
supplement the Prospectus or the Registration Statement to comply with the Act
or the Rules and Regulations, the Company will promptly notify the
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<PAGE> 19
Representatives thereof and, subject to Section 6(b) hereof, will prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(d) The Company will furnish to the Representatives,
without charge, two signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representatives, without
charge, for transmittal to each of the other Underwriters, copies of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(e) The Company will comply with all the provisions of
all undertakings contained in the Registration Statement.
(f) On the Effective Date, and thereafter from time to
time for such period as the Prospectus is required by the Act to be delivered,
the Company will deliver to each of the Underwriters, without charge, as many
copies of the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the several Underwriters
and by all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for any period of time thereafter during
which the Prospectus is required by law to be delivered in connection
therewith. If during such period of time any event shall occur which in the
judgment of the Company or counsel to the Underwriters should be set forth in
the Prospectus in order to make any statement therein, in the light of the
circumstances under which it was made, not misleading, or in the Registration
Statement in order to make any statement therein not misleading, or if it is
necessary to supplement or amend the Prospectus or the Registration Statement
to comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
each of the Underwriters, without charge, such number of copies thereof as the
Representatives may reasonably request.
(g) Prior to any public offering of the Shares by the
Underwriters, the Company will cooperate with the Representatives and counsel
to the Underwriters in connection with the registration or qualification of the
Shares for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Representatives may request; provided that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it
to general service of process in any jurisdiction where it is not now so
subject.
(h) During the period of three years commencing on the
Effective Date, the Company will furnish to the Representatives and each other
Underwriter who may so request copies of such financial statements and other
periodic and special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock, and will furnish to
the Representatives and each other Underwriter who may so request a copy of
each annual or other report it shall be required to file with the Commission.
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<PAGE> 20
(i) The Company will make generally available to holders
of its securities, as soon as may be practicable, but in no event later than
the last day of the fifteenth full calendar month following the calendar
quarter in which the Effective Date falls, a consolidated earnings statement
(which need not be audited but shall be in reasonable detail) for a period of
12 months commencing after the Effective Date, and satisfying the provisions of
Section 11(a) of the Act (including Rule 158 of the Rules and Regulations).
(j) Neither the Company nor any Selling Stockholder will
at any time, directly or indirectly, take any action intended, or which might
reasonably be expected, to cause or result in, or which will constitute,
stabilization of the price of the shares of Common Stock to facilitate the sale
or resale of any of the Shares.
(k) The Company will apply the net proceeds from the
offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds" and shall file such reports
with the Commission with respect to the sale of the Shares and the application
of the proceeds therefrom as may be required in accordance with Rule 463 under
the Act.
(l) The Company will not, for a period of 180 days after
the date hereof, without the prior written consent of NatWest Securities
Limited, 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 or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock,
except that the Company may (i) grant options to purchase shares of Common
Stock (and issue shares upon exercise thereof) under its 1995 Incentive
Compensation Plan, (ii) issue shares upon the exercise of any other options
outstanding on the date hereof and described in the Registration and the
Prospectus, and (iii) issue shares of Common Stock in partial or total
consideration for acquisitions of assisted living residences or operations
provided that the shares are not issued in a transaction registered under the
Act and that the holders of such shares are not given rights to register any
shares under the Act which are effective during the 180-day period referred to
herein.
(m) Each Selling Stockholder will not, for a period of 180
days after the date hereof, without the prior written consent of NatWest
Securities Limited, 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 or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock.
(n) Each Selling Stockholder [other than CCI] will
deliver to the Representatives prior to or on the Effective Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof). [CCI will deliver to the Representatives prior to or on the
Effective Date a letter stating that CCI will be wholly responsible for the tax
withholding obligations associated with Shares to be sold by CCI as agent for
the CCI Holders.] [Note: Subject to discussion with tax attorney.]
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<PAGE> 21
(o) Prior to the Closing, ALI will liquidate and will, in
connection therewith, distribute pro-rata to its members (including the ALI
Selling Stockholders) all shares of Common Stock held by it. All shares of
Common Stock transferred by ALI to the ALI Selling Stockholders will be
delivered (or caused to be delivered) by ALI directly to the Custodian to be
held in custody under the Custody Agreement.
7. Expenses.
(a) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will
pay, or reimburse if paid by the Representatives, all costs and expenses
incident to the performance of the obligations of the Company under this
Agreement, including but not limited to costs and expenses of or relating to
(i) the preparation, printing and filing of the Registration Statement and
exhibits thereto, each Preliminary Prospectus, the Prospectus, any amendment or
supplement to the Registration Statement or the Prospectus, the Custody
Agreements and the Powers of Attorney, (ii) the preparation and delivery of
certificates representing the Shares, (iii) furnishing (including costs of
shipping and mailing) such copies of the Registration Statement, the Prospectus
and any Preliminary Prospectus, and all amendments and supplements thereto, as
may be requested for use in connection with the offering and sale of the Shares
by the Underwriters or by dealers to whom Shares may be sold, (iv) the listing
of the Shares on the AMEX, (v) filing fees required to be paid by the
Underwriters to the NASD, (vi) the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 6(g), including the reasonable fees,
disbursements and other charges of counsel to the Underwriters in connection
therewith, and the preparation and printing of preliminary, supplemental and
final Blue Sky memoranda, (vii) counsel and accountants to the Company and
(viii) the transfer agent for the Shares. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
each of the Selling Stockholders will pay, or reimburse if paid by the
Representatives, all costs and expenses incident to the performance of such
Selling Stockholder under this Agreement, including, but not limited to, cost
and expenses of or relating to counsel to such Selling Stockholder.
(b) If this Agreement is terminated for any reason
permitted hereunder, the Company will reimburse the several Underwriters for
all out-of-pocket expenses (including the fees, disbursements and other charges
of counsel to the Underwriters) incurred by them in connection herewith.
8. Conditions of the Obligations of the Underwriters. The
obligations of each Underwriter to purchase the Firm Shares or the Options
Shares hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has
become effective shall have been received by the Representatives not later than
2:00 p.m., New York City time, on the date of this Agreement and all filings
required by Rules 424 and 430A of the Rules and Regulations shall have been
made.
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<PAGE> 22
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the
Commission or such authorities and (iv) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Representatives and the
Representatives did not object thereto in good faith, and the Representatives
shall have received certificates, dated the Closing Date and the Option Closing
Date and signed by the Chief Executive Officer of the Company and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of the foregoing
clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not
have been a material adverse change in the general affairs, business,
prospects, properties, management, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
and (ii) neither the Company nor any of its Subsidiaries shall have sustained
any material loss or interference with its business, assets or properties from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Registration Statement
and the Prospectus, if in the judgment of the Representatives any such
development makes it impracticable or inadvisable to consummate the sale and
delivery of the Shares by the Underwriters at the initial public offering
price.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been
no litigation or other proceeding instituted against the Company or any of its
Subsidiaries or any of their respective officers, directors or stockholders in
their capacities as such, or any of their respective assets or properties,
before or by any Governmental Body in which litigation or proceeding an
unfavorable ruling, decision or finding could reasonably be expected to
materially and adversely affect the business, properties, business prospects,
condition (financial or otherwise), net worth or results of operations of the
Company and its Subsidiaries, taken as a whole.
(e) Each of the representations and warranties of the
Company contained herein shall be true and correct at the Closing Date and,
with respect to the Option Shares, at the Option Closing Date, as if made on
such date, and all covenants and agreements herein contained to be performed on
the part of the Company and all conditions herein contained to be fulfilled or
complied with by the Company at or prior to the Closing Date and, with respect
to the Option Shares, at or prior to the Option Closing Date, shall have been
fully performed, fulfilled or complied with.
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<PAGE> 23
(f) The Representatives shall have received an opinion,
dated the Closing Date and the Option Closing Date, from Rogers & Hardin,
Atlanta, Georgia, counsel for the Company in the form attached hereto as
Exhibit A. In rendering any such opinion, such counsel may rely, as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials and, as to matters
involving the application of laws of any state other than the State of Georgia
and the General Corporation Law of the State of Delaware (to the extent
satisfactory in form and scope to counsel for the Underwriters) such counsel
may rely upon the opinion of local counsel to the Company. The foregoing
opinion shall also state that the Underwriters are justified in relying upon
such opinion of local counsel, and copies of such opinion shall be delivered to
the Representatives and counsel for the Underwriters.
In addition, such counsel shall state that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel has
participated in conferences with officers and representatives of the Company
and with the Accountants, at which conferences such counsel made inquiries of
such officers, representatives and Accountants and discussed the contents of
the Registration Statement and the Prospectus and, on the basis of the
foregoing, nothing has come to such counsel's attention that causes such
counsel to believe that the Registration Statement as of the Effective Date and
as of the date of such opinion contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus as of its date and as of the date of such opinion,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need not
express any belief with respect to the financial statements, schedules and
other financial data included in the Registration Statement or the Prospectus).
References to the Registration Statement and the Prospectus in such
opinion shall include any amendment or supplement thereto at the date of such
opinion.
(g) The Representatives shall have received an opinion,
dated the Closing Date and the Option Closing Date, from regulatory counsel for
the Company in each of the States of Wisconsin, Oregon, Michigan and Colorado,
which counsel shall be acceptable to the Underwriters and each such opinion to
relate to matters involving health care licensing and to be in the form
attached hereto as Exhibit B.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials. The foregoing opinion shall also
state that the Underwriters are justified in relying upon such opinion of local
counsel, and copies of such opinion shall be delivered to the Representatives
and counsel for the underwriters.
References to the Registration Statement and the Prospectus in such
opinion shall include any amendment or supplement thereto at the date of such
opinion.
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<PAGE> 24
(h) The Representatives shall have received an opinion,
dated the Closing Date or the Option Closing Date, as the case may be, from
counsel for each of the Selling Stockholders, which counsel shall be
satisfactory to the Underwriters, such opinion to be in the form attached
hereto as Exhibit C.
References to the Registration Statement and the Prospectus in such
opinion shall include any amendment or supplement thereto at the date of such
opinion.
(i) The Representatives shall have received an opinion,
dated the Closing Date and the Option Closing Date, from Jones, Day, Reavis &
Pogue, counsel to the Underwriters, which opinion shall be satisfactory in all
respects to the Representatives. In rendering such opinion, such counsel may
rely as to all matters of ______________ law upon the opinion of
_________________.
(j) Concurrently with the execution and delivery of this
Agreement, KPMG shall have furnished to the Representatives a letter, dated the
date of its delivery (the "Original Letter"), addressed to the Representatives
and in form and substance satisfactory to the Representatives, confirming that
(i) they are independent public accountants with respect to the Company and its
Subsidiaries, Crossings and its subsidiaries and ALS-Midwest and its affiliates
within the meaning of the Act and the Rules and Regulations; (ii) in their
opinion, the financial statements and any supplementary financial information
and schedules (and pro forma financial information) included in the
Registration Statement and examined by them comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations; (iii) on the basis of procedures, not constituting an
examination in accordance with generally accepted auditing standards, set forth
in detail in the Original Letter, including performance of the procedures
specified by the American Institute of Certified Public Accountants for a
review of interim financial information as described in SAS No. 71 "Interim
Financial Information," on the unaudited financial statements included in the
Registration Statement and the Prospectus, a reading of the unaudited financial
statements and other information referred to below, a reading of the latest
available interim financial statements of the Company and its Subsidiaries,
inspections of the minute books and corporate records of the Company and its
Subsidiaries, since the latest audited financial statements included in the
Prospectus, inquiries of officials of the Company responsible for financial and
accounting matters and such other inquiries and procedures as may be specified
in the Original Letter to a date not more than five days prior to the date of
the Original Letter, nothing came to their attention that caused them to
believe that: (A) the unaudited financial statements and schedules of the
Company and its subsidiaries, Crossings and its subsidiaries and ALS-Midwest
and its subsidiaries included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act and
the Rules and Regulations, or are not fairly presented in conformity with GAAP
applied on a basis substantially consistent with the basis for the audited
financial statements included in the Prospectus; (B) any other unaudited income
statement data and balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited financial statements from which
such data and items were derived, and any such unaudited data and items were
not determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited financial statements included in the
Prospectus;(C) in the unaudited financial statements which were not included
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<PAGE> 25
in the Prospectus but from which were derived any unaudited financial
statements referred to in clause (A) and any unaudited income statement data
and balance sheet items included in the Prospectus and referred to in clause
(B) were not determined on a basis substantially consistent with the basis for
the audited financial statements included in the Prospectus; (D) the unaudited
pro forma financial statements included in the Prospectus do not comply as to
form in all material respects with the applicable accounting requirements of
the Act and the Rules and Regulations or the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of those
statements; (E) as of a specified date not more than five days prior to the
date of the Original Letter, there have been any changes in the capital stock
of the Company and its Subsidiaries, or any increase in the long-term debt of
the Company and its Subsidiaries, or any decreases in net current assets or net
assets or other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in the Original Letter; and (F)
for the period from the date of the latest financial statements included in the
Prospectus to the specified date referred to in Clause (E), there were any
decreases in revenue or operating profit (loss) or the total or per share
amounts of net income (loss) or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and with any other
period of corresponding length specified by the Representatives, except in each
case for decreases or increases which the Prospectus discloses have occurred or
may occur or which are described in the Original Letter; and (iv) in addition
to the examination referred to in their reports included in the Prospectus and
the procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an examination in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives, which
are derived from the general accounting, financial or other records of the
Company and its Subsidiaries, as the case may be, which appear in the
Prospectus or in Part II of, or in exhibits or schedules to, the Registration
Statement, and have compared such amounts, percentages and financial
information with such accounting, financial and other records and have found
them to be in agreement. Concurrently with the execution and delivery of this
Agreement, Andersen shall have furnished to the Representatives a letter, dated
the date of its delivery (the "Andersen Original Letter"), addressed to the
Representatives and in form and substance satisfactory to the Representatives,
confirming that (i) they are independent accountants with respect to Heartland
and its subsidiaries within the meaning of the Act and the Rules and
Regulations; (ii) in their opinion, the financial statements and any
supplementary financial information and schedules (and pro forma financial
information) included in the Registration Statement and examined by them comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Rules and Regulations; and (iii) in addition to the
examination referred to in their reports included in the Prospectus, they have
carried out certain specified procedures, not constituting an examination in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting, financial or
other records of Heartland and its subsidiaries which appear in the Prospectus
and have compared such amounts, percentages and financial information with such
accounting, financial and other records and have found them to be in agreement.
At the Closing Date and, as to the
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<PAGE> 26
Option Shares, the Option Closing Date, each of the Accountants shall have
furnished to the Representatives a letter, dated the date of its delivery,
which shall confirm, on the basis of a review in accordance with the procedures
set forth in the Original Letter, that nothing has come to their attention
during the period from the date of the Original Letter or the Anderson Original
Letter, as the case may be, to a date (specified in the letter) not more than
five days prior to the Closing Date or the Option Closing Date, as the case may
be, which would require any change in the Original Letter if it were required
to be dated and delivered at the Closing Date or the Option Closing Date, as
the case may be.
(k) At the Closing Date and the Option Closing Date,
there shall be furnished to the Representatives a certificate, dated the date
of its delivery, signed by each of the Chief Executive Officer and the Chief
Financial Officer of the Company, in form and substance satisfactory to the
Representatives, to the effect that:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, (x) the Registration Statement does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading and (y) the Prospectus does
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading and (B) since the Effective Date no
event has occurred as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein not
untrue or misleading in any material respect;
(ii) Each of the representations and warranties of the
Company contained in this Agreement were, when originally made, and
are, at the time such certificate is delivered, true and correct; and
(iii) Each of the covenants required herein to be performed
by the Company on or prior to the date of such certificate has been
duly, timely and fully performed and each condition herein required to
be complied with by the Company on or prior to the delivery of such
certificate has been duly, timely and fully complied with.
(l) The Shares shall be qualified for sale in such states
as the Representatives may reasonably request, each such qualification shall be
in effect and not subject to any stop order or other proceeding on the Closing
Date and the Option Closing Date.
(m) Prior to the Closing Date, the Shares shall have been
approved for listing on the AMEX, subject only to notice of issuance.
(n) At the Closing Date, there shall be furnished to the
Representatives a certificate, dated the date of its delivery, from each
Selling Stockholder (which may be signed by an Attorney-in-Fact), in form and
substance satisfactory to the Representatives, to the effect that:
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(i) (A) As of the date of such certificate, (x) no
information with respect to such Selling Stockholder included under
the caption "Principal and Selling Stockholders" in the Registration
Statement contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and (y)
information regarding such Stockholder included under the caption
"Principal and Selling Stockholders" in the Prospectus does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, in the light of the
circumstances under which they were made, not misleading and (B) since
the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the information under the caption
"Principal and Selling Stockholders" in the Prospectus in order to
make the statements therein regarding such Stockholder not untrue or
misleading in any material respect;
(ii) Each of the representations and warranties of such
Selling Stockholder contained in this Agreement were, when originally
made, and are, at the time such certificate is delivered, true and
correct; and
(iii) Each of the covenants required herein to be performed
by such Selling Stockholder on or prior to the date of such
certificate has been duly, timely and fully performed and each
condition herein required to be complied with by such Selling
Stockholder on or prior to the delivery of such certificate has been
duly, timely and fully complied with.
(o) On or prior to the Closing Date, the Representatives
shall have received a Lock-up Agreement from the persons referred to in Section
3(x) of this Agreement.
(p) The Company shall have furnished to the
Representatives such certificates, letters and other documents, in addition to
those specifically mentioned herein, as the Representatives may have reasonably
requested as to the accuracy and completeness at the Closing Date and the
Option Closing Date of any statement in the Registration Statement or the
Prospectus. The Company and the Selling Stockholders shall have furnished to
the Representatives such certificates, letters and other documents, in addition
to those specifically mentioned herein, as the representatives may have
reasonably requested as to the accuracy at the Closing Date and the Option
Closing Date of the representations and warranties of the Company or the
Selling Stockholders, as to the performance by the Company or the Selling
Stockholders of their obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Underwriters.
(q) Prior to the Closing, ALI shall have liquidated and
distributed to its members of Common Stock owned by it and certificates
representing at least the number of shares of Common Stock set forth opposite
the name of each ALI Selling Stockholder in column (2) of Schedule I hereto
shall have been delivered to the Custodian to be held in custody under the
Custody Agreement.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you. The Company
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and the Selling Stockholders will furnish you with such conformed copies of
such opinions, certificates, letters and other documents as you shall
reasonably request.
9. Indemnification and Contribution.
(a) The Company and, subject to Section 9(f) GranCare,
Inc. ("GranCare"), jointly and severally agree to indemnify and hold harmless
each Underwriter and each person, if any, who controls such Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), from and against any and all
losses, claims, damages or liabilities, joint or several (and actions in
respect thereof), to which they, or any of them, may become subject under the
Act or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement made in Section 3 of this Agreement (ii) any untrue
statement or alleged untrue statement of any material fact contained in (A) any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or (B)
any application or other document, or any amendment or supplement thereto,
executed by the Company and based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify the Shares
under the securities or blue sky laws thereof or filed with the Commission or
any securities association or securities exchange (each, an "Application"), or
(iii) the omission or alleged omission to state in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any amendment or supplement to
the Registration Statement or the Prospectus or any Application a material fact
required to be stated therein or necessary to make the statement therein (A) in
the case of the Registration Statement, any amendment or supplement to the
Registration Statement or any Application, not misleading and (B) in the case
of any Preliminary Prospectus or the Prospectus or any amendment on supplement
thereto, not misleading in light of the circumstances in which they were made,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and GranCare
will not be liable in any such case to the extent that any such loss, claim,
damage or liability based upon an untrue statement or omission or alleged
untrue statement or omission in any of such documents was made in reliance upon
and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use therein. This
indemnity agreement will be in addition to any liability that the Company or
GranCare might otherwise have. The Company and GranCare will not, without the
prior written consent of each Underwriter, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party
to each claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of each Underwriter and each such
controlling person from all liability arising out of such claim, action, suit
or proceeding.
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<PAGE> 29
(b) Each Selling Stockholder, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls each Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages or liabilities, joint or several (and actions in respect thereof), to
which they, or any of them, may become subject under the Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement made by such Selling Stockholder in Section 4 or 4A, as applicable,
of this Agreement, (ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement to the Registration
Statement or the Prospectus or (B) any Application executed by such Selling
Stockholder or based upon written information furnished by or on behalf of such
Selling Stockholder, or (iii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or any
Application a material fact required to be stated therein or necessary to make
the statement therein (A) in the case of the Registration Statement, any
amendment or supplement to the Registration Statement or any Application, not
misleading and (B) in the case of any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, not misleading in light of the
circumstances in which they were made, and will reimburse, as incurred, each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action; provided,
however, that such Selling Stockholder will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based solely upon an untrue statement or omission or alleged untrue statement
or omission in any of such documents made in reliance upon and in conformity
with information relating to any Underwriter furnished in writing to the
Company by the Representatives on behalf of any Underwriter expressly for
inclusion therein; and provided further, that such Selling Stockholder will be
liable, in the case of clauses (ii) and (iii) above, only to the extent that
such loss, claim, damage, lability or action arises out of or is based upon any
untrue statement or omission or alleged untrue statement or omission made in
the Registration Statement or any amendment thereto or in the Prospectus or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with information furnished to the Company by such Selling
Stockholder for use in the Registration Statement. The Underwriters each
expressly acknowledge that none of the Selling Stockholders has provided any
information to the Underwriters with respect to the Registration Statement, the
Prospectus, any supplement or amendment of either or any Application other than
(i) the name and address of such Selling Stockholder included under the caption
"Principal and Selling Stockholders," (ii) the number of shares beneficially
owned by such Selling Stockholder under the caption "Principal and Selling
Stockholders," and (iii) the information (if any) contained in the footnotes
and related to such Selling Stockholder under the caption "Principal and
Selling Stockholders." This indemnity agreement will be in addition to any
liability that such Selling Stockholder might otherwise have. Such Selling
Stockholder will not, without the prior written consent of each Underwriter,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within
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<PAGE> 30
the meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to each claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of each Underwriter and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding. The liability of such Selling Stockholder under
this Section 9(b) shall be limited to an amount equal to the aggregate initial
public offering price of the Shares sold by such Selling Stockholder to the
Underwriters. The Company and such Selling Stockholder may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(c) Each Underwriter, severally and not jointly, will
indemnify and hold harmless the Company, each Selling Stockholder, each person,
if any, who controls the Company or any of the Selling Stockholders within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
director of the Company and each officer of the Company who signed the
Registration Statement against any losses, claims, damages or liabilities,
joint or several (and actions in respect thereof) to which the Company, the
Selling Stockholders and any such director, director nominee, officer or
controlling person may become subject under the Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement to the Registration
Statement or the Prospectus or any Application, or material fact required to be
stated therein or (ii) the omission or the alleged omission to state in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or any
Application, a material fact required to be stated therein or necessary to make
the statement therein (A) in the case of the Registration Statement, any
amendment or supplement to the Registration Statement or any Application, not
misleading and (B) in the case of any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, not misleading in light of the
circumstances in which they were made, in all cases to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives expressly for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company, the Selling Stockholders
and any such director, director nominee, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or any action in respect thereof. The Company and the Selling
Stockholders acknowledge that, for all purposes under this Agreement, the
statements set forth in the [third] paragraph under the heading "Underwriting"
and the information in the last two paragraphs on the inside front cover of any
Preliminary Prospectus and the Prospectus constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives on behalf of the Underwriters expressly for inclusion in the
Registration Statement, any Preliminary Prospectus or the Prospectus. This
indemnity agreement will be in addition to any liability that each Underwriter
may otherwise have.
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(d) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
or parties under this Section 9, notify such indemnifying party or parties of
the commencement thereof; but the omission so to notify that indemnifying party
or parties will not relieve it or them from any liability which it or they may
have to any indemnified party under the foregoing provisions of this Section 9
or otherwise unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against an indemnified party and it notifies an
indemnifying party or parties of its commencement, the indemnifying party or
parties against which a claim is made will be entitled to participate therein
and, to the extent that it or they may wish, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so as to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 9 for any
legal or other expenses other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the preceding sentence (it being understood,
however, that in connection with such action the indemnifying party shall not
be liable for the expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially similar actions
in the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Representatives in the case of paragraph (a)
of this Section 9, representing the indemnified parties under such paragraph
(a) who are parties to such action or actions), (ii) a conflict or potential
conflict exists (based on advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party), (iii) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of this action, or (iv) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expense of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party, unless such indemnified party waived its rights under this Section 9 in
which case the indemnified party may effect such a settlement without such
consent.
(e) If the indemnification provided for in the foregoing
paragraphs of this Section 9 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a), (b) or (c) above in respect of any
losses, claims, damages or liabilities (or actions in respect thereof) referred
to therein, then each indemnifying party shall contribute to the
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<PAGE> 32
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party or parties, on the one hand, and the indemnified party, on
the other, from the offering of the Shares or (ii) if, but only if, the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand, and the indemnified party, on
the other, in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders, on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total proceeds from the offering of
the Shares (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page
of the Prospectus; provided that, in the event the Underwriters shall have
purchased any Option Shares hereunder, any determination of the relative
benefits received by the Company, the Selling Stockholders or the Underwriters
from the offering of the Shares shall include the total proceeds from the
offering (before deducting expenses) received by the Company and the Selling
Stockholders, and the underwriting discounts and commissions received by the
Underwriters from the sale of such Option Shares, in each case as set forth in
the notes to the table on the cover page of the Prospectus. Relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriters through the Representatives, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, as well as any other relevant equitable
considerations with respect to such offering. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 9(e) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities
(or actions in respect thereof) referred to above in this Section 9(e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9(e), no Selling
Stockholder shall be required to contribute any amount in excess of the
aggregate initial public offering price of the Shares sold by such Selling
Stockholder to the Underwriters. Notwithstanding the provisions of this
Section 9(e), no Underwriter shall be required to contribute any amount in
excess of the total underwriting discounts received by it with respect to the
Shares purchased by such Underwriter under this Agreement, less the aggregate
amount of any damages that such Underwriter has otherwise been required to pay
in respect of the same or any substantially similar claim. No person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
as provided in this Section 9(e) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 9(e),
each person, if any,
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who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act will have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, will have the same rights to contribution as
the Company and the Selling Stockholders, subject in each case to the
provisions of this paragraph (e). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made under this Section 9(d), will notify any such party or parties from
whom contribution may be sought, but the omission so to notify will not relieve
the party or parties from whom contribution may be sought from any other
obligation(s) it or they may have hereunder or otherwise than under this
Section 9(d). The contribution agreement set forth above shall be in addition
to any liabilities which any indemnifying party may otherwise have. No party
will be liable for contribution with respect to any action or claim settled
without its written consent (which consent will not be unreasonably withheld).
(f) No indemnification or contribution provided for in
Section 9(a) by GranCare shall be available to any Underwriter, its officers,
directors, partners, employees, agents or counsel, or any person who controls
any Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (each an "Underwriter Indemnified Party") until
such Underwriter Indemnified Party has first used its best efforts to pursue
and exhaust all remedies (including the enforcement and collection of judgments
or claims against the Company) it may have against the Company under Section
9(a). Without limiting the generality of the foregoing, an Underwriter
Indemnified Party shall be deemed to have used its best efforts to pursue and
exhaust all remedies it may have against the Company, and may pursue any
remedies it may have against GranCare, if (A) such Underwriter Indemnified
Party is in the process of pursuing remedies against the Company and any of the
following events occurs, or, immediately prior to the time at which such
Underwriter Indemnified Party commences the process of pursuing remedies
against the Company, any of the following events has occurred and is
continuing: (1) the Company files a petition, answer or any pleading seeking
or acquiescing in any reorganization, liquidation or other relief under chapter
7 or 11 of the bankruptcy code; (2) the Company seeks or acquiesces in the
appointment of a trustee (other than a trustee appointed solely for purposes of
facilitating the issuance of any debt securities of the Company), receiver or
liquidator of all or part of its assets; or (3) the Company makes a general
assignment for the benefit of its creditors, (B) a court of competent
jurisdiction: (1) appoints a trustee, receiver or liquidator of all or part of
the Company's assets; or (2) determines in any action, suit or proceeding that
the Company is insolvent (in the accounting, bankruptcy, equity or legal
definitions), or (C) a court or arbitration panel of competent jurisdiction
enters an order in any action, suit or proceeding by such Underwriter
Indemnified Party for indemnification from the Company that is adverse to such
Underwriter Indemnified Party. Notwithstanding the foregoing, if, in the
reasonable judgment of any Underwriter Indemnified Party, the applicable
statute of limitations for any potential action, suit or proceeding by such
Underwriter Indemnified Party for indemnification against GranCare will expire,
such Underwriter Indemnified Party may name GranCare in any action, suit or
proceeding to which the Company is also a party solely for purposes of
preserving any rights such Underwriter Indemnified Party may have to seek
indemnification from the Selling
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<PAGE> 34
Stockholder after having used its best efforts to pursue and exhaust all
remedies it may have against the Company.
10. Termination. The obligations of the several Underwriters
under this Agreement may be terminated at any time prior to the Closing Date
(or, with respect to the Option Shares, on or prior to the Option Closing
Date), by notice to the Company from the Representatives, without liability on
the part of any Underwriter to the Company or the Selling Stockholders if,
prior to delivery and payment for the Firm Shares (or the Option Shares, as the
case may be), in the sole judgment of the Representatives, (i) trading in any
of the equity securities of the Company shall have been suspended by the
Commission or by an exchange that lists the Shares, (ii) trading in securities
generally on the AMEX, the New York Stock Exchange or the International Stock
Exchange of the United Kingdom and the Republic of Ireland, Limited shall have
been suspended or limited or minimum or maximum prices shall have been
generally established on any of such exchanges, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by any of such exchanges
or by order of the Commission or any court or other governmental authority,
(iii) a general banking moratorium shall have been declared by Federal, New
York State or United Kingdom authorities or (iv) any material adverse change in
the financial or securities markets in the United States or United Kingdom or
any outbreak or material escalation of hostilities or declaration by the United
States or the United Kingdom of a national emergency or war or other calamity
or crisis shall have occurred, the effect of any of which is such as to make
it, in the sole judgment of the Representatives, impracticable or inadvisable
to market the Shares on the terms and in the manner contemplated by the
Prospectus. Any such termination will not affect the obligations set forth in
Sections 7 and 9.
11. Default of Underwriters. If one or more Underwriters default
in their obligations to purchase Firm Shares or Option Shares hereunder and the
aggregate number of such Shares that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Shares or Option Shares to be purchased by all of the
Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Shares by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Shares or Option
Shares that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Shares that is more than ten percent of the aggregate number of Firm
Shares or Option Shares, as the case maybe, to be purchased by all of the
Underwriters at such time hereunder, and if arrangements satisfactory to the
Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Shares with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter, the Company or the Selling
Stockholders other than as provided in Section 12 hereof. In the event of any
default by one or more Underwriters as described in this Section 11, the
Representatives shall have the right to postpone the Firm Closing Date or the
Option Closing Date, as the case may be,
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<PAGE> 35
established as provided in Section 11 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Shares or Option Shares, as
the case may be. As used in this agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section 11. Nothing
herein shall relieve any defaulting Underwriter from liability for its default.
12. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers, the Selling Stockholders and the several Underwriters set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, any Selling Stockholder, any Underwriter or any controlling person
referred to in Section 9 hereof and (ii) delivery of and payment for the
Shares. The respective agreements, covenants, indemnities and other statements
set forth in Sections 7 and 9 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
13. Notices. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 450 N.
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005, Attention:
President, (b) if to the Selling Stockholders, to the Power of Attorney at the
address set forth in the Custody Agreement, or (c) if to the Underwriters, to
the Representatives at the offices of NatWest Securities Limited, c/o
[___________ _____________________]. Any such notice shall be effective only
upon receipt. Any notice under Section 9 or 10 may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.
14. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, the Selling
Stockholders and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company and the Selling Stockholders contained in Section 9 of this Agreement
shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Underwriters contained in Section
9 of this Agreement shall also be for the benefit of the directors of the
Company, the officers of the Company who have signed the Registration Statement
and any person or persons who control the Company or the Selling Stockholders
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Shares from any Underwriter shall be deemed a successor because
of such purchase. This Agreement shall not be assignable by any party hereto
without the prior written consent of the other party.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE
-35-
<PAGE> 36
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-36-
<PAGE> 37
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
ALTERNATIVE LIVING SERVICES, INC.
By:
----------------------------------
Name:
Title:
ALTERNATIVE LIVING INVESTORS, L.L.C.
By:
----------------------------------
Name:
Title:
SELLING STOCKHOLDERS:
EVERGREEN HEALTHCARE, INC.
(a wholly-owned subsidiary of GranCare, Inc.)
CAPITAL CONSULTANTS, INC., as agent and investment
manager for the individuals and entities listed
on Schedule IV hereto
CARE LIVING CENTERS, INC.
HEARTLAND DEVELOPMENT CORPORATION
Dr. Jonathan S. Berman
Joel H. Shapiro
Merton J. Segal and Beverly Segal
[ALI MEMBERS]
By:
----------------------------------------------
[William G. Petty]
Attorney-in-Fact
-37-
<PAGE> 38
Confirmed as of the date first
above mentioned:
NATWEST SECURITIES LIMITED
By:
----------------------------------
Name:
Title:
McDONALD & COMPANY SECURITIES, INC.
By:
----------------------------------
Name:
Title:
THE CHICAGO CORPORATION
By:
----------------------------------
Name:
Title:
Acting on behalf of
themselves and as the
Representatives of the
other several Underwriters
named in Schedule II hereof.
-38-
<PAGE> 39
SCHEDULE I
SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
(1) (2)
Number of Firm Maximum Number of
Shares to be Option Shares
Sold to be Sold
-------------- -----------------
<S> <C> <C>
GranCare, Inc.(*) . . . . . . . . . . . . . . . . . . 1,852,493 39,809
Capital Consultants, Inc. . . . . . . . . . . . . .
742,602 0
Care Living Centers, Inc.(*) . . . . . . . . . . . . 0 29,049
Heartland Development Corporation . . . . . . . . . . 198,547 0
Dr. Jonathan S. Berman . . . . . . . . . . . . . . . 6,492 0
Joel H. Shapiro . . . . . . . . . . . . . . . . . . . 7,960 0
Merton J. Segal and Beverly Segal . . . . . . . . . . 4,406 0
[Members of ALI](8)(*) (**) . . . . . . . . . . . . . 0 [700,000]
--------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . 2,812,500 768,858
========= ========
</TABLE>
- ------------------------
(*) Participating in sale of Option Shares.
(**) Member of ALI. Option Shares to be sold will be distributed by ALI to
member prior to the Closing and placed automatically in custody under
the Custody Agreement.
-39-
<PAGE> 40
SCHEDULE II
UNDERWRITERS
<TABLE>
<CAPTION>
(1) (2) (3)
Number of
Number of Firm Shares
Firm Shares to be Aggregate
to be Purchased Number of
Purchased from the Firm
from the Selling Shares to be
Company Stockholders Purchased
<S> <C> <C> <C>
NatWest Securities
Limited . . . . . . . . . . . . . . . . . . .
McDonald & Company
Securities, Inc. . . . . . . . . . . . . . .
The Chicago Corporation . . . . . . . . . . . .
[Others] . . . . . . . . . . . . . . . . . . .
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . 3,187,500 2,812,500 6,000,000
========= ========= =========
</TABLE>
-40-
<PAGE> 41
SCHEDULE III
SUBSIDIARIES
[To Come]
-41-
<PAGE> 42
SCHEDULE IV
CCI HOLDERS
[To Be Provided]
-42-
<PAGE> 43
DRAFT OF 7/16/96
EXHIBIT A
FORM OF OPINION OF COMPANY COUNSEL
___________, 1996
NATWEST SECURITIES LIMITED
McDONALD & COMPANY SECURITIES, INC.
THE CHICAGO CORPORATION
As Representatives of the
several Underwriters
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M 3XT
England
Re: 6,000,000 Shares of Common Stock, par value $.01 per
share of Alternative Living Services, Inc.
Ladies and Gentlemen:
We have acted as counsel to Alternative Living Services, Inc., a
Delaware corporation (the "Company"), in connection with the purchase on this
date by you and the other underwriters (collectively, the "Underwriters") named
in Schedule II of that certain Underwriting Agreement dated __________________,
1996, among the Underwriters, the Company and the Selling Stockholders (as
defined therein) (the "Underwriting Agreement") of an aggregate of 6,000,000
shares (the "Firm Shares") of the Company's common stock, par value $.01 (the
"Common Stock"), of which (i) 2,831,358 shares in the aggregate are to be sold
by the Selling Stockholders and (ii) 3,168,642 shares are to be issued and sold
by the Company. This opinion is furnished to you pursuant to Section 8(f) of
the Underwriting Agreement. Terms used herein and not defined herein are used
as defined in the Underwriting Agreement.
In connection with this opinion, we have reviewed such documents and
matters of law as we have deemed necessary for the purposes of expressing the
opinions set forth herein. Based upon the foregoing, we are of the opinion
that:
1. The Company is duly organized, validly existing and
in good standing under the laws of the State of Delaware. We are not aware of
any subsidiaries of the Company other than the Subsidiaries. Each of the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the state of its incorporation or formation. The Company and each of
the Subsidiaries has full corporate or other power and authority
A-1
<PAGE> 44
to conduct all the activities conducted by it, to own or lease all the
properties and assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company and
each of its Subsidiaries is duly licensed or qualified to do business and in
good standing as a foreign corporation or partnership, as the case may be, in
all jurisdictions in which the nature of the activities conducted by it or the
character of the properties and assets owned or leased by it makes such
licensing or qualification necessary, except where the failure to so qualify
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole. To the best of our knowledge after due inquiry, the Company
beneficially owns the percentage indicated in Exhibit 21.1 of the Registration
Statement of the outstanding equity interests in each of the Subsidiaries, free
and clear of all Encumbrances. All of the equity interests held by the Company
in each of the Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights.
2. The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights arising by or through the Company. The Shares to be issued and sold by
the Company are duly authorized and, upon such issuance and payment therefor in
accordance with the terms of the Underwriting Agreement will be, validly
issued, fully paid and nonassessable and are not the subject to any preemptive
or similar rights arising by or through the Company. The Company has, and,
upon completion of the sale of the Shares, will have, an authorized, issued and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. The description of the securities of the Company in the
Registration Statement and the Prospectus is complete and accurate in all
material respects.
3. To the best our knowledge after due inquiry, except
as set forth in the Registration Statement and the Prospectus, the Company does
not have outstanding any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into or
exchangeable for, or any contracts or commitments to issue or sell, any shares
of its capital stock or any such warrants, convertible securities or
obligations.
4. To the best of our knowledge after due inquiry,
except as set forth in the Registration Statement and the Prospectus, no person
has any right to have any securities of the Company held by them registered
under the Act.
5. The Company (either directly or through its
Subsidiaries) has good and indefeasible title to all properties and assets
described in the Registration Statement and Prospectus as owned by it, free
and clear of all Encumbrances other than those described in the Registration
Statement and Prospectus and other than those that do not materially adversely
affect the value of such properties and assets and do not interfere with the
use made or proposed to be made of such properties and assets. The Company
(either directly or through its Subsidiaries) has valid and subsisting
leasehold interests in the properties and assets described in the Registration
Statement and Prospectus as leased by it, free and clear of all Encumbrances,
other than those described in the Registration Statement and
A-2
<PAGE> 45
Prospectus and those that do not materially adversely affect the value of such
properties and assets and do not materially interfere with the use made, or
proposed to be made, of such properties and assets. The Company (either
directly or through its Subsidiaries) has valid and subsisting options to
purchase the properties described in the Registration Statement and Prospectus
under the caption "Business - Properties - Properties Under
Construction/Development" as being under development.
6. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act.
7. Except as set forth in the Registration Statement and
Prospectus, there are no actions, suits or proceedings pending or, to the best
of our knowledge after due inquiry, threatened against or affecting the Company
or any of its Subsidiaries or any of their respective directors, officers or
stockholders in their capacity as such, or any of the properties or assets
owned, leased or operated by the Company or any of its Subsidiaries, before or
by any Governmental Body, wherein an unfavorable ruling, decision or finding
would have a material adverse effect on the business, properties, prospects,
condition (financial or otherwise), net worth or results of operations of the
Company and its Subsidiaries, taken as a whole. There is no pending litigation
or governmental proceeding required to be described in the Prospectus that is
not described as required.
8. To the best of our knowledge after due inquiry, none
of the Company and its Subsidiaries is in breach or default (nor has an event
occurred which, with notice or lapse of time or both, would constitute a
default) in the due performance and observation of any term, covenant or
condition of any contract or other agreement to which it is a party or by which
its properties is bound or affected, which default could reasonably be
expected, individually or in the aggregate, to have a material adverse effect
on the business, properties, prospects, condition (financial or otherwise), net
worth or results of operations of the Company and its Subsidiaries, taken as a
whole. To the best of our knowledge after due inquiry, (i) the Company is not
in violation of any provision of its Certificate of Incorporation or Bylaws, as
amended, and (ii) none of the Subsidiaries is in violation of its
organizational documents, as amended.
9. No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation of the transactions contemplated by the Underwriting Agreement or
in connection with the issuance and sale of the Shares to be sold by the
Company, except such as have been obtained under the Act or the Rules and
Regulations and such as may be required under state securities or Blue Sky laws
or the bylaws and rules of the NASD in connection with the purchase and
distribution by the Underwriters of the Shares to be sold by the Company.
10. The Company has full power and authority to enter
into the Underwriting Agreement and to carry out all the terms and provisions
thereof to be carried out by it. The Underwriting Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding agreement of the Company and is
A-3
<PAGE> 46
enforceable against the Company in accordance with the terms thereof, except as
limited by general principles of equity relating to the availability of
remedies and except as rights to indemnity or contribution may be limited by
federal or state securities laws and the public policy underlying such laws.
11. The execution, delivery and the performance of the
Underwriting Agreement and the consummation of the transactions contemplated
thereby will not result in the creation or imposition of any Encumbrance upon
any of the properties or assets of the Company or any of its Subsidiaries
pursuant to the terms or provisions of, or result in a breach or violation of
or conflict with any of the terms or provisions of, or constitute a default
under, or give any other party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under, (i) the
Certificate of Incorporation or Bylaws of the Company, in each case as amended,
(ii) the organizational or charter documents of any of the Subsidiaries, as
amended, or (iii) any contract or other agreement to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective assets or properties are bound or
affected, or (iv) any judgment, ruling, decree, order, law, statute, rule or
regulation of any Governmental Body applicable to the Company or any of its
Subsidiaries or their business or properties, except, in the case of clauses
(iii) and (iv), any violation which could not reasonably be expected,
individually or in the aggregate, to have a material adverse effect on the
business, properties, prospects, condition (financial or otherwise), net worth
or results of operations of the Company and its Subsidiaries, taken as a whole.
12. The Company has full power and authority to
authorize, issue, offer and sell the Shares to be sold by it, as contemplated
by the Underwriting Agreement, free of any preemptive or similar rights. The
offer, issuance and sale by the Company of any shares of its capital stock
prior to the Effective Date was exempt from the registration requirements of
the Act and applicable state securities, real estate syndication and blue sky
laws.
13. All holders of securities of the Company have waived
any rights to the registration of any securities of the Company which they may
have as a result of the filing of the Registration Statement.
14. There is no document or contract of a character
required to be described in the Registration Statement or Prospectus or to be
filed as a exhibit to the Registration Statement which is not described or
filed as required.
15. Each of the Company and its Subsidiaries owns, or is
licensed or otherwise has the right to use, all material trademarks and trade
names which are used in or necessary for the conduct of its business as
described in the Registration Statement and Prospectus. To the best of our
knowledge after due inquiry, no claims have been asserted by any person to the
use of any such trademarks or trade names or challenging or questioning the
validity or effectiveness of any such trademark or trade name.
16. The Registration Statement has become effective under
the Act and, to the best of our knowledge after due inquiry, no stop order
preventing or suspending the
A-4
<PAGE> 47
use of the Registration Statement or Prospectus, has been issued and no
proceeding for that purpose has been instituted or is pending or threatened by
the Commission.
17. The Registration Statement, as of the Effective Date,
and the Prospectus, as of its date and as of the date hereof, complied or
complies, as the case may be, in all material respects with the applicable
requirements of the Act and the Rules and Regulations of the Commission.
18. The form of certificate evidencing the Shares has
been duly approved by all necessary corporate action of the Company and
complies as to form with the requirements of the Delaware General Corporation
Law.
19. The statements in the Prospectus under the captions
"Business - Joint Ventures and Strategic Alliances," "History and
Organization," "Management - Employment and Services Agreements" and "Certain
Relationships and Related Transactions," insofar as they purport to summarize
the provisions of documents referred to therein, and the statements in the
Prospectus under the captions "Description of Capital Stock" and "Shares
Eligible For Future Sale" insofar as they purport to summarize the provisions
of documents or matters of law referred to therein or constitute legal
conclusions, are accurate in all material respects.
Very truly yours,
Rogers & Hardin
A-5
<PAGE> 48
EXHIBIT B
FORM OF OPINION OF COMPANY REGULATORY COUNSEL
___________, 1996
NATWEST SECURITIES LIMITED
McDONALD & COMPANY SECURITIES, INC.
THE CHICAGO CORPORATION
As Representatives of the
several Underwriters
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M 3XT
England
Re: 6,000,000 Shares of Common Stock, par value $.01 per
share of Alternative Living Services, Inc.
Ladies and Gentlemen:
We have acted as counsel to Alternative Living Services, Inc., a
Delaware corporation (the "Company"), in connection with the purchase on this
date by you and the other underwriters (collectively, the "Underwriters") named
in Schedule II of that certain Underwriting Agreement dated __________________,
1996, among the Underwriters, the Company and the Selling Stockholders (as
defined therein) (the "Underwriting Agreement") of an aggregate of 6,000,000
shares (the "Firm Shares") of the Company's common stock, par value $.01 (the
"Common Stock"), of which (i) 2,831,358 shares in the aggregate are to be sold
by the Selling Stockholders and (ii) 3,168,642 shares are to be issued and sold
by the Company. This opinion is furnished to you pursuant to Section 8(g) of
the Underwriting Agreement. Terms used herein and not defined herein are used
as defined in the Underwriting Agreement.
In connection with this opinion, we have reviewed such documents and
matters of law as we have deemed necessary for the purposes of expressing the
opinions set forth herein. Based upon the foregoing, we are of the opinion
that:
1. Except as otherwise described in the Registration
Statement and Prospectus, each of the facilities described in the Registration
Statement under the captions "Business-Properties" and located in the State of
__________ is organized, licensed and operated in conformity with the
requirements for qualification as a licensed facility of the type set forth
next to the name of such Facility in Exhibit A hereto under the applicable
laws, rules and regulations of the State of __________ in which the Facilities
are located and
B-1
<PAGE> 49
is therefore able to conduct the Company's business of "assisted living"
described as being conducted at each such Facility in its beds as set forth
more fully in the Prospectus. Furthermore, the Company's _________________
facility in ______________, is not currently a licensed facility but is
operated as an independent living facility. Those facilities listed herein
which are not licensed under state law or which contain unlicensed beds do not
currently provide in those facilities or unlicensed beds services of a nature
which would require the Company or its Subsidiaries to be duly licensed to
provide the same.
2. The statements set forth under the headings "Risk
Factors-Governmental Regulation" and "Business-Government Regulation" in the
Registration Statement and the Prospectus, insofar as such statements
constitute a summary of the legal matters, documents or proceedings referred to
therein, provide accurate summaries of such legal matters, documents and
proceedings.
3. To our knowledge after reasonable investigation, the
conduct of the business of the Company and its Subsidiaries is not in violation
of any federal, state or local statute, administrative regulation or other law,
which violation is likely to have a material adverse effect on the Company and
its Subsidiaries, taken as a whole; and each of the Company and its
Subsidiaries has either (i) obtained all Licenses which are necessary or
required to be issued to the Company and its Subsidiaries for the ownership,
leasing and operation o f its Facilities and the conduct of its business as
presently conducted, except where the failure to obtain such Licenses would not
have a material adverse affect on each of the Company and its Subsidiaries or
(ii) taken all steps necessary to obtain such Licenses an depending issuance
thereof is lawfully operating its Facilities under Licenses issued in the name
of the prior operator thereof.
Although we assume no responsibility for the accuracy,
completeness and fairness of the statements contained in the Registration
Statement and Prospectus, we have participated in discussions with officers of
the Company regarding the provisions of the Prospectus described in Paragraph 2
of this opinion and no facts have come to our attention that lead us to believe
that the provisions of the Registration Statement described in Paragraph 2 of
this opinion as of the date it was declared effective and as of the date hereof
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the provisions of the
Prospectus described in Paragraph 2 of this opinion as of its date and the date
hereof, contained or contains any untrue statement of a material fact or
omitted or omits 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 were made, not misleading (it being understood that we have not been
requested to comment on, and express no comment with respect to, financial,
operating and statistical data and the historical and pro forma financial
statements, including the notes and schedules thereto, in the Prospectus).
Sincerely,
B-2
<PAGE> 50
EXHIBIT C
FORM OF OPINION OF SELLING STOCKHOLDERS
___________, 1996
NATWEST SECURITIES LIMITED
McDONALD & COMPANY SECURITIES, INC.
THE CHICAGO CORPORATION
As Representatives of the
several Underwriters
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M 3XT
England
Re: 6,000,000 Shares of Common Stock, par value $.01 per
share, of Alternative Living Services, Inc.
Ladies and Gentlemen:
We have acted as counsel to _________________, _______________ and
_________________________ (collectively, the "Selling Stockholders"), in
connection with the purchase on this date by you and the other underwriters
(collectively, the "Underwriters") named in Schedule II of that certain
Underwriting Agreement dated __________________, 1996, among the Underwriters,
Alternative Living Services, Inc., a Delaware corporation (the "Company"), and
certain stockholders of the Company including the Selling Stockholders (the
"Underwriting Agreement") of an aggregate of 6,000,000 shares (the "Firm
Shares") of the Company's common stock, par value $.01 (the "Common Stock"),
of which (i) 2,831,358 shares in the aggregate are to be sold by the Selling
Stockholders and (ii) 3,168,642 shares are to be issued and sold by the
Company. This opinion is furnished to you pursuant to Section 8(h) of the
Underwriting Agreement. Terms used herein and not defined herein are used as
defined in the Underwriting Agreement.
In connection with this opinion, we have reviewed such documents and
matters of law as we have deemed necessary for the purposes of expressing the
opinions set forth herein. Based upon the foregoing, we are of the opinion
that:
1. Each Selling Stockholder that is a corporation or
other business entity is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
C-1
<PAGE> 51
2. Each Selling Stockholder has full power and authority
to enter into the Underwriting Agreement and to carry out all the terms and
provisions thereof to be carried out by it. All authorizations and consents
necessary for the execution and delivery by each Selling Stockholder of the
Underwriting Agreement have been given. The Underwriting Agreement has been
duly authorized, executed and delivered by or on behalf of each Selling
Stockholder and constitutes a valid and binding agreement of each Selling
Stockholder and is enforceable against each Selling Stockholder in accordance
with the terms thereof, except as limited by general principles of equity
relating to the availability of remedies and except as rights to indemnity or
contribution may be limited by federal or state securities laws and the public
policy underlying such laws.
3. Each Selling Stockholder has full power and authority
to enter into the Power of Attorney in the form heretofore furnished to the
Underwriters and the Custody Agreement in the form heretofore furnished to the
Underwriters and to carry out all the terms and provisions thereof to be
carried out by it. All authorizations and consents necessary for the execution
and delivery by each Selling Stockholder of the Power of Attorney and the
Custody Agreement have been given. Each Power of Attorney and Custody
Agreement has been duly authorized, executed and delivered by or on behalf of
such Selling Stockholder and is enforceable against such Selling Stockholder in
accordance with the terms thereof, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
relating to or affecting creditors' rights generally or by general principles
of equity relating to the availability of remedies.
4. Each Selling Stockholder has (i) good and marketable
title to the Shares to be sold by such Selling Stockholder under the
Underwriting Agreement, free and clear of all Encumbrances, and (ii) full legal
right and power, and all authorizations and approvals required by law, to sell,
transfer and deliver the Shares to the Underwriters pursuant to the
Underwriting Agreement and to make the representations, warranties and
agreements made by such Selling Stockholder therein.
5. Upon the delivery of and payment for the Shares to be
sold by the Selling Stockholders under the Underwriting Agreement, the
Underwriters will receive good and marketable title to such Shares, free and
clear of all Encumbrances.
6. None of the execution, delivery or performance of the
Underwriting Agreement, the Power of Attorney or the Custody Agreement and the
consummation of the transactions contemplated therein by the Selling
Stockholders conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation or imposition of any
Encumbrance upon, any property or assets of any Selling Stockholder pursuant to
(i) the terms of its organizational documents; (ii) the terms of any contract
or other agreement to which any Selling Stockholder is a party or by which it
is bound or to which any of its properties is subject; (iii) any statute, rule
or regulation of any Governmental Body having jurisdiction
C-2
<PAGE> 52
over such Selling Stockholder or any of its activities or properties; or (iv)
the terms of any judgment, decree or order of any arbitration or Governmental
Body having such jurisdiction.
7. No consent, approval, authorization or order of, or
any filing or declaration with, any Governmental Body is required for the
consummation by any Selling Stockholder of the transactions on its part
contemplated by the Underwriting Agreement, the Custody Agreement or Power of
Attorney, except such as have been obtained under the Act or the Rules and
Regulations and such as may be required under state securities or Blue Sky laws
or the bylaws and rules of the NASD in connection with the purchase and
distribution by the Underwriters of the Shares to be sold by such Selling
Stockholder.
C-3
<PAGE> 53
EXHIBIT D
FORM OF LOCK-UP AGREEMENT
NATWEST SECURITIES LIMITED
McDONALD & COMPANY SECURITIES, INC.
THE CHICAGO CORPORATION
As Representatives of the
several Underwriters
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M 3XT
England
Ladies and Gentlemen:
The undersigned understands that Alternative Living Services,
Inc. (the "Company") has filed a Registration Statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
relating to the proposed sale of the Company's common stock, par value $.01 per
share (the "Common Stock") by the Company and certain existing stockholders of
the Company in a public offering (the "Offering") to be underwritten by NatWest
Securities Limited ("NatWest"), McDonald & Company Securities, Inc., The
Chicago Corporation (the "Representatives"), and other potential underwriters
(the "Underwriters"). NatWest has requested that certain stockholders of the
Company enter into this Agreement because the prospect of public sales of
Common Stock by the Company's stockholders during the period after the offering
would be detrimental to the proposed underwriting effort. The undersigned
recognizes that it is in the best financial interests of the undersigned, as a
stockholder of the Company, that the proposed public offering be completed.
In consideration of the foregoing and with the understanding
that the Underwriters will rely hereon in connection with their commitment to
underwrite the proposed public offering, the undersigned hereby agrees for the
benefit of the Company, the Representatives and the Underwriters not to,
without the prior written consent of NatWest, directly or indirectly, 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
D-1
<PAGE> 54
disposition) of any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for, shares of Common Stock for a period of 180
days after the date of the Underwriting Agreement related to the Offering.
Dated: , 1996
----------------------------
------------------------------
[Director/Officer/Stockholder]
D-2
<PAGE> 1
EXHIBIT 4.2
[LOGO] ALTERNATIVE LIVING SERVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
------ ------
A
CUSIP 02145K 10 7
SEE REVERSE FOR
CERTAIN DEFINITION
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
$.01 PAR VALUE PER SHARE, OF
ALTERNATIVE LIVING SERVICES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued under and shall be
subject to the laws of the State of Delaware and all of the provisions of the
Restated Certificate of Incorporation and Restated Bylaws of the Corporation,
and all of the amendments from time to time made thereto. This certificate is
not valid until countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
[SEAL]
/s/ William F. Lasky /s/ John W. Kneen
-------------------------- -----------------------
Chief Executive Officer Vice President and
and President Secretary
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, N.Y.)
Transfer Agent and Registrar,
By
Authorized Signature
<PAGE> 2
ALTERNATIVE LIVING SERVICES, INC.
This Corporation will furnish without charge to each stockholder who
so requests, a copy of the designations, powers, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Any such requests may be addressed to the Secretary
of the Corporation.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - _____________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors Act
_________________________________
(State)
Additional abbreviations may also be used though not in the above list
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[______________________________________]________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint__________________________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, ______________________________
________________________________________________________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the Certificate, in every particular,
without alteration or enlargement or any change whatever.
<PAGE> 1
EXHIBIT 10.64
PROMISSORY NOTE
$8,500,000.00 Boston, Massachusetts
June 28, 1996
FOR VALUE RECEIVED, NORTH SCHOENHERR LIMITED PARTNERSHIP, TWELVE/DRAKE
LIMITED PARTNERSHIP AND HAMILTON HOUSE LIMITED PARTNERSHIP, all having an
address c/o Alternative Living Services, Inc., 450 North Sunnyslope Road, Suite
300, Brookfield, Wisconsin 53005 (collectively and jointly and severally, the
"Maker") promise to pay to the order of MEDITRUST MORTGAGE INVESTMENTS, INC., a
Delaware corporation (hereinafter referred to as the "Lender")(the Lender and
each successor, owner, endorsee, bearer and holder of this Note being
hereinafter referred to as the "Holder") at its principal place of business
located at 197 First Avenue, Needham Heights, Massachusetts, 02194, the
principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000.00)
(hereinafter referred to as the "Loan Amount") or so much thereof as shall have
been advanced to the Maker, with interest on so much thereof as shall from time
to time be outstanding at the rate of interest defined below as the "Interest
Rate," except as otherwise specifically provided herein. Interest hereunder
shall be calculated on the basis of a 360-day year, but charged for the actual
days elapsed during each calendar year (or portion thereof) that the
indebtedness evidenced by this Note remains outstanding.
The Maker shall make the following payments to the Holder:
(i) on the date hereof, Maker shall pay the commitment fee in the
amount of Eighty Five Thousand Dollars ($85,000.00);
(ii) commencing on August 1, 1996, and on the first day of each calendar
month thereafter during the Loan Term, the Maker shall pay to the Holder
interest only in arrears and at the Interest Rate (as hereinafter defined); and
(iii) on October 1, 1996 (hereinafter referred to as the "Maturity
Date"), the Maker shall pay to the Holder the entire principal balance then
remaining unpaid, together with accrued and unpaid interest thereon and any
costs, charges and other amounts due under this Note and all of the other Loan
Documents (as hereinafter defined). The period from the date hereof through
the Maturity Date shall be referred to herein as the "Loan Term."
The "Interest Rate" shall be Ten Percent (10%) per annum.
In the event of any delinquency in the payment of any installment of
principal and interest due under this Note, or in the payment of any other
monetary obligation owed to the Holder under any of the Loan Documents, the
Maker shall pay interest on any such late payment calculated at the Advances
Rate (as defined in the Mortgage) from the date upon which the payment in
question was originally due until the date that the Holder actually
<PAGE> 2
receives such payment. However, nothing contained in this paragraph shall be
deemed to relieve the Maker of its obligation to make any and all payments due
and payable to the Lender pursuant to the provisions of this Note or any of the
other Loan Documents upon the dates set forth therein, it being acknowledged
that time is of the essence.
Except as may otherwise be specifically set forth herein or in any of the
other Loan Documents, all payments to be made to the Holder hereinunder or
under any of the other Loan Documents shall be made to the Holder at the
address shown above in lawful money of the United States of America, not later
than 12:00 Noon, Eastern Standard Time, on the date that such payment is due.
All payments received by the Holder after such time shall be deemed to have
been received by the Holder for the purpose of computing interest as of the
next Business Day (as defined in the Mortgage). If any payment to be made to
the Holder under any of the Loan Documents falls due on a day which is not a
Business Day, the due date therefore shall be extended to the next succeeding
Business Day.
This Note is secured by (i) a Mortgage and Security Agreement from NORTH
SCHOENHERR LIMITED PARTNERSHIP covering CLARE BRIDGE FARMINGTON HILLS having an
address at NORTH POINT BOULEVARD, UTICA, MICHIGAN, Mortgage and Security
Agreement from TWELVE/DRAKE LIMITED PARTNERSHIP covering UNIT NO. 2, HAMILTON
HOUSE having an address at 12 MILE ROAD, FARMINGTON HILLS, MICHIGAN, and a
Mortgage and Security Agreement from HAMILTON HOUSE LIMITED PARTNERSHIP
covering UNIT NO. 1, HAMILTON HOUSE having an address at 12 MILE ROAD,
FARMINGTON HILLS, MICHIGAN (collectively, the "Mortgages"), (ii) a Guaranty
(the "Guaranty") of even date herewith in favor of the Lender from Alternative
Living Services, Inc. (the "Guarantor") and (iii) an Environmental Indemnity
Agreement (the "Indemnity Agreement") of even date herewith by and among the
Maker, the Holder and the Guarantor (the Note, the Mortgages, the Indemnity
Agreement and the Guaranty also being referred to collectively as the "Loan
Documents").
In the event than any Event of Default (as defined in the Mortgages)
shall occur and be continuing, the entire unpaid principal amount of this Note
and all of the unpaid interest accrued thereon, shall at the election of the
Lender become immediately due and payable.
The Maker and all endorsers hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note and assent to the
extensions of the time of payment or forbearance or other indulgence without
notice.
THIS NOTE AND THE OBLIGATIONS OF THE MAKER HEREUNDER SHALL BE GOVERNED
BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties constituting the Maker has
caused this Note to be signed in its name as an instrument under seal by its
duly authorized officer on the date and in the year first above written.
WITNESS TO ALL SIGNATURES: MAKER:
NORTH SCHOENHERR
LIMITED PARTNERSHIP
WITNESS:
/s/ John W. Kneen By: /s/ William F. Lasky
- ---------------------------------- ----------------------------------
Name: John W. Kneen Name: William F. Lasky
its General Partner
TWELVE/DRAKE LIMITED PARTNERSHIP
WITNESS:
/s/ John W. Kneen By: /s/ William F. Lasky
- ---------------------------------- ----------------------------------
Name: John W. Kneen Name: William F. Lasky
its General Partner
HAMILTON HOUSE LIMITED
PARTNERSHIP
WITNESS:
/s/ John W. Kneen By: /s/ William F. Lasky
- ---------------------------------- ----------------------------------
Name: John W. Kneen Name: William F. Lasky
its General Partner
-3-
<PAGE> 4
DISBURSEMENT LETTER
June 28, 1996
Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham, MA 02194
Attention: Michael F. Bushee, Chief Operating Officer
RE: Eight Million Five Hundred Thousand and xx/100 Dollars ($8,500,000.00)
Loan (the "Loan") from Meditrust Mortgage Investments, Inc. ("MMI") to
North Schoenherr Limited Partnership, Twelve/Drake Limited Partnership
and Hamilton House Limited Partnership (collectively, the "Borrower")
Gentlemen:
In connection with the Loan, the undersigned hereby authorize you to
disburse the Loan proceeds as follows:
Loan Amount $ 8,500,000.00
LESS
<TABLE>
<CAPTION>
Payee Amount
- ----- ------
<S> <C>
Metropolitan Title Insurance Company per $(4,881,546.02)
wiring instructions on Exhibit A (for
title premium and other title charges,
and Borrower's balance of Loan proceeds)
Fidelity Bank per wiring instructions on $(1,485,622.99)
Exhibit B (for mortgage payoff on the
mortgaged property)
NBD Bank per wiring instructions on $(2,047,830.99)
Exhibit C (for mortgage payoff on the
mortgaged property)
Meditrust Mortgage Investments, Inc. $ (85,000.00)
(Commitment Fee)
TOTAL $ 8,500,000.00
==============
</TABLE>
<PAGE> 5
Page 2 of 4
Executed as a sealed instrument as of the date first above written.
Very truly yours,
NORTH SCHOENHERR LIMITED
PARTNERSHIP
By: Alternative Living Services--
Meditrust, Inc.
By: /s/ William F. Lasky
---------------------------------
Name: William F. Lasky
Title: President
TWELVE/DRAKE LIMITED PARTNERSHIP
By: Alternative Living Services--
Meditrust, Inc.
By: /s/ William F. Lasky
---------------------------------
Name: William F. Lasky
Title: President
HAMILTON HOUSE LIMITED PARTNERSHIP
By: Alternative Living Services--
Meditrust, Inc.
By: /s/ William F. Lasky
---------------------------------
Name: William F. Lasky
Title: President
<PAGE> 6
INTEREST RATE CONFIRMATION
June 28, 1996
Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attn: Michael F. Bushee, C.O.O.
RE: Eight Million Five Hundred Thousand and xx/100 Dollars ($8,500,000.00)
Loan (the "Loan") from Meditrust Mortgage Investments, Inc. ("MMI") to
North Schoenherr Limited Partnership, Twelve/Drake Limited Partnership
and Hamilton House Limited Partnership (collectively, the "Borrower")
Gentlemen:
This letter shall confirm our agreement to the establishment of Ten
percent (10%) as the "Interest Rate" defined in the Promissory Note (the "Note")
of the undersigned delivered to you in the original principal amount of
$8,500,000. In addition, this letter shall direct and authorize you to (i)
substitute a revised pages of the Note: dating the Note "June 28, 1996," and
inserting Ten percent (10%) in the definition of "Interest Rate," and correcting
a scrivener's error in the name of North Schoenherr Limited Partnership,
revising the first payment date to August 1, 1996 and deleting any prepayment of
interest at closing, and (ii) strike from the signature page of the Note the
same scrivener's error in the name of North Schoenherr Limited Partnership.
In addition, each of the undersigned hereby authorize you to date all of
the loan documents related to said Note as of June 28, 1996, and correct the
name of North Schoenherr Limited Partnership therein, whether by strike-outs or
substitution of changed pages.
<PAGE> 7
Witness the execution hereof as a Massachusetts instrument under seal.
Very truly yours,
NORTH SCHOENHERR LIMITED
PARTNERSHIP
By: Alternative Living Services --
Meditrust, Inc.
By: /s/ William F. Lasky
---------------------------------
Name: William F. Lasky
Title: President
TWELVE/DRAKE LIMITED PARTNERSHIP
By: Alternative Living Services --
Meditrust, Inc.
By: /s/ William F. Lasky
---------------------------------
Name: William F. Lasky
Title: President
HAMILTON HOUSE LIMITED PARTNERSHIP
By: Alternative Living Services --
Meditrust, Inc.
By: /s/ William F. Lasky
---------------------------------
Name: William F. Lasky
Title: President
<PAGE> 1
EXHIBIT 10.65
Amended and Restated Lease and Security Agreement
by and between
Nationwide Health Properties, Inc.,
a Maryland corporation,
as "Landlord"
and
Alternative Living Services, Inc.
a Delaware corporation
as "Tenant"
Dated June 18, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Renewal Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Construction of Expansion Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Original River Place Premises Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Initial Term Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Initial Term Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Renewal Term Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Renewal Term Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Total Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Rent Cap and Floor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. River Place Expansion Premises Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Initial Term Expansion Premises Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Initial Term Expansion Premises Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Renewal Term Expansion Premises Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Renewal Term Expansion Premises Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Total Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Expansion Premises Rent Cap and Floor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Proration for Partial Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Form for Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Absolute Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. Taxes, Assessments and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Right to Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Tax Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5 Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Fire and Other Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Public Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Professional Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Workers Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Boiler Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Business Interruption Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Application of this Section 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 Deductible Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6. Use, Maintenance and Alteration of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Tenant's Maintenance Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Permitted Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 No Liens; Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Alterations by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.7 Capital Improvements Funded by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.8 Compliance With IRS Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Condition And Title Of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8. Landlord and Tenant Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Tenant Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Landlord's Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9. Representations And Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Due Authorization And Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.3 No Breach of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10. Financial, Management and Regulatory Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Monthly Facility Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Quarterly Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.3 Annual Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.5 Regulatory Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. Events of Default and Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3 Receivership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.4 Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.5 Remedies Cumulative; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.6 Performance of Tenant's Obligations by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.7 Waiver of Redemption Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13. Damage by Fire or Other Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.1 Reconstruction Using Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.2 Surplus Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.3 No Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
14. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.1 Complete Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.3 Lease Remains in Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15. Provisions on Termination of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.1 Surrender of Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.2 Removal of Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.3 Title to Personal Property Not Removed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.4 Management of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.5 Correction of Deficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
16. Notices and Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
17. Right of Entry; Examination of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
18. Landlord May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
19. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
20. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
21. Preservation of Gross Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
22. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.1 Hazardous Material Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.2 Tenant Notices to Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.3 Extension of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
22.4 Participation in Hazardous Materials Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
22.5 Environmental Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
22.6 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
22.7 Hazardous Materials Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
22.8 Hazardous Materials Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
23. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
24. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
25. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
26. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
27. Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
28. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
29. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
30. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
31. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
32. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
33. Waiver and Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
34. Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
35. Incorporation of Recitals and Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
36. Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
37. Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
38. Joint and Several . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
39. Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 43
40. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
EXHIBITS
EXHIBIT A(1) LEGAL DESCRIPTION OF THE PREMISES
EXHIBIT A(2) LEGAL DESCRIPTION OF ACQUIRED PARCELS
EXHIBIT A(3) LEGAL DESCRIPTION OF EXCHANGED PARCEL
EXHIBIT B LANDLORD PERSONAL PROPERTY
EXHIBIT C SAMPLE PROCEDURES FOR DETERMINING BLENDED ANNUAL PERCENTAGE RATE
EXHIBIT D APPRAISAL PROCESS
EXHIBIT E PERMITTED EXCEPTIONS
EXHIBIT F GROUP LEASES
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED LEASE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LEASE AND SECURITY AGREEMENT ("LEASE") is
made and entered into as of the 18th day of June, 1996 by and between
Nationwide Health Properties, Inc., a Maryland corporation ("LANDLORD"), and
Alternative Living Services, Inc., a Delaware corporation (as successor by
merger to New Crossings International Corporation) ("TENANT").
R E C I T A L S:
A. Landlord and New Crossings International Corporation, a Nevada
corporation ("NEW CROSSINGS"), are parties to that certain Lease and Security
Agreement dated as of December 15, 1995, as amended by that certain
Acknowledgment, Consent and Amendment of Lease Documents dated as of May 23,
1996 (the "FIRST AMENDMENT"), by and among Landlord, New Crossings and Tenant
(as amended, the "ORIGINAL LEASE"), pursuant to the terms and conditions of
which Landlord agreed to lease to Tenant, and Tenant agreed to lease from
Landlord, on terms and conditions as more specifically set forth in the
Original Lease, that certain real property, all improvements thereon and all
appurtenances thereto, presently used as 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 eighty (80) units,
located at 739 E. Parkcenter Boulevard, Boise, Idaho 83706 and more
specifically described in Exhibit "A" of the Original Lease, together with the
furniture, machinery, equipment, appliances, fixtures and other personal
property used in connection therewith ("LANDLORD PERSONAL PROPERTY") as more
specifically described on Exhibit "B" attached hereto (but specifically
excluding vehicles and supplies) (collectively, the "RIVER PLACE PREMISES").
B. Pursuant to the terms of that certain Side Letter Agreement
dated December 15, 1995, between Landlord and Tenant, as amended by the First
Amendment, Tenant desires to construct on that portion of the Premises (as
hereinafter defined) located at 741 E. Parkcenter Boulevard, Boise, Idaho 83706
and more particularly depicted on the "Design Drawings" described in the
Development Agreement (as hereinafter defined), an additional ALF/ILF licensed
for seventy-eight (78) units (the "RIVER PLACE EXPANSION PREMISES"), and
Landlord will fund a portion of the construction of the River Place Expansion
Premises pursuant to the terms of that certain Development Agreement of even
date herewith between Landlord, as owner, and Tenant, as developer (the
"DEVELOPMENT AGREEMENT").
C. In connection with the development of the River Place
Expansion Premises, (i) Landlord has agreed to purchase that certain unimproved
real property located adjacent to the
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<PAGE> 7
River Place Premises and more specifically described in Exhibit "A(2)" attached
hereto (the "ACQUIRED PARCELS"), (ii) Landlord has agreed to lease the Acquired
Parcels to Tenant, and Tenant has agreed to lease the Acquired Parcels from
Landlord, (iii) Landlord has agreed to transfer all of its estate, right, title
and interest in and to that certain unimproved portion of the River Place
Premises described in Exhibit "A(3)" attached hereto (the "EXCHANGED PARCEL")
to Douglas W. Tamura, an individual, in exchange for a portion of the Acquired
Parcels, and (iv) Tenant has agreed to substitute its leasehold interest in the
Exchanged Parcel for a leasehold interest in the Acquired Parcels. For all
purposes herein, the River Place Premises, excluding the Exchanged Parcel and
the River Place Expansion Premises, shall be collectively referred to in this
Lease as the "ORIGINAL RIVER PLACE PREMISES".
D. The foregoing property owned by Landlord, including, without
limitation, the Original River Place Premises and the River Place Expansion
Premises (which is collectively more specifically described on Exhibit "A(1)"
attached hereto), together with the furniture, machinery, equipment,
appliances, fixtures and other personal property used in connection therewith
and conveyed to Landlord pursuant to Section 6.7 below, shall be collectively
referred to in this Lease as the "PREMISES".
E. Landlord and Tenant now desire to amend and restate the
Original Lease in its entirety to reflect the parties agreements and
modifications of the Original Lease.
NOW, THEREFORE, taking into account the foregoing Recitals, and in
consideration of the covenants and conditions herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Landlord and Tenant hereby agree to amend and restate the
Original Lease in its entirety as follows:
1. TERM.
1.1 TERM. The term of this Lease shall commence on December 15,
1995 and shall end on December 31, 2014 (the "INITIAL TERM") unless extended
pursuant to Section 1.2 or earlier terminated in accordance with the provisions
hereof. The Initial Term and all Renewal Terms are referred to collectively as
the "TERM".
1.2 RENEWAL TERMS. The Term 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 and Expansion
Premises Minimum Rent for a subsequent Renewal Term pursuant to the
provisions of Sections 2.3 and 3.3 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)
2
<PAGE> 8
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, as tenant under the Group Leases (as defined
and described on Exhibit "F" attached hereto), shall give Landlord
notices with respect to the renewal or extension of the then
current lease term of the Group Leases. Tenant hereby acknowledges
and agrees that the exercise of its renewal option set forth in
this Section 1.2 is contingent upon the concurrent exercise of all
of Tenant's renewal options under Section 1.2 of each of the Group
Leases. In no event shall Tenant be entitled to exercise its
renewal options under this Section 1.2 unless Tenant concurrently
exercises its renewal options under Section 1.2 of all of the Group
Leases.
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 EXPANSION PREMISES. Tenant shall construct
the River Place Expansion Premises, and Landlord shall fund such construction,
in accordance with the terms and conditions of the Development Agreement.
2. ORIGINAL RIVER PLACE PREMISES RENT. During the Initial Term and
all Renewal Terms Tenant shall pay to Landlord, with respect to the Original
River Place Premises, minimum rent ("MINIMUM RENT") and additional rent
("ADDITIONAL RENT") as follows:
2.1 INITIAL TERM MINIMUM RENT. During the Initial Term, Tenant
shall pay to Landlord Minimum Rent of $568,244.50 annually. Such Minimum Rent
with respect to each month shall be paid in advance and in equal monthly
installments of $47,353.71 on the first business day of each such calendar
month.
2.2 INITIAL TERM ADDITIONAL RENT.
2.2.1 Commencing with the third Lease Year and
continuing thereafter, 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 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 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
3
<PAGE> 9
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.
2.2.2 "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 Original River Place 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.
2.2.3 "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 Original River Place
Premises.
2.2.4 "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 Original River Place
Premises, excluding Gross Medicare Home Health Revenues.
2.2.5 "LEASE YEAR" shall be defined as the twelve (12)
calendar month period commencing on January 1, 1996 and ending on
December 31, 1996 and each successive twelve (12) calendar month
period thereafter during the Term.
2.2.6 The "BASE YEAR" during the Initial Term shall mean
the year ending on December 31, 1997.
2.3 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:
2.3.1 the greater of (i) the fair market value of the
Original River Place 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 Original
4
<PAGE> 10
River Place Premises of Five Million Seven Hundred Eleven Thousand
Dollars ($5,711,000) as increased by any amount advanced by
Landlord with respect to the Original River Place Premises pursuant
to Section 6.7 below and as decreased by any net award paid to
Landlord with respect to the Original River Place Premises pursuant
to Section 14.2 below, both as applicable (as so adjusted,
"LANDLORD'S ORIGINAL INVESTMENT"); and
2.3.2 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.
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
Original River Place Premises for purposes of this calculation, such fair
market value shall be established by the appraisal process described on Exhibit
"D" 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 Original
River Place Premises during the applicable Renewal Terms.
2.4 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 quarter of each Lease Year. The Additional Rent for each Renewal Term
shall be calculated as provided in Section 2.2 except that the Base Year for
the purpose of determining such Additional Rent shall be the first Lease Year
of the applicable Renewal Term.
2.5 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.
2.6 RENT CAP AND FLOOR.
2.6.1 Notwithstanding any of the other terms of this
Section 2 but subject to Sections 2.6.2 and 2.6.4 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.
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<PAGE> 11
2.6.2 The terms of Section 2.6.1 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.
2.6.3 Notwithstanding any of the other terms of this
Lease but subject to Section 2.6.4, 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 Term or preceding
Renewal Term, as applicable.
2.6.4 Notwithstanding any of the other terms of this
Section 2, the terms of Section 2.5 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.
2.6.5 To the extent that Section 2.6.1 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 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.
2.6.6 To the extent that Section 2.6.3 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.
2.6.7 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 2.6. 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
shall pay such sum to Tenant within thirty (30) days of Landlord's
receipt of the report in question.
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<PAGE> 12
2.6.8 For the purpose of comparing the total of Minimum
Rent and Additional Rent from Lease Year to Lease Year pursuant to
Sections 2.6.1 and 2.6.4 above, the increase in Minimum Rent by
reason of any disbursement by Landlord pursuant to Section 6.7 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.
3. RIVER PLACE EXPANSION PREMISES RENT. During the Initial Term and
all Renewal Terms Tenant shall pay to Landlord, with respect to the River Place
Expansion Premises, minimum rent ("EXPANSION PREMISES MINIMUM RENT") and
additional rent ("EXPANSION PREMISES ADDITIONAL RENT") as follows:
3.1 INITIAL TERM EXPANSION PREMISES MINIMUM RENT.
3.1.1 During the first Lease Year of the Initial Term
and continuing thereafter, Tenant shall pay to Landlord Expansion
Premises Minimum Rent of $28,755.50 annually. Such Expansion
Premises Minimum Rent with respect to each month shall be paid in
advance and in equal monthly installments of $2,396.29 on the first
business day of each such calendar month. Monthly installments of
Expansion Premises Minimum Rent shall be increased by 1/12th of
each subsequent escalation in Expansion Premises Minimum Rent
provided for herein.
3.1.2 Commencing on the day of the initial disbursement
by Landlord of any Expansion Development Costs (as hereinafter
defined), and continuing thereafter on the day of each additional
disbursement by Landlord of any Expansion Development Costs during
the Construction Period (as hereinafter defined), the Expansion
Premises Minimum Rent shall be increased by an amount, calculated
for each disbursement of Expansion Development Costs, equal to the
product of:
3.1.2.1 the amount of funds disbursed by Landlord
with respect to the River Place Expansion Premises pursuant to
Section 6.7 and/or the Development Agreement (the "EXPANSION
DEVELOPMENT COSTS"), and
3.1.2.2 an annual percentage rate equal to the
average of (i) a percentage equal to two hundred ninety-five
(295) basis points over the dividend yield on the common stock
of Landlord, based upon an average of such yield for the 20
trading days immediately preceding the date of disbursement,
and (ii) a percentage equal to three hundred eighty (380)
basis points over the 10 year United States Treasury Rate,
based upon an average of
7
<PAGE> 13
such rate for the 20 trading days immediately preceding the
date of disbursement.
3.1.3 "CONSTRUCTION PERIOD" shall be defined as the
period of time commencing on the date Landlord purchases the
Acquired Parcels pursuant to that certain Purchase and Sale and
Exchange Agreement dated as of June 18, 1996, between Landlord,
Tenant, Douglas W. Tamura, an individual, Christopher Korte, an
individual, and Christine Korte, an individual, and ending on the
day immediately prior to the Expansion Premises Minimum Rent
Increase Date (as defined in Section 3.1.6 below).
3.1.4 The increase in Expansion Premises Minimum Rent
set forth in Section 3.1.2 shall not be payable during the
Construction Period but shall accrue and compound monthly in
arrears at the rate so calculated for each disbursement of
Expansion Development Costs.
3.1.5 Landlord shall provide Tenant with a statement of
accrued Expansion Premises Minimum Rent within a reasonable time
after Tenant's written request.
3.1.6 Commencing on the earlier of June 30, 1997 or the
first business day of the calendar month after the Substantial
Completion Date (as defined in the Development Agreement) (the
"EXPANSION PREMISES MINIMUM RENT INCREASE DATE") and continuing
throughout the Initial Term, the annual Expansion Premises Minimum
Rent shall be increased (with a corresponding increase to the
monthly installments) by the product of (i) the amount of the
Expansion Development Costs plus the amount of all accrued but
unpaid Expansion Premises Minimum Rent, and (ii) the Blended Annual
Percentage Rate (as hereinafter defined). As used herein, the
"BLENDED ANNUAL PERCENTAGE RATE" shall mean an annual percentage
rate equal to the weighted average of the rates at which each of
the disbursements of Expansion Development Costs have been made (as
set forth in Section 3.1.2.2 above), weighted according to the
amount of the disbursement, without taking into account the amount
of time such disbursement has been outstanding. The table set
forth on Exhibit "C" attached hereto is provided for purposes of
example only in determining the Blended Annual Percentage Rate and
shall not be deemed or construed to establish or prescribe any
actual disbursement dates, advances or applicable rental accrual
rates.
3.2 INITIAL TERM EXPANSION PREMISES ADDITIONAL RENT.
3.2.1 Commencing with the third Lease Year of the
Initial Term, Tenant agrees to pay Expansion Premises 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 Expansion Premises Additional Rent shall be equal
to the product of:
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<PAGE> 14
3.2.1.1 the sum of Landlord's original River Place
Expansion Premises investment of Two Hundred Eighty-Nine
Thousand Dollars ($289,000) plus all Expansion Development
Costs plus the amount of all accrued but unpaid Expansion
Premises Minimum Rent (collectively, "LANDLORD'S EXPANSION
PREMISES INVESTMENT"); and
3.2.1.2 a percentage determined as follows: (i)
during the third Lease Year, the number of calendar months
from the Expansion Premises Rent Increase Date through
December 31, 1997 (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) during the
fourth Lease Year, the sum of the Year One Factor and twenty
(20) basis points per annum, and (iii) during the fifth Lease
Year and thereafter, including, without limitation, any
Renewal Terms, the sum of the Year One Factor and forty (40)
basis points per annum.
3.2.2 Commencing with the sixth Lease Year and
continuing thereafter, the Expansion Premises Additional Rent shall
be increased by an amount equal to the sum of (i) ten percent (10%)
of the amount by which the Expansion Premises Gross Revenues for
the Lease Year through the applicable quarter exceed the prorated
Expansion Premises Gross Revenues for the applicable portion of the
Expansion Premises Base Year and (ii) five percent (5%) of the
amount by which the Expansion Premises Gross Medicare Home Health
Revenues for the Lease Year through the applicable quarter exceed
the prorated Expansion Premises Gross Medicare Home Health Revenues
for the applicable portion of the Expansion Premises Base Year and
(iii) five percent (5%) of the amount by which the Expansion
Premises Gross Non-Medicare Home Health Revenues for the Lease Year
through the applicable quarter exceed the prorated Expansion
Premises Gross Non-Medicare Home Health Revenues for the applicable
portion of the Expansion Premises Base Year.
3.2.3 "EXPANSION PREMISES 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 River Place
Expansion 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)
Expansion Premises Gross Medicare Home Health Revenues; and (v)
Expansion Premises Gross Non-Medicare Home Health Revenues.
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3.2.4 "EXPANSION PREMISES GROSS MEDICARE HOME HEALTH
REVENUES" shall have the same meaning as "Gross Medicare Home
Health Revenues" except shall apply to the residents of the River
Place Expansion Premises.
3.2.5 "EXPANSION PREMISES GROSS NON-MEDICARE HOME HEALTH
REVENUES" shall have the same meaning as "Gross Non-Medicare Home
Health Revenues" except shall apply to the residents of the River
Place Expansion Premises and shall exclude Expansion Premises Gross
Medicare Home Health Revenues.
3.2.6 The "EXPANSION PREMISES BASE YEAR" during the
Initial Term shall mean the year ending on December 31, 2000.
3.3 RENEWAL TERM EXPANSION PREMISES MINIMUM RENT. The Expansion
Premises 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 Expansion Premises
Minimum Rent shall be equal to the product of:
3.3.1 the greater of (i) the fair market value of the
River Place Expansion 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 Expansion Premises Investment, as increased by any
amount advanced by Landlord with respect to the River Place
Expansion Premises pursuant to Section 6.7.2 below, and as
decreased by any net award paid to Landlord with respect to the
River Place Expansion Premises pursuant to Section 14.2 below; and
3.3.2 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.
If within ten (10) days of the date of Tenant's notice of exercise to determine
the applicable Expansion Premises 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 River Place Expansion Premises for purposes of this
calculation, such fair market value shall be established by the appraisal
process described on Exhibit "D" attached hereto. The Expansion Premises
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 Expansion Premises Minimum Rent for the River Place
Expansion Premises during the applicable Renewal Terms.
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3.4 RENEWAL TERM EXPANSION PREMISES ADDITIONAL RENT. Except
during the first Lease Year of any Renewal Term, Tenant shall pay to Landlord
Expansion Premises Additional Rent in each Renewal Term on a quarterly basis in
arrears no more than 45 days after the end of each quarter of each Lease Year.
The Expansion Premises Additional Rent for each Renewal Term shall be
calculated as provided in Section 3.2.2 except that the Expansion Premises Base
Year for the purpose of determining such Expansion Premises Additional Rent
shall be the first Lease Year of the applicable Renewal Term.
3.5 TOTAL RENT. For all purposes of calculating and paying
Expansion Premises Minimum Rent and Expansion Premises Additional Rent under
this Lease, the total of the Expansion Premises Minimum Rent plus Expansion
Premises Additional Rent payable by Tenant in any Lease Year will not be less
than the total Expansion Premises Minimum Rent plus Expansion Premises
Additional Rent paid by Tenant for the previous Lease Year.
3.6 EXPANSION PREMISES RENT CAP AND FLOOR. Commencing with the
third Lease Year:
3.6.1 Notwithstanding any of the other terms of this
Section 3 but subject to Sections 3.6.2 and 3.6.4 below, the total
of the Expansion Premises Minimum Rent and Expansion Premises
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
Expansion Premises Minimum Rent and the Expansion Premises
Additional Rent due during the immediately preceding Lease Year.
3.6.2 The terms of Section 3.6.1 above shall have no
applicability in determining the calculation of the Expansion
Premises Minimum Rent or Expansion Premises Additional Rent due
during the first Lease Year of any Renewal Term.
3.6.3 Notwithstanding any of the other terms of this
Lease but subject to Section 3.6.4, in no event shall the Expansion
Premises Minimum Rent in the first Lease Year of any Renewal Term
exceed one hundred fifteen percent (115%) of the total Expansion
Premises Minimum Rent plus Expansion Premises Additional Rent due
for the last Lease Year in the Initial Term or preceding Renewal
Term, as applicable.
3.6.4 Notwithstanding any of the other terms of this
Section 3, the terms of Section 3.5 above shall continue to apply
such that the sum of the Expansion Premises Minimum Rent and the
Expansion Premises Additional Rent due during any Lease Year shall
in no event be less than the sum of the Expansion Premises Minimum
Rent and the Expansion Premises Additional Rent due during the
immediately preceding Lease Year.
3.6.5 To the extent that Section 3.6.1 above operates to
limit the rent for any Lease Year, the amount of rent which would
have otherwise been paid or
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payable by Tenant will be carried forward on a cumulative basis and
will be paid 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 Expansion Premises Minimum Rent and Expansion
Premises Additional Rent for such Lease Year is less than one
hundred three and one-half percent (103.5%) of the total of the
Expansion Premises Minimum Rent and Expansion Premises Additional
Rent for the then immediately preceding Lease Year.
3.6.6 To the extent that Section 3.6.3 above operates to
limit the Expansion Premises 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 Expansion Premises Minimum Rent for such
subsequent Renewal Term is less than one hundred fifteen percent
(115%) of the total of the Expansion Premises Minimum Rent and
Expansion Premises Additional Rent for the last Lease Year in the
preceding Renewal Term.
3.6.7 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 3.6. 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 Expansion Premises Minimum Rent and Expansion
Premises 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 shall pay such sum to
Tenant within thirty (30) days of Landlord's receipt of the report
in question.
3.6.8 For the purpose of comparing the total of
Expansion Premises Minimum Rent and Expansion Premises Additional
Rent from Lease Year to Lease Year pursuant to Sections 3.6.1 and
3.6.4 above, the increase in Expansion Premises Minimum Rent by
reason of any disbursement by Landlord pursuant to Section 6.7 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 Expansion Premises 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 Expansion Premises
Minimum Rent shall be deemed effective on the first day of the
Lease Year in which the disbursement is made.
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3.7 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.
3.8 FORM FOR ADDITIONAL RENT. Tenant shall accompany each payment
of Additional Rent and Expansion Premises Additional Rent with a completed
calculation supporting such payment in a form mutually approved by Landlord and
Tenant.
3.9 ABSOLUTE NET LEASE. All rent payments shall be absolutely net
to the Landlord free of taxes (as described in Section 4.1 hereof),
assessments, utility charges, operating expenses, refurnishings, insurance
premiums or any other charge or expense in connection with any of the Premises.
All expenses and charges, whether for upkeep, 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 19 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.
4. TAXES, ASSESSMENTS AND OTHER CHARGES:
4.1 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.
4.2 PRORATION. At the commencement and at the end of the Term,
all such taxes and assessments shall be prorated.
4.3 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 any of 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 6.5 below, Tenant
shall pay any tax, assessment or other charge before the imposition of any
penalty or interest.
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4.4 TAX BILLS. Landlord shall promptly forward to Tenant copies
of all tax bills and payment receipts relating to the Premises received by
Landlord.
4.5 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 any of the Premises during the Term. Notwithstanding the
foregoing, nothing contained in this Section 4.5 is intended to limit
Landlord's obligations under the Development Agreement.
5. INSURANCE.
5.1 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 Idaho, 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 5.2. All policies of insurance required herein may be in the form
of "blanket" or "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.
5.2 FIRE AND OTHER CASUALTY. 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,
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 with respect to the Original River
Place Premises and
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with coverage not less than Five Million Eight Hundred Fifty Thousand Dollars
($5,850,000) per policy year with respect to the River Place Expansion
Premises], 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 Four Million Eight Hundred Thousand Dollars
($4,800,000) with respect to the Original River Place Premises and no less than
eighty percent (80%) of Landlord's Expansion Premises Investment with respect
to the River Place Expansion Premises. 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 5.2 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.
5.3 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 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.
5.4 PROFESSIONAL LIABILITY INSURANCE. 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.
5.5 WORKERS COMPENSATION. 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.
5.6 BOILER INSURANCE. 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
amount not less than Five Million Dollars
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($5,000,000) for each of the Original River Place Premises and the River Place
Expansion Premises for damage to property, bodily injury or death resulting
from such perils.
5.7 BUSINESS INTERRUPTION INSURANCE. 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, Expansion Premises Minimum
Rent, Expansion Premises 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.
5.8 APPLICATION OF THIS SECTION 5. Until such time as the River
Place Expansion Premises shall have been completed in accordance with the terms
of the Development Agreement, (i) the provisions of this Section 5 shall apply
solely to the Original River Place Premises, and (ii) Tenant shall obtain
insurance covering the River Place Expansion Premises pursuant to the terms of
the Development Agreement.
5.9 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).
6. USE, MAINTENANCE AND ALTERATION OF THE PREMISES.
6.1 TENANT'S MAINTENANCE OBLIGATIONS.
6.1.1 Subject to the terms of the Development Agreement,
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 of Idaho or as otherwise required under all applicable local,
state and federal laws. Notwithstanding the foregoing, Tenant's
obligation to maintain and repair the Premises as provided in this
Section 6.1.1 shall not apply to the River Place Expansion Premises
until such time as the construction of the River Place Expansion
Premises is complete.
6.1.2 As part of Tenant's obligations under this Section
6.1, Tenant shall be responsible to maintain, repair and replace
all Landlord Personal Property and all Tenant Personal Property (as
defined in Section 8.1 below) in good condition, ordinary wear and
tear excepted, consistent with prudent industry practice for
ALF/ILF facilities.
6.1.3 Without limiting Tenant's obligations to maintain
the Original River Place Premises under this Lease, within thirty
(30) days after the end of each Lease Year commencing with the end
of the fourth (4th) Lease Year, Tenant shall provide Landlord with
evidence satisfactory to Landlord in the reasonable exercise
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of Landlord's discretion that Tenant has in such Lease Year spent
on Upgrade Expenditures for all of the leased premises in the Group
Leases, except the River Place Expansion Premises, an amount at
least equal to the Required Average Upgrade Expenditures when
averaged with such Upgrade Expenditures made in the then three (3)
previous Lease Years. As used herein, the "REQUIRED AVERAGE
UPGRADE EXPENDITURES" for any Lease Year shall be calculated as
follows: In the first (1st) Lease Year an amount shall be
calculated equal to One Hundred Fifty Dollars ($150.00) times the
number of units in all of the leased premises in the Group Leases
(including the Original River Place Premises but excluding the
River Place Expansion Premises). For each subsequent Lease Year,
the calculated amount for the previous Lease Year shall be
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) (the "CPI"). Commencing with the fourth
(4th) Lease Year and every Lease Year thereafter, an average of
such calculated amounts for the applicable Lease Year and the then
previous three (3) Lease Years shall be considered to be the
Required Average Upgrade Expenditures; provided, however, Tenant
shall receive a credit against the Required Average Upgrade
Expenditures in Lease Years four (4), five (5) and six (6) equal to
(i) the First Year Upgrade Expenditures for all of the leased
premises in the Group Leases divided by four (4), times (ii) the
Applicable Credit Percentage. As used in the foregoing, the
"Applicable Credit Percentage" shall be 75% in the fourth (4th)
Lease Year; 50% in the fifth (5th) Lease Year; and 25% in the sixth
(6th) Lease Year.
6.1.4 Without limiting Tenant's obligations to maintain
the River Place Expansion Premises under this Lease, within thirty
(30) days after the end of each Lease Year commencing with the end
of the eighth (8th) Lease Year, 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 River Place Expansion 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 sixth (6th) Lease Year an
amount shall be calculated equal to One Hundred Fifty Dollars
($150.00) times the number of units in the River Place Expansion
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 CPI.
Commencing with the eighth (8th) 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 (2) immediately preceding Lease
Years, minus the sum of the Upgrade Expenditures made with respect
to the River Place Expansion Premises in the two (2) immediately
preceding Lease Years. If the Required Upgrade Expenditures for a
particular Lease Year is less than or equal to zero, then no
Upgrade Expenditures are required in that Lease Year.
6.1.5 The term "UPGRADE EXPENDITURES" is defined to mean
upgrades or improvements to the Original River Place Premises or
the River Place Expansion
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Premises, as applicable, which have the effect of maintaining or
improving the competitive position of such 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 Sections 6.1.3 and 6.1.4 only,
"evidence satisfactory to Landlord" may consist of a certificate of
an officer of Tenant, certifying as to the matters set forth in
Sections 6.1.3 or 6.1.4, 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 Sections 6.1.3 or 6.1.4, in addition to
any other rights and remedies provided to Landlord under this
Lease, Tenant shall pay for Landlord's 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.
6.2 REGULATORY COMPLIANCE.
6.2.1 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 either the Original River Place Premises or the River
Place Expansion Premises be licensed as an ALF/ILF for the use
permitted under Section 6.3 below, throughout the Term and at the
time the Premises are returned to Landlord at the termination of
this Lease, Tenant shall ensure that such Premises continue to be
licensed as an ALF/ILF with a licensed capacity of eighty (80)
units (as to the Original River Place Premises) and seventy-eight
(78) units (as to the River Place Expansion Premises), 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 without
any suspension, revocation, decertification, penalty or limitation.
Nothing contained in this Section 6.2.1 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
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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. Notwithstanding
the above, Landlord agrees that Tenant shall have until December
31, 1996 to ensure that the Original River Place Premises are
licensed in Tenant's name, so long as prior to such date any
license required by any applicable federal, state or local law
shall not be revoked, surrendered or materially limited.
6.2.2 During the Term, all inspection fees, costs and
charges associated with a change of any licensure or certification
shall be borne solely by Tenant.
6.3 PERMITTED USE. Tenant shall continuously use and occupy the
Original River Place Premises during the Term solely as a licensed ALF/ILF with
at least eighty (80) units and the River Place Expansion Premises during the
Term solely for the construction and operation of a licensed ALF/ILF with at
least seventy-eight (78) units, both in compliance with all applicable
regulations and legal requirements (the "PERMITTED USE").
6.4 [INTENTIONALLY OMITTED].
6.5 NO LIENS; PERMITTED CONTESTS. Tenant shall not cause or
permit any liens, levies or attachments to be placed or assessed against any of
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 any of 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 6.5 shall be promptly and
diligently prosecuted to a final conclusion by Tenant.
6.6 ALTERATIONS BY TENANT. 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 except with respect to the
improvements contemplated by the Development Agreement, 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 6.7) 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
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constitute Tenant Personal Property subject to the security interest granted to
Landlord in Section 8.2 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 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.
6.7 CAPITAL IMPROVEMENTS FUNDED BY LANDLORD.
6.7.1 In accordance with the terms of the Development
Agreement, Landlord has agreed to provide funding to Tenant to
cover the costs incurred by Tenant in developing the River Place
Expansion Premises. As to any specific request for funding, Tenant
shall accompany such request with a description in reasonable
detail of the costs incurred by Tenant in connection with such
improvements, a statement signed by an officer of Tenant certifying
that the improvements covered by such request have been completely
installed in a lien free condition and consist only of those
improvements to be made pursuant to the terms of the Development
Agreement, evidence satisfactory to Landlord in the reasonable
exercise of its discretion documenting the amounts expended and/or
otherwise incurred by Tenant in making the improvements covered by
such request and such other documentation as Landlord may
reasonably request. Landlord shall have the right to inspect the
improvements completed by Tenant for the purpose of verifying the
documentation provided to Landlord by Tenant with any funding
request. Upon Landlord's receipt of such documentation and upon
completion of Landlord's inspection of such improvements, Landlord
shall, in accordance with the terms of the Development Agreement,
distribute to Tenant the amounts necessary to cover the costs of
causing such improvements to be completed on Landlord's behalf,
provided that Landlord's disbursements under this Section 6.7.1
(together with accrued rent thereon as set forth in Sections 3.1.2
and 3.1.4 above) shall not exceed a total aggregate amount of Five
Million Eight Hundred Fifty Thousand Dollars ($5,850,000) (the
"DEVELOPMENT ADVANCE"). Tenant will, on demand from Landlord,
execute a bill of sale or bills of sale in a form reasonably
required by Landlord, in order to convey any furniture, machinery,
equipment, appliances, fixtures, supplies and other personal
property acquired by Tenant on Landlord's behalf in connection with
the development of the River Place Expansion Premises, and such
personal property shall immediately become a portion of the
Landlord Personal Property. Such Landlord Personal Property,
together with all other development improvements funded by Landlord
under this Section 6.7.1, shall immediately become a part of the
Premises and shall belong to Landlord subject to
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the terms and conditions of this Lease. At such time as Landlord
makes disbursements pursuant to the Development Agreement and as
provided herein, Landlord's Expansion Premises Investment shall be
increased for all purposes under this Lease by the amount of the
funds provided by Landlord for development improvements, together
with accrued rent thereon as set forth in Sections 3.1.2 and 3.1.4
above.
6.7.2 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 Development Agreement, 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 6.7.2 shall immediately
become a part of the Premises and shall belong to Landlord subject
to the terms and conditions of this Lease. At such time as
Landlord makes disbursements as provided herein, Landlord's
Original Investment and/or Landlord's Expansion Premises
Investment, as applicable, shall be increased for all purposes
under this Lease by the amount of the funds provided by Landlord
for such capital improvements.
6.8 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 modification to the Premises
if, in its judgment, such improvement or modification does not meet the
foregoing requirements.
7. CONDITION AND TITLE OF PREMISES. Tenant acknowledges that it is
presently engaged in the operation of ALF/ILF facilities in the State of Idaho
and has expertise in the ALF/ILF industry. Tenant has thoroughly investigated
the Premises, has selected the Premises to its own specifications, and has
concluded that, except for the improvements described in Section 6.7, no
improvements or modifications to the Premises are required in order to operate
the Premises for its intended use. Tenant understands the necessary steps to
construct the River Place Expansion Premises, has determined that the funds to
be advanced by Landlord under the terms of the Development Agreement are
sufficient for completion of such construction, and has no reason to believe
that the River Place Expansion Premises cannot be constructed and licensed
within the schedule provided in the Development Agreement. Tenant accepts the
Original River Place Premises for use as an ALF/ILF and the River Place
Expansion Premises for construction and subsequent use as an ALF/ILF under this
Lease, each 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
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the Premises prior to the execution and delivery of this Lease and has found
the same to be satisfactory.
8. LANDLORD AND TENANT PERSONAL PROPERTY.
8.1 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 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.
8.2 LANDLORD'S SECURITY INTEREST.
8.2.1 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 8.4 below) (to the
extent assignable) so that Landlord or its designee can operate or
re-let the Premises, or such portion thereof as has been
constructed pursuant to the terms of the Development Agreement at
the time of such default, intact for use as an ALF/ILF.
8.2.2 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 Property (to the extent assignable). The security
interest granted to Landlord in this Section 8.2.2. 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
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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.
8.3 FINANCING 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 execute any such documents on its behalf, which power of
attorney shall be irrevocable and is deemed to be coupled with an interest.
8.4 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 names "River Place" and "River Place Estates"; but shall not
include any accounts receivable now owned or hereafter acquired by Tenant.
9. REPRESENTATIONS AND WARRANTIES. Landlord and Tenant do hereby each
for itself represent and warrant to each other as follows:
9.1 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.
9.2 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
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authorized and qualified to do all things required of the applicable party
under this Lease within the State of Idaho.
9.3 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.
10. FINANCIAL, MANAGEMENT AND REGULATORY REPORTS.
10.1 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 for each of the Original River Place Premises and
River Place Expansion Premises (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, as applicable, Gross
Revenues, Expansion Premises Gross Revenues, Gross Medicare Home Health
Revenues, Expansion Premises Gross Medicare Home Health Revenues, Gross
Non-Medicare Home Health Revenues and Expansion Premises Gross Non-Medicare
Home Health Revenues for the applicable period.
10.2 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, Tenant shall deliver to Landlord its quarterly consolidated financial
statements, substantially in the form as previously provided to Landlord.
10.3 ANNUAL FINANCIAL STATEMENT. Within ninety (90) days of
the fiscal year end of Tenant, Tenant shall deliver to Landlord 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 10.3, if Tenant becomes
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.
10.4 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.
10.5 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
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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 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.
11. EVENTS OF DEFAULT AND LANDLORD'S REMEDIES.
11.1 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"):
11.1.1 The failure to pay within five (5) calendar days of
the date when due any Minimum Rent, Additional Rent, Expansion Premises
Minimum Rent, Expansion Premises Additional Rent, taxes or assessments,
utilities, premiums for insurance or other charges or payments required
of Tenant under this Lease;
11.1.2 A material breach by Tenant or Crossings International
Corporation, a Washington corporation ("OLD CROSSINGS"), of any of the
representations, warranties or covenants in favor of Landlord as set
forth in the Purchase and Sale Agreement dated as of December 15, 1995,
by and between Landlord, Tenant, Old Crossings and 2010 Union Limited
Partnership, a Washington limited partnership ("UNION LIMITED
PARTNERSHIP") (the "PURCHASE AGREEMENT");
11.1.3 A material breach by Tenant of any of the
representations, warranties or covenants in favor of Landlord as set
forth in the Purchase and Sale and Exchange Agreement dated as of June
18, 1996, by and between Landlord, Tenant, Douglas W. Tamura, an
individual, Christopher Korte, an individual, and Christine Korte, an
individual (the "PURCHASE AND EXCHANGE AGREEMENT");
11.1.4 A material default by Tenant (or any Affiliate of
Tenant) ("AFFILIATE" being defined to mean, with respect to any person or
entity, any other person or entity which "CONTROLS" [as defined in
Section 23.1 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 Affiliate of Tenant) to Landlord or any Affiliate of
Landlord (including, without limitation, any of the Other Leases [as
hereinafter defined], and any and all amendments, modifications and
restatements thereto and all extensions and renewals thereof, any other
loan or financing agreement or any other lease, but not including that
certain Loan Agreement dated as of December 15, 1995, by and between
Landlord, as lender, and Union Limited Partnership, as borrower, and the
"LOAN DOCUMENTS" as defined therein), which default is not cured within
any applicable
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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 as of 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; J)
Columbia Edgewater, 1629 George Washington Way, Richland, Washington
99352; (ii) that certain Sublease and Security Agreement dated as of
December 15, 1995, between Landlord and Tenant, with respect to Heritage,
Mt. Hood, 25200 S.E. Stark Street, Gresham, Oregon 97030; (iii) that
certain Sublease and Security Agreement dated as of December 15, 1995,
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; and (iv) that
certain Lease and Security Agreement dated as of March 27, 1996, between
Landlord and Tenant, with respect to Allenmore Assisted Living in Tacoma,
Washington.
11.1.5 A material default by Tenant 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 agreement with any other party, which default is not
cured within any applicable cure period provided in the documentation for
such obligation;
11.1.6 Any material misstatement or omission of fact in any
written report, notice or communication from Tenant to Landlord with
respect to Tenant or the Premises;
11.1.7 Except as permitted under Section 23.2 below, 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 as of the date
hereof; provided, however, nothing contained in this Section 11.1.7 is
intended to restrict the authority of the respective boards of directors
of Tenant to appoint officers or management of Tenant;
11.1.8 An assignment by Tenant of all or substantially all of
its property for the benefit of creditors;
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11.1.9 The appointment of a receiver, trustee, or liquidator
for Tenant, or any of the property of Tenant, if within three (3)
business days of such appointment Tenant does not inform Landlord in
writing that Tenant intends to cause such appointment to be discharged
and Tenant does not thereafter diligently prosecute such discharge to
completion within thirty (30) days after the date of such appointment;
11.1.10 The filing by Tenant 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 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 to cause such petition to be dismissed, if Tenant does not
thereafter diligently prosecute such dismissal, or if such filing is not
dismissed within ninety (90) days after filing thereof;
11.1.11 The occurrence of a default by Tenant under the
Development Agreement or the Construction Contract (as defined in the
Development Agreement) which is not cured within any applicable cure
period provided for therein);
11.1.12 The failure to perform or comply with any other term
or provision of this Lease (other than those provisions set forth in
Section 11.1.13 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 11.1.12 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 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;
11.1.13 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 5.1 above, (ii) the provisions of
Section 21 below, or (iii) the provisions of Section 23 below with
respect to assignments and other related matters; and
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11.1.14 All notice and cure periods provided herein shall run
concurrently with any notice or cure periods provided by applicable law.
11.2 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 Idaho 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:
11.2.1 Sue for the specific performance of any covenant of
Tenant under this Lease as to which Tenant is in breach;
11.2.2 Upon compliance with the requirements of applicable
law, Landlord may do any of the following: enter upon any of the
Premises, terminate this Lease, dispossess Tenant from any of the
Premises and/or collect money damages by reason of Tenant's breach,
including without limitation all rent which would have accrued after such
termination and all obligations and liabilities of Tenant under this
Lease which survive the termination of the Term;
11.2.3 Elect to leave this Lease in place and sue for rent
and/or other money damages as the same come due;
11.2.4 Before or after repossession of any of the Premises
pursuant to Section 11.2.2, 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;
11.2.5 Sell the Tenant Personal Property in a non-judicial
foreclosure sale.
11.2.6 Upon the failure of Tenant to satisfy all of the
conditions precedent to the initial disbursement of Expansion Development
Costs as set forth in the Development Agreement, on or before September
30, 1996 (an "INITIAL DISBURSEMENT DEFAULT"), or upon Tenant's failure to
substantially complete the construction of the
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River Place Expansion Premises by the Completion Date (as such term is
defined in the Development Agreement) (a "COMPLETION DATE DEFAULT"), or
upon Tenant's failure to complete each of the material items set forth in
the Construction Schedule (as such term is defined in the Development
Agreement) within the time period(s) set forth therein (a "CONSTRUCTION
SCHEDULE DEFAULT"), after notice and the expiration of any applicable
cure period provided in the Development Agreement, require Tenant to
purchase from Landlord, in the sole and absolute discretion of Landlord,
either all of the Premises or only the River Place Expansion Premises
(the portion of the Premises Landlord elects to require Tenant to
purchase being referred to herein as the "PUT PREMISES"), for a cash
price equal to the sum of (i) Landlord's Original Investment (if the Put
Premises includes the Original River Place Premises) and (ii) Landlord's
Expansion Premises Investment and (iii) any rent or other amounts due and
unpaid as of the closing date of such transaction (as increased by any
amounts advanced by Landlord pursuant to Section 6.7 and decreased by any
net award paid to Landlord pursuant to Section 14.2). So long as Tenant
continues to pay all rent and other amounts due as provided in this
Lease, Tenant shall have one hundred eighty (180) days from Landlord's
exercise of its option pursuant to this Section 11.2.6 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 on behalf of Landlord 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 Put Premises subject only to those title exceptions
shown on Exhibit "E" attached hereto. Tenant's failure to complete the
purchase of the Put Premises or to pay rent and other amounts due as
provided herein shall, upon expiration of the cure period set forth in
Section 11.1.1, constitute an Event of Default, and the amount owed to
Landlord by Tenant pursuant to this Section 11.2.6 for the purchase of
the Put 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. In addition to the
remedies provided in this Section 11.2.6, Landlord shall have the right
to receive all attorneys' fees and costs incurred in connection with
Tenant's default and Tenant's purchase of the Put Premises. The remedies
provided in this Section 11.2.6, if elected by Landlord, shall together
be an exclusive remedy with respect to the defaults described in this
Section 11.2.6, and Tenant's consummation of the purchase of the Put
Premises in accordance with this Section 11.2.6 and payment of attorneys'
fees and costs shall cure such defaults for the purposes of any agreement
or document that may be cross-defaulted with this Lease. If the Put
Premises consists only of the River Place Expansion Premises, this Lease
shall not terminate and shall remain in full force and effect with
respect to the Original River Place Premises.
11.2.7 After the occurrence of an Initial Disbursement
Default, or a Completion Date Default, or a Construction Schedule
Default, elect to leave this Lease in place and take over construction of
the River Place Expansion Premises using the
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Development Advance, without relieving Tenant of its obligation to pay
any shortage pursuant to the Development Agreement. In such event,
Tenant shall cooperate with Landlord and shall provide all documents or
information and perform any action reasonably necessary to smoothly
effectuate the transition.
11.2.8 For the purpose of calculating rent loss damages
payable to Landlord with respect to the Original River Place Premises,
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.
11.2.9 For the purpose of calculating rent loss damages
payable to Landlord with respect to the River Place Expansion Premises,
Expansion Premises Additional Rent for all periods after an Event of
Default shall be calculated based on the higher of the sum of (i) actual
Expansion Premises Gross Revenues, Expansion Premises Gross Medicare Home
Health Revenues and Expansion Premises Gross Non-Medicare Home Health
Revenues or (ii) extrapolated Expansion Premises Gross Revenues,
Expansion Premises Gross Medicare Home Health Revenues and Expansion
Premises Gross Non-Medicare Home Health Revenues based on Expansion
Premises Gross Revenues, Expansion Premises Gross Medicare Home Health
Revenues and Expansion Premises Gross Non-Medicare Home Health Revenues
performance prior to the Event of Default.
11.3 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
any of the Premises, to collect the rents, issues, profits and income of any of
the Premises and to manage the operation of any 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 Idaho 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 any 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 generated thereby
and to preserve or replace to the extent possible the ALF/ILF licenses and
provider certifications 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.
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11.4 LATE CHARGES. Tenant acknowledges that the late payment of
any Minimum Rent, Additional Rent, Expansion Premises Minimum Rent or Expansion
Premises 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, Additional Rent, Expansion
Premises Minimum Rent or Expansion Premises 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 such rent payment 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.
11.5 REMEDIES CUMULATIVE; NO WAIVER. Except as provided in Section
11.2.6, no right or remedy herein conferred upon or reserved to Landlord 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, 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.
11.6 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.
11.7 WAIVER OF REDEMPTION RIGHTS. IN THE EVENT THAT LANDLORD
EXERCISES ANY OF ITS REMEDIES UNDER THIS LEASE, TENANT
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EXPRESSLY WAIVES ALL RIGHTS OF REDEMPTION WHICH TENANT MAY HAVE TO THE EXTENT
PERMITTED BY APPLICABLE LAW.
12. SECURITY DEPOSIT. Tenant has deposited with the Landlord the sum
of One Hundred Forty-Nine Thousand Two Hundred Fifty Dollars ($149,250.00)
representing a security deposit against the faithful performance of the terms
and conditions contained in this Lease. On or before November 18, 1996, Tenant
shall increase the foregoing security deposit by depositing with Landlord (from
Tenant's own funds, and not from the Development Advance) the sum of Seventy
Two Thousand Seven Hundred Sixty Dollars ($72,760.00). On or before April 18,
1997, Tenant shall again increase the foregoing security deposit by depositing
with Landlord (from Tenant's own funds, and not from the Development Advance)
the sum of Seventy Two Thousand Seven Hundred Sixty Dollars ($72,760.00).
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.
13. DAMAGE BY FIRE OR OTHER CASUALTY.
13.1 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 payable with respect to the casualty
shall be used for the repair or reconstruction of the Premises so affected
pursuant to reasonable disbursement controls in favor of Landlord. If such
proceeds are insufficient for such purposes, Tenant shall provide the required
additional funds.
13.2 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.
13.3 NO RENT ABATEMENT. The rent payable under this Lease shall
not abate by reason of any damage or destruction of any 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.
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14. CONDEMNATION.
14.1 COMPLETE TAKING. If during the Term all or substantially all
of either of the Original River Place Premises or the River Place Expansion
Premises is taken or condemned by any competent public or quasi-public
authority (the portion of the Premises so taken being referred to herein as the
"TAKEN PREMISES"), then Tenant may, at Tenant's election, made within thirty
(30) days of such taking by condemnation, terminate this Lease as to the Taken
Premises, and the current Minimum Rent and Additional Rent or Expansion
Premises Minimum Rent and Expansion Premises Additional Rent, as applicable,
shall be prorated as of the date of such termination. The award payable with
respect to any Taken Premises 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 Landlord and Tenant
pursuant to the appraisal procedure described on Exhibit "D" attached hereto.
14.2 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 either of the Original River Place Premises or the River Place Expansion
Premises, the Minimum Rent and Additional Rent or Expansion Premises Minimum
Rent and Expansion Premises Additional Rent, as applicable, shall be abated to
the same extent as the diminution in the fair market value of the individual
Premises affected 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
such fair market value will be determined by appraisal pursuant to Exhibit "D"
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. The applicable of Landlord's Original
Investment and/or Landlord's Expansion Premises Investment will be reduced for
all purposes under this Lease by reason of any award paid to Landlord under
this Section 14.2 which was not made available to be used by Tenant in
accordance with the terms of the previous sentence.
14.3 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 any 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.
15. PROVISIONS ON TERMINATION OF TERM.
15.1 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
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(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;
provided, however, that if such earlier termination of this Lease occurs prior
to the date Tenant is obligated to cause the River Place Expansion Premises to
be completed pursuant to the terms of the Development Agreement, Tenant shall,
with respect to the River Place Expansion Premises, surrender such portion of
the Premises to Landlord in the state of completion and condition then required
under the terms of the Development Agreement. The foregoing shall not be
deemed or construed to reduce or otherwise limit or restrict Tenant's
obligations to cause the River Place Expansion Premises to be completed
pursuant to the provisions of the Development Agreement.
15.2 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 Idaho or any other governmental
entity to operate the Premises for the purpose set forth in Section 6.3 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.
15.3 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 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.
15.4 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 any 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.
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15.5 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 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 Idaho Department
of Health and Welfare 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
15.5 shall be promptly and diligently prosecuted to a final conclusion by
Tenant.
16. 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
(i) if to Tenant, addressed to Alternative Living Services, Inc., 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005, Attn: William F.
Lasky, Fax No. (414) 789-9592, with a copy to Crossings International
Corporation, 1201 Pacific Avenue, Suite 1800, Tacoma, Washington 98402, Attn:
President, Fax No. (206) 383-9979, with a copy to Rogers & Hardin, 2700 Cain
Tower, 229 Peach Tree Street NE, Atlanta, Georgia 30303, Attn: Alan C. Leet,
Esq., Fax No. (404) 525-2224 or at such other address as Tenant from time to
time may have designated by written notice to Landlord, (ii) 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
Sherry & Holthouse LLP, 18301 Von Karman Avenue, Suite 420, Irvine, California
92715, Attn: Kevin L. Sherry, Esq., Fax No. (714) 251-0244, 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.
17. 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 Term or any applicable Renewal
Term, so long as there is no Event of Default under this Lease, only if Tenant
has not
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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.
18. LANDLORD MAY GRANT LIENS. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth below in this Section 18,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title 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 19, 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.
19. 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 13 and 14 hereof).
20. APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the internal laws of the State of Idaho without regard to the
conflict of laws rules of such State.
21. PRESERVATION OF GROSS REVENUES.
21.1 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 in which the Premises is located. Tenant further
acknowledges that the diversion of resident or patient care activities from
either the Original River Place Premises or the River Place Expansion Premises
to other facilities or other healthcare providers owned or operated by Tenant
or its
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Affiliates at or near the end of the Term will have a material adverse impact
on the value and utility of each individual Premises.
21.1.1 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; provided, that, 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.
21.1.2 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 otherwise employ any
management or supervisory personnel working on or in connection with the
Premises.
21.2 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 resident or patient
from the Premises to any other nursing or health care facility, or to any
senior housing or retirement housing facility.
22. HAZARDOUS MATERIALS.
22.1 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.
22.2 TENANT NOTICES TO LANDLORD. Tenant shall immediately advise
Landlord in writing of:
22.2.1 any Environmental Activities in violation of any
Hazardous Materials Laws,
22.2.2 any Hazardous Materials Claims against Tenant or the
Premises,
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22.2.3 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,
22.2.4 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,
22.2.5 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.
22.3 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).
22.4 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 participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims.
22.5 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 22 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 and/or
the Purchase and Exchange Agreement.
22.6 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
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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
Premises or the owners and/or occupants of property adjacent to or surrounding
the Premises.
22.7 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.
22.8 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.
23. 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 either of the Original River Place Premises or
the River Place Expansion 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 buildings now or
hereafter 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 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, 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
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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.
23.1 For the purposes of this Lease, the transfer, assignment,
sale, hypothecation or other disposition of any stock of Tenant, 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, as 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 23.1 is intended to restrict the
authority of the respective boards of directors of Tenant to appoint officers
or management of Tenant.
23.2 Notwithstanding anything to the contrary contained in Sections
11 and 23.1, in no event shall (a) a leveraged buyout by existing management of
Tenant (the "MGMT LBO"); or (b) an employee stock option plan leveraged buyout
(the "ESOP LBO"); or (c) an initial public offering of Tenant (the "IPO"); or
(d) after the IPO, any other transfer, exchange, issuance, assignment, sale,
hypothecation or other disposition of the capital stock of Tenant
(collectively, the "STOCK TRANSACTIONS"); or (e) any merger or business
combination of Tenant with another Person or Persons (a "MERGER"), be deemed to
be an assignment of this Lease or an Event of Default hereunder, provided that
(i) with respect to a Mgmt LBO or an ESOP LBO, Landlord must have approved in
advance, upon its reasonable discretion, the terms of any leveraged buyout; and
(ii) with respect to a Merger or one or a series of Stock Transactions which
results in a change in Control of Tenant, Landlord shall have approved in
advance, upon its sole discretion, the Person (and any Persons which are
affiliated with such Person in connection with the transaction) acquiring
Control of Tenant; provided, however, Landlord's consent shall not be
unreasonably withheld in the event that such Person(s), in Landlord's good
faith judgment, has/have a financial condition and creditworthiness that
exceeds that of Tenant immediately prior to any such Merger or Stock
Transaction, and such Person(s)' experience, reputation and competence in
operating healthcare facilities is satisfactory to Landlord. Without limiting
the generality of the foregoing, Tenant acknowledges and agrees that the
transfer, exchange, issuance, assignment, sale, hypothecation or other
disposition, on a cumulative basis, of thirty percent (30%) or more of the
voting stock (or other equity/debt instruments convertible to voting stock) of
Tenant to any Person or related group of Persons who did not have such
ownership interest after the IPO, shall constitute a change in Control and an
assignment of the Lease requiring the consent of Landlord. Furthermore, and
notwithstanding the foregoing, in the event that Tenant elects to assign this
Lease or sublet the Premises or any portion thereof to a wholly-owned
subsidiary of Tenant pursuant to the terms of this Section 23, the transfer,
exchange, issuance, assignment, sale, hypothecation or other disposition, on a
cumulative basis, of twenty-five percent (25%) or more of the voting stock (or
other equity/debt
40
<PAGE> 46
instruments convertible to voting stock) or ownership control of any such
subsidiary to any Person or Persons shall constitute an assignment of the Lease
requiring the consent of Landlord, which consent may be granted or withheld in
Landlord's sole discretion.
24. 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 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.
25. 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 and
Expansion Premises Minimum Rent payable with respect to the last Lease Year
plus Additional Rent and Expansion Premises 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.
26. 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, Expansion Premises Minimum Rent, Expansion Premises
Additional Rent and additional charges hereunder have been paid, certifying
that no default by either Landlord or Tenant
41
<PAGE> 47
exists hereunder or specifying each such default and as to other matters as the
requesting party may reasonably request.
27. 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.
28. 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.
29. 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.
30. SEVERABILITY. In the event any part or provision of the Lease
shall be determined to be invalid or unenforceable, the remaining portion of
this Lease shall nevertheless continue in full force and effect.
31. 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.
32. BINDING EFFECT. Subject to the provisions of Section 23 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.
33. 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.
42
<PAGE> 48
34. 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 Idaho 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.
35. 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.
36. 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.
37. 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 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.
38. 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.
39. 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.
40. 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.
43
<PAGE> 49
Executed as of the date indicated above.
TENANT:
------
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By: /s/ William F. Lasky
---------------------------
William F. Lasky, President
LANDLORD:
--------
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: /s/ Gary E. Stark
-----------------------------
Gary E. Stark, Vice President
44
<PAGE> 50
EXHIBIT "A(1)"
Legal Description of the Premises
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF IDAHO, COUNTY OF ADA,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A PARCEL OF LAND BEING A PORTION 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 PAGE 1183, AS SHOWN ON RECORD OF
SURVEY NO. ________________, FILED FOR RECORD IN THE OFFICE OF THE ADA
COUNTY RECORDER, BOISE, IDAHO UNDER INSTRUMENT NO. __________, AND LYING IN
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 A BRASS CAP MARKING THE NORTHEAST CORNER OF THE SAID SECTION 23;
THENCE NORTH 87 (degrees) 19'10" WEST 431.35 FEET TO AN ALUMINUM CAP ON THE
SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD, ALSO SAID POINT
MARKING A POINT OF BEGINNING OF CURVE; THENCE ALONG THE SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.01 FEET, SAID CURVE HAVING A
CENTRAL ANGLE OF 08 (degrees) 46'04", A RADIUS OF 1372.40 FEET AND A LONG CHORD
BEARING SOUTH 38 (degrees) 23'37" EAST 209.81 FEET TO AN IRON PIN, ALSO SAID
POINT BEING THE REAL POINT OF BEGINNING; THENCE CONTINUING ALONG A CURVE TO THE
RIGHT 303.28 FEET, SAID CURVE HAVING A CENTRAL ANGLE OF 12 (degrees) 39'41", A
RADIUS OF 1372.40 FEET AND A LONG CHORD BEARING SOUTH 27 (degrees) 40'44" EAST
302.66 FEET TO AN IRON PIN MARKING A POINT OF A NON-TANGENT; THENCE CONTINUING
SOUTH 21 (degrees) 04'52" EAST 173.27 FEET TO AN IRON PIN MARKING A POINT OF
CURVE; THENCE CONTINUING ALONG A CURVE TO THE RIGHT 267.21 FEET, SAID CURVE
HAVING A CENTRAL ANGLE 11 (degrees) 04'29", A RADIUS OF 1382.40 FEET AND A LONG
CHORD BEARING SOUTH 08 (degrees) 38'29" EAST 266.79 FEET TO AN IRON PIN MARKING
A POINT OF NON-TANGENT; THENCE CONTINUING SOUTH 02 (degrees) 46'26" WEST 24.04
FEET TO AN IRON PIN; THENCE LEAVING THE SAID SOUTHWESTERLY RIGHT-OF-WAY LINE
SOUTH 61 (degrees) 59'29" WEST 59.78 FEET TO AN IRON PIN; THENCE SOUTH 58
(degrees) 37'29" WEST 38.79 FEET TO A POINT ON THE CENTERLINE OF LOGGERS CREEK;
THENCE ALONG THE SAID CENTERLINE NORTH 75 (degrees) 38'31" WEST 208.63 FEET TO
A POINT; THENCE CONTINUING NORTH 59 (degrees) 22'31" WEST 297.55 FEET TO A
POINT; THENCE CONTINUING NORTH 48 (degrees) 10'31" WEST 147.55 FEET TO A POINT;
THENCE CONTINUING NORTH 41#16'01" WEST 206.48 FEET TO A POINT; THENCE
CONTINUING NORTH 57 (degrees) 01'01" WEST 48.41 FEET TO A POINT; THENCE
CONTINUING NORTH 44 (degrees) 31'31" WEST 16.48 FEET TO A POINT; THENCE LEAVING
THE SAID CENTERLINE NORTH 45 (degrees) 27'07" EAST 345.87 FEET TO AN IRON PIN;
THENCE SOUTH 44 (degrees) 32'53"
A(1)-1
<PAGE> 51
EAST 228.33 FEET TO AN IRON PIN; THENCE NORTH 45 (degrees) 27'07" EAST 272.02
FEET TO THE POINT OF BEGINNING,
SAID PARCEL OF LAND CONTAINS 8.46 ACRES, MORE OR LESS.
A(1)-2
<PAGE> 52
EXHIBIT "A(2)"
Legal Description of Acquired Parcels
ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF IDAHO, COUNTY OF ADA,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
PARCEL 1:
A PARCEL OF LAND BEING A PORTION 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 PAGE 1183, LYING IN 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 A BRASS CAP MARKING THE NORTHEAST CORNER OF THE SAID SECTION 23;
THEN NORTH 87(degrees)19'10" WEST 431.35 FEET TO AN ALUMINUM CAP ON THE S
OUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD, ALSO SAID POINT
MARKING A POINT OF BEGINNING OF CURVE; THENCE ALONG THE SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.01 FEET, SAID CURVE HAVING
A CENTRAL ANGLE OF 08(degrees)46'04", A RADIUS OF 1372.40 FEET AND A LONG
CHORD BEARING SOUTH 38(degrees)23'37" EAST 209.81 FEET TO AN IRON PIN;
THENCE LEAVING THE SAID SOUTHWESTERLY RIGHT-OF-WAY LINE SOUTH 45(degrees)27'07"
WEST 272.02 FEET TO AN IRON PIN, ALSO SAID POINT BEING THE REAL POINT OF
BEGINNING; THENCE CONTINUING SOUTH 45(degrees)27'07" WEST 94.82 FEET TO A
POINT; THENCE NORTH 44(degrees)32'53" WEST 228.33 FEET TO A POINT; THENCE NORTH
45(degrees)27'07" EAST 94.82 FEET TO A POINT; THENCE SOUTH 44(degrees)32'53"
EAST 228.33 FEET TO THE POINT OF BEGINNING,
SAID PARCEL OF LAND CONTAINS 0.497 ACRE, MORE OR LESS.
PARCEL 2:
A PARCEL OF LAND BEING 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 PAGE 1183, LYING IN 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 A BRASS CAP MARKING THE NORTHEAST CORNER OF THE SAID SECTION 23;
THEN NORTH 87(degrees)19'10" WEST 431.35 FEET TO AN ALUMINUM CAP ON THE
SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD, ALSO SAID
POINT MARKING A POINT OF BEGINNING OF CURVE;
A(2)-1
<PAGE> 53
THENCE ALONG THE SAID SOUTHWESTERLY RIGHT-OF-WAY LINE ALONG A CURVE TO THE
RIGHT 210.01 FEET, SAID CURVE HAVING A CENTRAL ANGLE OF 08(degrees)46'04",
A RADIUS OF 1372.40 FEET AND A LONG CHORD BEARING SOUTH 38(degrees)23'37" EAST
209.81 FEET TO AN IRON PIN; THENCE LEAVING THE SAID SOUTHWESTERLY RIGHT-OF-WAY
LINE SOUTH 45(degrees)27'07" WEST 366.84 FEET TO A POINT; THENCE NORTH
44(degrees)32'53" WEST 228.33 FEET TO A POINT; THENCE SOUTH 45(degrees)27'07"
WEST 135.72 FEET TO A POINT, ALSO SAID POINT BEING THE REAL POINT OF BEGINNING;
THENCE CONTINUING SOUTH 45(degrees)27'07" WEST 115.33 FEET TO A POINT ON THE
CENTERLINE OF LOGGERS CREEK; THENCE ALONG THE SAID CENTERLINE SOUTH
44(degrees)31'31" EAST 16.48 FEET TO A POINT; THENCE CONTINUING SOUTH
57(degrees)01'01" EAST 48.41 FEET TO A POINT; THENCE CONTINUING SOUTH
41(degrees)16'01" EAST 47.44 FEET TO A POINT; THENCE LEAVING THE SAID
CENTERLINE NORTH 50(degrees)31'08" EAST 34.87 FEET TO A POINT; THENCE NORTH
12(degrees)00'25" WEST 135.46 FEET TO THE POINT OF BEGINNING,
SAID PARCEL OF LAND CONTAINS 0.190 ACRE, MORE OR LESS.
A(2)-2
<PAGE> 54
EXHIBIT "A(3)"
Legal Description of Exchanged Parcel
fALL THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF IDAHO, COUNTY OF ADA,
AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A PARCEL OF LAND BEING A PORTION 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 PAGE 1183, LYING IN 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 A BRASS CAP MARKING THE NORTHEAST CORNER OF THE SAID SECTION 23;
THEN NORTH 87(degrees)9'10" WEST 431.35 FEET TO AN ALUMINUM CAP ON THE
SOUTHWESTERLY RIGHT-OF-WAY LINE OF EAST PARKCENTER BOULEVARD, ALSO SAID POINT
MARKING A POINT OF BEGINNING OF CURVE; THENCE ALONG THE SAID SOUTHWESTERLY
RIGHT-OF-WAY LINE ALONG A CURVE TO THE RIGHT 210.01 FEET, SAID CURVE HAVING A
CENTRAL ANGLE OF 08(degrees)46'04", A RADIUS OF 1372.40 FEET AND A LONG CHORD
BEARING SOUTH 38(degrees)23'37" EAST 209.81 FEET TO AN IRON PIN; THENCE LEAVING
THE SAID SOUTHWESTERLY RIGHT-OF-WAY LINE SOUTH 45(degrees)27'07" WEST 366.84
FEET TO A POINT; THENCE NORTH 44(degrees)32'53" WEST 228.33 FEET TO A POINT,
ALSO SAID POINT BEING THE REAL POINT OF BEGINNING; THENCE CONTINUING NORTH
44(degrees)32'53" WEST 159.60 FEET TO A POINT; THENCE SOUTH 24(degrees)50'45"
WEST 47.63 FEET TO A POINT; THENCE SOUTH 12(degrees)00'25" EAST 169.43 FEET TO
A POINT; THENCE NORTH 45(degrees)27'07" EAST 135.72 FEET TO THE POINT OF
BEGINNING,
SAID PARCEL OF LAND CONTAINS 0.304 ACRE, MORE OR LESS.
A(3)-1
<PAGE> 55
EXHIBIT "B"
Landlord Personal Property
[SEE SCHEDULE ATTACHED HERETO]
B-1
<PAGE> 56
EXHIBIT "C"
Sample Procedures for Determining Blended Annual Percentage Rate
[SEE TABLE ATTACHED HERETO]
C-1
<PAGE> 57
EXHIBIT C
SAMPLE PROCEDURES FOR DETERMINING BLENDING ANNUAL PERCENTAGE RATE
<TABLE>
<CAPTION>
A B C D E F G
Date of Amount of 10 Yr Treasury Plus Rent Accrued to Amount of Expansion % of Total Portion Applied to
Advance Advance Spread as of Expansion Premises Development Costs Expansion Blended Annual
Advance Date Minimum Rent Development Costs Percentage Rate
Increase Date 1 (B + D) (C X F)
<S> <C> <C> <C> <C> <C> <C>
7/1/96 $500,000 9.85% $45,145 $545,145 9.319% .918%
8/1/96 500,000 9.90% 41,250 541,250 9.252% .916%
9/1/96 500,000 10.10% 37,875 537,875 9.194% .929%
10/1/96 500,000 9.90% 33,000 533,000 9.111% .902%
11/1/96 500,000 10.20% 29,750 529,750 9.056% .924%
12/1/96 500,000 9.95% 24,875 524,875 8.972% .893%
1/1/97 500,000 10.10% 21,042 521,042 8.907% .900%
2/1/97 500,000 10.05% 16,750 516,750 8.834% .888%
3/1/97 500,000 9.75% 12,188 512,188 8.755% .854%
4/1/97 500,000 9.85% 8,208 508,208 8.687% .856%
5/1/97 575,219 9.80% 4,698 579,917 9.913% .971%
TOTALS $5,575,219 $274,781 $5,850,000 2 100.000% 9.951%3
</TABLE>
1 Assuming the Expansion Premises Minimum Rent Increase Date is
6/1/97.
2 The Expansion Development Costs (not to exceed $5,850,000).
3 Blended Annual Percentage Rate.
<PAGE> 58
EXHIBIT "D"
Appraisal Process
If Landlord and Tenant are unable to agree upon the Fair Market Value of
either of the Original River Place Premises or the River Place Expansion
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 applicable 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 applicable 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
applicable 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 MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the fair market value of the applicable
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
applicable 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.
D-1
<PAGE> 59
"MAI APPRAISER" shall mean an appraiser licensed or otherwise
qualified to do business in the State of Idaho 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.
D-2
<PAGE> 60
EXHIBIT "E"
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 the ALTA owner's policies
of title insurance obtained by Landlord in connection with Landlord's
acquisition of the Premises.
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.
E-1
<PAGE> 61
EXHIBIT "F"
Group Leases
The Group Leases for this Lease are the leases contained in the
group, selected from the following groups, which contains this Lease:
GROUP 1
COURTYARD VILLAGE
1929 Grand Prairie Rd SE
Albany, Oregon 97321
THE ATRIUM
3350 30th Street
Boulder, Colorado 80301
HERITAGE, MT. HOOD
25200 S.E. Stark Street
Gresham, Oregon 97030
FOREST GROVE RESIDENTIAL
3110 19th Ave.
Forest Grove, Oregon 97116
GROUP 2
RIDGE POINT
3375 34th Street
Boulder, Colorado 80301
MCMINNVILLE RESIDENTIAL
775 E 27th Street
McMinnville, Oregon 97128
THE HERITAGE AT ROGUE VALLEY
3033 Barnett Rd.
Medford, Oregon 97504
COLUMBIA EDGEWATER
1629 George Washington Way
Richland, Washington 99352
F-1
<PAGE> 62
GROUP 3
ALBANY RESIDENTIAL
1560 Davidson St. SE
Albany, Oregon 97321
CANTERBURY GARDENS
11265 E. Mississippi Ave.
Aurora, Colorado 80012
RIVER PLACE
739 and 741 E. Parkcenter Blvd.
Boise, Idaho 83706
F-2
