<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ATRIA COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8361 61-1303738
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 596-7540
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
W. PATRICK MULLOY, II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATRIA COMMUNITIES, INC.
515 WEST MARKET STREET
LOUISVILLE KENTUCKY 40202
(502) 596-7540
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
IVAN M. DIAMOND, ESQ. J. VAUGHAN CURTIS, ESQ.
GREENEBAUM DOLL & MCDONALD PLLC ALSTON & BIRD
3300 NATIONAL CITY TOWER ONE ATLANTIC CENTER
LOUISVILLE, KENTUCKY 40202 1201 WEST PEACHTREE STREET
(502) 589-4200 ATLANTA, GEORGIA 30309-3424
(404) 881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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 statement 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.10 par
value................. 5,750,000 shares $15.00 $86,250,000 $29,741.38
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 750,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
----------------
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 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
ATRIA COMMUNITIES, INC.
CROSS-REFERENCE SHEET PURSUANT TO REGULATION S-K,
ITEM 501(B), SHOWING THE LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 LOCATION OR
ITEM NO. 1 CAPTION CAPTION IN PROSPECTUS
---------- ------- ---------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Page of
Prospectus......................... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front and Outside
Back Cover Pages;
Additional Information
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Prospectus Summary; Risk
Charges............................ Factors; Business
4. Use of Proceeds..................... Use of Proceeds
5. Determination of Offering Price..... Underwriting
6. Dilution............................ Dilution
7. Selling Security Holders............ Not Applicable
8. Plan of Distribution................ Outside Front Cover Page;
Underwriting
9. Description of Securities to be Description of Capital Stock
Registered.........................
10. Interests of Named Experts and Legal Matters; Experts
Counsel............................
11. Information with Respect to the Outside Front Cover Page;
Registrant......................... Prospectus Summary; Risk
Factors; The Company and
its Predecessors; Use of
Proceeds; Dividend Policy;
Capitalization; Dilution;
Selected Combined Financial
Data; Management's
Discussion and Analysis of
Financial Condition and
Results of Operations;
Business; Management;
Certain Transactions;
Principal Stockholders;
Description of Capital
Stock; and Shares Eligible
for Future Sale
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ Not applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JUNE , 1996
5,000,000 Shares
ATRIA COMMUNITIES, INC.
Common Stock
--------
All of the 5,000,000 shares of Common Stock offered hereby are being sold by
Atria Communities, Inc. (the "Company" or "Atria"), a wholly owned subsidiary
of Vencor, Inc. ("Vencor"). Prior to this offering, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $13.00 and $15.00 per share. See
"Underwriting" for the factors to be considered in determining the initial
offering price.
Upon completion of this offering, Vencor will own 66.2% of the Common Stock
(63.1% if the Underwriters' over-allotment option is exercised in full).
Accordingly, Vencor will be able to control the management and operations of
the Company. See "Risk Factors--Control by Principal Stockholder."
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
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<S> <C> <C> <C>
Per Share................................. $ $ $
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Total(2).................................. $ $ $
</TABLE>
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(1) Before deducting expenses of the offering estimated at $750,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to 750,000 additional shares of Common Stock to cover over-allotments, if
any. To the extent the option is exercised, the Underwriters will offer the
additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the shares of Common Stock will be made
at the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland on or
about August , 1996.
Alex. Brown &
Sons
INCORPORATED
Morgan Stanley & Co.
INCORPORATED
J.C. Bradford & Co.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
[PHOTOGRAPHS]
Our vision of assisted living is a residential community which recognizes,
enhances and celebrates the value of individuals by promoting their
independence and dignity while providing assistance with daily living.
Our mission is to be the leading provider of senior living services by
delivering consistent, high- quality, innovative services to our residents and
their community.
------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and combined financial statements and the notes thereto appearing
elsewhere in this Prospectus.
THE COMPANY
Atria Communities, Inc. is a national provider of assisted and independent
living communities for the elderly. The Company currently operates 22
communities in 13 states with a total of 3,022 units, including 650 assisted
living units and 2,372 independent living units. The Company also has nine
assisted living communities under development with a total of approximately 500
units. During the year ended December 31, 1995, the Company had revenues and
net income of $48.0 million and $3.4 million, respectively, and had an average
occupancy rate of 94.5%. For the quarter ended March 31, 1996, the Company had
revenues and net income of $12.6 million and $1.2 million, respectively, and
had an average occupancy rate of 95.7%. Substantially all of the Company's
revenues are from private pay sources.
The assisted and independent living industries are rapidly emerging
components of the non-acute health care system for the elderly. The assisted
living industry serves the long-term care needs of the elderly who do not
require the more extensive medical services available in skilled nursing
facilities, yet who are no longer capable of a totally independent lifestyle.
Assisted living residents typically require assistance with two to three
activities of daily living ("ADLs"), such as eating, grooming and bathing,
personal hygiene and toileting, dressing, transportation, walking and
medication reminders. The independent living industry serves the long-term care
needs of elderly individuals who require only occasional assistance with ADLs
and who no longer desire, or cannot maintain, a totally independent lifestyle.
The assisted and independent living industries represented approximately $10
to $12 billion in revenue in 1995. Growth in these industries is being driven
by the continued aging of the population and the increase in demand for elder-
care services; cost-containment efforts that limit access to acute care
hospitals and skilled nursing facilities for the elderly with less intensive
medical needs; changing societal patterns that make it difficult for families
to provide in-home care to the elderly; and an increasing awareness among the
elderly that assisted and independent living communities afford a cost-
effective, secure and attractive lifestyle.
Atria's objective is to expand its position as a national provider of high-
quality assisted and independent living services. Key elements of the Company's
strategy are to: (i) develop or acquire 60 to 85 additional assisted living
communities by the year 2000 and to convert at least 700 of its existing
independent living units to assisted living units; (ii) network its operations
with Vencor's health care delivery system where appropriate; (iii) pursue a
higher acuity model of care enabling residents to "age in place;" and (iv)
continue to focus on private pay, middle- and upper-income residents.
Prior to completion of this offering, all of the Company's assisted and
independent living communities have been operated by Vencor. Vencor and its
predecessors have operated assisted and independent living communities for over
a decade. Vencor operates an integrated network of health care services
primarily focusing on the needs of the elderly. After completion of this
offering, Vencor will own 66.2% of the outstanding Common Stock (63.1% if the
Underwriters' over-allotment option is exercised in full). As a separate public
company, management believes that it will be able to accelerate the development
and acquisition of assisted living communities. Furthermore, Atria will have
independent access to capital, an enhanced ability to incentivize management
and a management team focused solely on the Company's business.
3
<PAGE>
THE OFFERING
Common Stock offered hereby............. 5,000,000 shares
Common Stock to be outstanding after 15,095,000 shares(1)
this offering..........................
Use of proceeds......................... To finance the development and
acquisition of additional assisted
living communities, the conversion of
certain of its existing independent
living units to assisted living units
and for working capital and other
general corporate purposes.
Proposed Nasdaq National Market ATRC
symbol.................................
- --------
(1) Excludes options to purchase 639,500 shares of Common Stock at the initial
public offering price per share, but includes 95,000 restricted shares of
Common Stock which vest over a two-year period following this offering. See
"Management--Non-Employee Directors 1996 Stock Incentive Plan," "--Employee
Awards Granted," "--Vencor Employee Option Grants" and "--1996 Stock
Incentive Plan."
4
<PAGE>
SUMMARY COMBINED FINANCIAL AND STATISTICAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<TABLE>
<CAPTION>
YEARS ENDED YEARS ENDED THREE MONTHS ENDED
MAY 31, DECEMBER 31, MARCH 31,
------------------ -------------------------------- --------------------
1992(1) 1993(1) 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues............... $ 31,664 $ 36,479 $ 35,870 $ 39,758 $ 47,976 $ 11,367 $ 12,611
Operating income
(loss)................ (2,164) 2,843 4,156 9,551 10,100 2,337 2,861
Income (loss) before
income taxes and
extraordinary loss.... (7,874) (1,770) 1,003(2) 6,343(3) 5,925(4) 1,203 1,927
Income (loss) before
extraordinary loss.... (4,764) (1,071) 607(2) 3,837(3) 3,584(4) 728 1,166
Net income (loss)...... (4,764) (1,071) 504 3,837 3,438 728 1,166
Pro forma earnings per
common share before
extraordinary loss.... $ .24 $ .08
Shares used in
computing earnings per
common share.......... 15,095 15,095
STATISTICAL DATA:
Number of
communities(5):
Owned and leased....... 21 20 19 19 20 20 20
Managed................ 2 2 2 2 2 2 2
-------- -------- -------- -------- -------- --------- ---------
Total................. 23 22 21 21 22 22 22
======== ======== ======== ======== ======== ========= =========
Number of units(5):
Owned and leased....... 2,900 2,734 2,574 2,531 2,603 2,603 2,603
Managed................ 419 419 419 419 419 419 419
-------- -------- -------- -------- -------- --------- ---------
Total................. 3,319 3,153 2,993 2,950 3,022 3,022 3,022
======== ======== ======== ======== ======== ========= =========
Average occupancy(6)... 80.9% 87.1% 90.8% 93.8% 94.5% 92.7% 95.7%
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 2,251 $ 2,473 $ 1,695 $ 1,497 $ 2,819 $ 2,694 $ 3,954
Working capital
(deficit)............. 212 849 (386) (1,638) (776) 656 (586)
Assets................. 135,674 141,151 137,308 133,016 140,917 144,835 141,577
Long-term debt......... 98,403 107,685 91,191 90,599 104,506 107,025 104,640
Stockholder's equity... 24,045 30,049 34,959 31,835 28,447 30,961 27,984
</TABLE>
- --------
(1) For accounting purposes, the historical combined financial information of
Atria for years 1991 and 1992 are based upon the previous fiscal reporting
periods of such entities which most closely approximate the respective
calendar year. Accordingly, operating results for the five months ended May
31, 1993 are included in both May 31, 1993 and December 31, 1993
disclosures. Revenues and net income for such period approximated $15.6
million and $61,000, respectively.
(2) Includes $266,000 ($160,000 net of tax) of income related to settlement of
certain litigation.
(3) Includes $1.3 million of income ($750,000 net of tax) related to settlement
of certain litigation and a $425,000 ($255,000 net of tax) gain on the sale
of property.
(4) Includes a charge of $600,000 ($360,000 net of tax or $.02 per common share
on a pro forma basis) related to the writedown of undeveloped property to
net realizable value.
(5) At end of period.
(6) Average occupancy is calculated by dividing the number of occupied units by
the total number of available units during the respective period.
At or before completion of this offering, Vencor will contribute to the
Company substantially all of its assisted and independent living communities in
exchange for shares of Common Stock and the Company will assume certain
liabilities related to such communities (the "Contribution Transaction").
Unless otherwise indicated, all share information and financial information set
forth herein assumes: (i) completion of the Contribution Transaction and the
issuance of 95,000 restricted shares of Common Stock upon completion of this
offering; and (ii) no exercise of the Underwriters' over-allotment option. All
references in this Prospectus to the "Company" or "Atria" mean Atria
Communities, Inc. and its subsidiaries, or the assisted and independent living
communities held by Vencor prior to the Contribution Transaction.
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the Common Stock offered hereby.
FINANCIAL RISKS ASSOCIATED WITH EXPANSION PROGRAM
Newly developed assisted living communities are expected to incur operating
losses during the first 12 months of operations of between $150,000 and
$250,000 for a 90-unit community. The Company may incur additional operating
losses if it fails to achieve expected occupancy rates at newly developed
communities or if expenses related to the development, acquisition or
operation of new communities exceed expectations. The risks associated with
the Company's development of additional assisted living communities and
uncertainties regarding the profitability of such operations could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Development Program."
DEVELOPMENT AND CONSTRUCTION RISKS
The Company intends to develop or acquire 60 to 85 additional assisted
living communities by the year 2000. The Company's ability to expand at this
pace will depend upon a number of factors, including, but not limited to, the
Company's ability to acquire suitable properties or communities at reasonable
prices; the Company's success in obtaining necessary zoning, land use,
building, occupancy, licensing and other required governmental permits and
authorizations; and the Company's ability to control construction and
renovation costs and project completion schedules. In addition, the Company's
development plan is subject to numerous factors outside its control, including
competition for acquisitions, shortages of, or the inability to obtain, labor
or materials, changes in applicable laws or regulations or in the method of
applying such laws and regulations, the failure of general contractors or
subcontractors to perform under their contracts, strikes and adverse weather.
The Company's business, financial condition and results of operations could be
materially and adversely affected if the Company is unable to achieve its
development plan. See "Business--Development Program."
In addition, the Company will rely initially on Vencor for certain services
in connection with development projects pursuant to an Administrative Services
Agreement. The Administrative Services Agreement has an initial term of one
year and thereafter may be renewed on a month-to-month basis and terminated by
either party on 60 days' prior written notice. The Company does not currently
have a substantial internal development staff but it has retained third
parties to locate suitable sites for new assisted living communities and to
handle other aspects of the development process on a contract basis. Final
approval of all development sites will be made by officers of the Company. If
Vencor terminates the Administrative Services Agreement before the Company is
able to expand its development staff or if the Company is unable to continue
to retain third-party sources to assist in the development process, the
Company's ability to execute its development and growth plans and the
Company's business, financial condition and results of operations could be
materially and adversely affected. See "Business--Business Strategy," "--
Development Program" and "Certain Transactions."
ACQUISITION RISKS; DIFFICULTIES OF INTEGRATION
In addition to developing additional assisted living communities, the
Company currently plans to acquire additional assisted living facilities or
other properties that can be repositioned as Atria assisted living
communities. The Company has not entered into any agreements with respect to
any material acquisitions. There can be no assurance that the Company's
acquisition of assisted living facilities will be completed at the rate
currently expected, if at all. The success of the Company's acquisitions will
be determined by numerous factors, including the Company's ability to identify
suitable acquisition candidates, competition for such acquisitions, the
purchase price, the financial performance of the
6
<PAGE>
facilities after acquisition and the ability of the Company to integrate
effectively the operations of acquired facilities. Any failure by the Company
to identify suitable candidates for acquisition, or integrate or operate
acquired facilities effectively may have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Business Strategy" and "--Development Program."
ABSENCE OF HISTORY AS A STAND-ALONE COMPANY AND NEW MANAGEMENT
Although the Company's predecessors have operated assisted and independent
living communities for over a decade, the Company itself has never operated as
a stand-alone company. Certain officers, including the President and Chief
Executive Officer of the Company, do not have experience in the assisted and
independent living industry. After this offering, the Company will continue to
be a subsidiary of Vencor, but will operate as a separate public company.
Vencor will have no obligation to provide assistance to the Company except as
described in the Administrative Services Agreement and the Services Agreements.
There can be no assurance that upon termination of such agreements the Company
will have adequate staffing to perform the functions Vencor performed for the
Company. The Administrative Services Agreement and the Services Agreements each
have a one-year term and upon expiration may be renewed on a month-to-month
basis or terminated by either party on 60 days' prior written notice.
Termination of these agreements before the Company is able to provide such
services could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Certain Transactions."
CONTROL BY PRINCIPAL STOCKHOLDER
Upon completion of this offering, Vencor will own 66.2% of the outstanding
Common Stock (63.1% if the Underwriters' over-allotment option is exercised in
full) and, accordingly, will be in a position to elect all of the directors of
the Company and effectively control the management and operations of the
Company. Initially, four of the seven directors will be officers or directors
of Vencor and only two directors of the Company will be independent directors
who are not Vencor affiliates or employees of the Company. Upon completion of
this offering, Vencor will enter into a Voting Agreement pursuant to which it
will agree to vote all of its shares of Common Stock at any meeting at which
directors are elected in favor of the election of at least two independent
directors who are not affiliates of Vencor or employees of the Company. The
Voting Agreement will continue in effect as long as Vencor beneficially owns
30% or more of the Common Stock. The concentration of ownership in Vencor may
have a limiting effect on the price and trading volume of the Common Stock and
may inhibit changes in control of the Company. See "Principal Stockholders" and
"Description of Capital Stock."
RELATIONSHIP WITH VENCOR; CONFLICTS OF INTEREST
Certain directors and officers of Vencor, who are also directors of the
Company, and Vencor, as the Company's controlling stockholder, may have
conflicts of interest with respect to certain transactions concerning the
Company. When the interests of Vencor and the Company diverge, Vencor may
exercise its influence in its own best interests. The Company anticipates
resolving potential conflicts of interest on a case-by-case basis, which may
include the use of committees comprised of disinterested directors and the
retention of independent financial and other advisors. See "Management,"
"Certain Transactions" and "Principal Stockholders."
The Company and Vencor have entered into certain agreements including an
Administrative Services Agreement, a Tax Sharing Agreement, a Registration
Rights Agreement and Services Agreements (the "Vencor Agreements") to resolve
certain issues in connection with the Contribution Transaction and to specify
certain services to be provided to the Company by Vencor. For example, under
the Administrative Services Agreement, Vencor will provide certain
administrative services to the Company, including finance and accounting, human
resources, risk management, legal support, market planning and information
systems support. These agreements were negotiated by officers of Vencor and the
Company whilethe Company was a wholly owned subsidiary of Vencor. Accordingly,
there is no assurance that the terms and conditions of these arrangements: (i)
are as favorable to the Company as those the Company
7
<PAGE>
could have obtained from unaffiliated third parties; or (ii) will continue or
that the terms of such arrangements will not be modified in the future.
Although Vencor has advised the Company that it does not intend to compete
with the Company, the Vencor Agreements do not contain any covenant not to
compete or similar restrictions prohibiting Vencor from developing or
acquiring and operating its own assisted or independent living communities
following completion of this offering. See "Certain Transactions."
NEED FOR ADDITIONAL FINANCING
To achieve its growth objectives, the Company will need to obtain
substantial additional financing to fund its development, construction and
acquisition activities. The estimated cost to complete 60 to 85 assisted
living communities targeted for development or acquisition by the year 2000
substantially exceeds the net proceeds from this offering. Accordingly, the
Company's future growth will depend on its ability to obtain additional
financing on acceptable terms. The Company currently estimates that the net
proceeds from this offering together with anticipated financing commitments
and financing expected to be available, will be sufficient to fund its
development and acquisition program for approximately 18 months following
completion of this offering. There can be no assurance, however, that the
Company will not be required to obtain additional capital at an earlier date.
The Company may from time to time seek additional financing through public or
private financing sources, including equity or debt financing. If additional
funds are raised by issuing equity securities, the Company's stockholders may
experience dilution. There can be no assurance that adequate funding will be
available as needed or on terms acceptable to the Company. Insufficient
financial resources may require the Company to delay or eliminate all or some
of its development projects and acquisition plans, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity" and "--Capital
Resources."
RISKS OF INDEBTEDNESS
Leverage. At March 31, 1996, the Company had long-term debt of $104.6
million. The amount of debt and debt-related payments is expected to increase
substantially as the Company pursues its growth strategy. As a result, an
increasing portion of the Company's cash flow will be devoted to debt service
and related payments and the Company will be subject to risks normally
associated with increased financial leverage. There can be no assurance that
the Company will generate sufficient cash flows from operations to cover
required interest, principal and any operating lease payments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity" and "--Capital Resources."
Risk of Rising Interest Rates. At March 31, 1996, $72.0 million in principal
amount of the Company's indebtedness bore interest at floating rates. In
addition, indebtedness that the Company may incur in the future may also bear
interest at a floating rate. Therefore, increases in prevailing interest rates
could increase the Company's interest payment obligations and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Bond Financing. Nine of the Company's assisted living and independent living
communities have been financed in whole or in part by industrial revenue
bonds. Under the terms of such bonds, the Company is required to rent
approximately 250 assisted and independent living units to individuals who
have incomes which are 80% or less of the average income levels in a
designated market. In certain cases, the Company's ability to increase prices
in communities with such bond financing (in response to higher operating costs
or other inflationary factors) could be limited if it affects the ability of
the Company to attract and retain residents with qualifying incomes. Failure
to satisfy these requirements constitutes an event of default under the bonds,
thereby accelerating their maturity. See "Business--Funding for Assisted and
Independent Living Care."
8
<PAGE>
VARIATIONS IN OPERATING RESULTS
Although the Company was profitable in 1993, 1994 and 1995, there can be no
assurance that revenue growth or profitability will not fluctuate on a
quarterly or annual basis in the future. The Company may experience variations
in quarterly and annual operating results. Quarterly or annual variations may
result from the timing of opening new communities and the rate at which
certain occupancy levels are achieved. The Company's operating results for any
particular quarter or year may not be indicative of results for future
periods. See "Risk Factors--Financial Risks Associated with Expansion Program"
and "Business--Development Program."
MANAGEMENT OF PLANNED RAPID GROWTH
The Company's success will depend, in part, on its ability to manage its
planned rapid growth. The Company does not presently have adequate staff to
manage its planned growth and will rely on Vencor to provide many internal
management functions. The Company will need to expand its operational,
financial and management information systems and continue to attract, motivate
and retain key employees. If the Company does not manage its growth
effectively, its business, financial condition and results of operations could
be materially and adversely affected. See "Risk Factors--Absence of History as
a Stand-Alone Company and New Management," "--Relationship with Vencor;
Conflicts of Interest" and "Certain Transactions."
DEPENDENCE ON PRIVATE PAY RESIDENTS
The Company currently relies, and in the foreseeable future expects to rely,
primarily on the ability of residents to pay for the Company's charges from
their own financial resources. Inflation or other circumstances which
adversely affect the ability of the elderly to pay for the Company's services
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Funding for Assisted and
Independent Living Care."
COMPETITION
The assisted living industry is highly competitive. The Company faces
competition from numerous local, regional and national providers of assisted
living and long-term care. The Company also competes with companies providing
home-based health care. Some of the Company's competitors operate on a not-
for-profit basis or as charitable organizations. Also, many of the Company's
competitors are significantly larger and have greater financial resources than
the Company. The Company believes that the assisted living industry will
become even more competitive in the future. Regulatory barriers to entry into
the assisted living industry are generally not substantial. If the development
of new assisted living facilities surpasses the demand for such facilities in
particular markets, such markets may become saturated. The Company also
expects to compete for acquisitions of additional assisted living facilities
and properties. There can be no assurance that competition will not limit the
Company's ability to attract residents or expand its business or have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Competition."
GOVERNMENT REGULATION
The health care industry is subject to extensive regulation and frequent
regulatory change. At this time, no federal laws or regulations specifically
define or regulate assisted or independent living facilities. While a number
of states have not yet enacted specific assisted living regulations, the
Company's communities are subject to regulation, licensing, certificate of
need and permitting by state and local health and social service agencies and
other regulatory authorities. Requirements vary from state to state. Changes
in existing laws and regulations, adoption of new laws and regulations and new
interpretations of existing laws and regulations could have a material impact
on the Company's operations. The Company believes that such regulation will
increase in the future. In addition, health care providers are receiving
9
<PAGE>
increased scrutiny under anti-trust laws as the integration and consolidation
of health care delivery increases and affects competition. Regulation of the
assisted living industry is evolving. The Company is unable to predict the
content of new regulations and their effect on its business. There can be no
assurance that the Company's operations will not be adversely affected by
regulatory developments. Failure by the Company to comply with applicable
regulatory requirements could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Government Regulation."
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients
to such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
health care items or services. Vencor provides certain services to residents
of the Company's communities. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between
health care providers and sources of patient referral. Similar state laws
vary, are sometimes vague and seldom have been interpreted by courts or
regulatory agencies. Violation of these laws can result in loss of licensure,
civil and criminal penalties, and exclusion of health care providers or
suppliers from participation in the Medicare and Medicaid program. There can
be no assurance that such laws will be interpreted in a manner consistent with
the practices of the Company. See "Business--Government Regulation."
Under the Americans with Disabilities Act of 1990, all places of public
accommodation are required to meet certain federal requirements related to
access and use by disabled persons. A number of additional federal, state and
local laws exist which also may require modifications to existing and planned
properties to create access to the properties by disabled persons. While the
Company believes that its properties are substantially in compliance with
present requirements or are exempt therefrom, if required changes involve a
greater expenditure than anticipated or must be made on a more accelerated
basis than anticipated, additional costs would be incurred by the Company.
Further legislation may impose additional burdens or restrictions with respect
to access by disabled persons, the costs of compliance with which could be
substantial.
LABOR COSTS
The Company competes with various health care providers and other employers
for qualified and skilled personnel. The Company's labor costs will increase
over time. The Company's business, financial condition and results of
operations could be adversely affected if the Company is unable to control its
labor costs. See "Business--Employees."
ENVIRONMENTAL RISKS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
held liable for the cost of removal or remediation of certain hazardous or
toxic substances that may be located on, in or under the property. These laws
and regulations may impose liability regardless of whether the owner or
operator was responsible for, or knew of, the presence of the hazardous or
toxic substances. The liability of the owner or operator and the cost of any
required remediation or removal of hazardous or toxic substances could exceed
the property's value. In connection with the ownership or operation of its
communities, the Company could be liable for these costs. As a result, the
presence of hazardous or toxic substances at any property held or operated by
the Company or acquired or operated by the Company in the future could have a
material adverse effect on the Company's business, financial condition and
results of operations.
LIABILITY AND INSURANCE
In recent years, the long-term care industry has experienced an increase in
the number of lawsuits alleging negligence and other legal theories, many of
which involve significant legal costs and substantial claims. Vencor
maintains, and the Company intends to secure, insurance policies in amounts
and with
10
<PAGE>
such coverage as it deems appropriate for its operations. There can be no
assurance, however, that the Company will be able to continue to obtain
sufficient liability insurance coverage in the future or that such coverage
will be available on acceptable terms. A successful claim in excess of the
Company's coverage or not covered by the Company's insurance could have a
material adverse effect on the Company's business, financial condition and
results of operations. Claims against the Company, regardless of their merit or
outcome, may involve significant legal costs and require management to devote
considerable time which would otherwise be utilized in the operation of the
Company.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation and Amended and Restated
By-laws, as well as Delaware corporate law, contain certain provisions that
could have the effect of making it more difficult for a third party to acquire,
or discouraging a third party from attempting to acquire or take control of the
Company. These provisions could limit the price that certain investors might be
willing to pay in the future for shares of Common Stock. Certain of these
provisions allow the Company to issue, without stockholder approval, preferred
stock having voting rights senior to those of the Common Stock. Other
provisions impose various procedural and other requirements that could make it
more difficult for stockholders to effect certain corporate actions. In
addition, commencing with the 1997 Annual Meeting of Stockholders, the
Company's Board of Directors will be divided into three classes, each of which
will serve for a staggered three-year term, which may make it more difficult
for a third party to gain control of the Board of Directors. As a Delaware
corporation, the Company is subject to Section 203 of the Delaware General
Corporation Law which, in general, prevents an "interested stockholder"
(defined generally as a person owning 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" for three
years following the date such person became an interested stockholder unless
certain conditions are satisfied. See "Risk Factors--Control by Principal
Stockholder" and "Description of Capital Stock--Certain Corporate Governance
Matters."
SUBSTANTIAL AND IMMEDIATE DILUTION
Purchasers of the Common Stock in this offering will experience substantial
and immediate dilution in the net tangible book value per share of their
investment of $8.02 per share of Common Stock (assuming an initial public
offering price of $14.00 per share). See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 15,095,000 shares of
Common Stock outstanding (15,845,000 shares if the Underwriters' over-allotment
option is exercised in full). Of these shares, the 5,000,000 shares sold in
this offering will be freely transferable without restriction or limitation
under the Securities Act of 1933, as amended ("Securities Act"), except for any
shares purchased by "affiliates" of the Company, as such term is defined in
Rule 144 under the Securities Act. The remaining 10,095,000 shares constitute
"restricted securities" within the meaning of Rule 144 such that the sale of
such securities would be restricted for two years (one year if certain proposed
amendments to Rule 144 are adopted). Vencor holds 10,000,000 of the restricted
shares and nine officers and directors of the Company will hold the remaining
95,000 restricted shares. Commencing 180 days following completion of this
offering, Vencor will be entitled to certain demand and incidental registration
rights with respect to such shares. If Vencor, by exercising its demand
registration rights, causes a large number of shares to be registered and sold
in the public market, such sales could have a material adverse effect on the
market price for the Common Stock. Further, the Company intends to register
within 180 days of the date of this offering, 1,250,000 shares of Common Stock
reserved for issuance pursuant to the Company's incentive compensation
programs. At this date, the Company anticipates that it will have outstanding
options to purchase 639,500 shares of Common Stock. The options become
exercisable in four equal installments beginning one year from the date of
grant. Sales of substantial amounts of shares of Common Stock in the public
market after this offering or the perception that such sales could occur may
materially and adversely affect the market price of the Common Stock. See
"Description of Capital Stock--Registration Rights Agreement" and "Shares
Eligible for Future Sale."
11
<PAGE>
Subject to certain exceptions, Vencor, the Company and the Company's
directors and executive officers have agreed with the Underwriters not to sell
or otherwise dispose of any shares of Common Stock, any options to purchase
Common Stock or any securities convertible or exchangeable for shares of
Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Alex. Brown & Sons Incorporated. See
"Underwriting."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop
for the Common Stock after this offering. The trading volume of the Common
Stock following this offering is expected to be limited because Vencor will
hold 66.2% of the outstanding Common Stock (63.1% if the Underwriters' over-
allotment option is exercised in full). The initial public offering price of
the Common Stock will be based on negotiations between the Company and the
Underwriters and may bear no relationship to the price at which the Common
Stock will trade after completion of this offering. In addition, the stock
market in recent years has experienced broad price and volume fluctuations
that have frequently been unrelated to the performance of particular
companies. Such market fluctuations may materially and adversely affect the
market price of the Common Stock.
12
<PAGE>
THE COMPANY AND ITS PREDECESSORS
The Company was incorporated in Delaware on May 1, 1996, as a wholly owned
subsidiary of Vencor. Vencor operates an integrated network of health care
services primarily focusing on the needs of the elderly. At or prior to
completion of this offering, Vencor will contribute to the Company
substantially all of its assisted and independent living communities in
exchange for shares of Common Stock and the Company will assume certain
liabilities related to such communities.
On September 28, 1995, Vencor consummated a merger (the "Hillhaven Merger")
with The Hillhaven Corporation ("Hillhaven"). Prior to the Hillhaven Merger,
Hillhaven and its subsidiaries operated the communities now operated by the
Company. Prior to the Hillhaven Merger, Hillhaven consummated a share exchange
(the "Nationwide Exchange") with Nationwide Care, Inc. ("Nationwide") on June
30, 1995. Four of the communities now operated by the Company were operated by
Nationwide until the effective date of the Nationwide Exchange, and from that
date until the consummation of the Hillhaven Merger, by Hillhaven.
The Company's executive offices are located at 515 West Market Street,
Louisville, Kentucky 40202, and its telephone number is (502) 596-7540.
USE OF PROCEEDS
The net proceeds to the Company of this offering are estimated to be
approximately $64.4 million ($74.1 million if the Underwriters' over-allotment
option is exercised in full), assuming an initial offering price of $14.00 per
share and after deducting the estimated underwriting discounts and offering
expenses payable by the Company. The Company expects to use the net proceeds
to finance the development and acquisition of additional assisted living
communities, to convert certain of its existing independent living units to
assisted living units and for working capital and other general corporate
purposes. Pending such uses, the Company intends to invest the net proceeds in
short-term investment grade, interest-bearing securities or certificates of
deposit. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity," "--Capital Resources" and "Business--
Business Strategy."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and currently plans to retain future earnings to finance the growth of
the Company's business rather than to pay cash dividends. Payment of any cash
dividends in the future will depend on the financial condition, results of
operations and capital requirements of the Company as well as other factors
deemed relevant by the Board of Directors. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations
- --Liquidity" and "--Capital Resources."
13
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1996, the pro forma
capitalization of the Company (i) after giving effect to the Contribution
Transaction but without giving effect to this offering, and (ii) as adjusted
to reflect the sale of the shares of Common Stock offered hereby (assuming an
initial public offering price of $14.00 per share) and the application of the
estimated net proceeds therefrom, all as if they occurred on March 31, 1996
(in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
<S> <C> <C>
Long-term debt, including current maturities............. $105,485 $105,485
-------- --------
Stockholders' equity:
Preferred stock, $1.00 par value, 5,000,000 shares au-
thorized;
none issued and outstanding........................... $ - $ -
Common stock, $.10 par value; 50,000,000 shares autho-
rized;
issued and outstanding, 10,095,000 shares (pro forma)
and 15,095,000 shares (pro forma as adjusted)(1)...... 1,010 1,510
Additional paid-in capital............................. 26,974 90,824
-------- --------
Total stockholders' equity............................. 27,984 92,334
-------- --------
Total capitalization................................. $133,469 $197,819
======== ========
</TABLE>
- --------
(1) Excludes options to purchase 639,500 shares of Common Stock at the initial
public offering price, but includes 95,000 restricted shares of Common
Stock which vest over a two-year period following this offering. In
addition, 605,500 shares of Common Stock will be available under the
Company's incentive compensation plans for future grants. See
"Management--Non-Employee Directors 1996 Stock Incentive Plan," "--
Employee Awards Granted," "--Vencor Employee Option Grants" and "--1996
Stock Incentive Plan."
14
<PAGE>
DILUTION
The Company's pro forma net tangible book value at March 31, 1996 was
approximately $26.0 million or $2.57 per share of Common Stock. Net tangible
book value represents the Company's total tangible assets less total
liabilities divided by 10,095,000 shares of Common Stock outstanding. After
giving effect to the sale of 5,000,000 shares of Common Stock pursuant to this
offering (assuming an initial public offering price of $14.00 per share) and
the application by the Company of the estimated net proceeds therefrom, the
Company will have 15,095,000 shares of Common Stock outstanding with a pro
forma adjusted net tangible book value at March 31, 1996, of approximately
$90.3 million or $5.98 per share. This represents an immediate increase in net
tangible book value of $3.41 per share to existing investors and an immediate
dilution of $8.02 per share in net tangible book value per share to new
investors in this offering, as illustrated by the following:
<TABLE>
<S> <C> <C>
Assumed public offering price per share........................... $14.00
Pro forma net tangible book value per share prior to this offer-
ing(1)........................................................... $2.57
Increase per share attributable to new investors................ 3.41
-----
Pro forma adjusted net tangible book value per share after this
offering......................................................... 5.98
------
Net tangible book value dilution per share to new investors(2).... $ 8.02
======
</TABLE>
The following table summarizes on a pro forma basis at March 31, 1996,
certain differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid by the
existing investors and by the new investors purchasing shares in this offering
(based upon an assumed initial public offering price of $14.00 per share)
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing investors(1)...... 10,095,000 66.9% $ 27,984 28.6% $ 2.77
New investors.............. 5,000,000 33.1 70,000 71.4 14.00
---------- ----- ----------- ---------
Total.................... 15,095,000 100.0% $97,984 100.0%
========== ===== =========== =========
</TABLE>
- --------
(1) Excludes options to purchase up to 639,500 shares of Common Stock at the
initial public offering price per share, but includes 95,000 restricted
shares of Common Stock which vest over a two-year period following this
offering. See "Management--Non-Employee Directors 1996 Stock Incentive
Plan," "--Employee Awards Granted," "--Vencor Employee Option Grants" and
"--1996 Stock Incentive Plan."
(2) Dilution is determined, after giving effect to this offering, by
subtracting pro forma net tangible book value per share from the assumed
initial public offering price of $14.00 per share. Dilution to new
investors will be $7.68 per share if the Underwriters' over-allotment
option is exercised in full.
15
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The following table sets forth selected combined financial and statistical
data of the Company which have been derived from the consolidated financial
statements of Vencor and is presented as if the Company had been operated as a
separate entity. The financial statements of the Company for the years ended
December 31, 1993, 1994 and 1995 have been audited by Ernst & Young LLP,
independent auditors. The selected financial data for the years ended May 31,
1992 and 1993 and the three months ended March 31, 1995 and 1996 were derived
from unaudited consolidated financial statements of Vencor and include all
adjustments which management considers necessary for a fair presentation of
financial position and results of operations for the respective periods. The
following data should be read in conjunction with the combined financial
statements of the Company included elsewhere in this Prospectus:
<TABLE>
<CAPTION>
YEARS ENDED YEARS ENDED THREE MONTHS ENDED
MAY 31, DECEMBER 31, MARCH 31,
------------------ ---------------------------- --------------------
1992(1) 1993(1) 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues............... $ 31,664 $ 36,479 $ 35,870 $ 39,758 $ 47,976 $ 11,367 $ 12,611
-------- -------- -------- -------- -------- --------- ---------
Salaries, wages and
benefits.............. 13,898 14,620 14,735 14,638 17,455 4,198 4,677
Supplies............... 3,289 4,199 4,360 4,023 4,860 1,125 1,227
Rent................... 1,832 563 351 333 383 94 100
Depreciation and
amortization.......... 4,751 5,025 4,503 4,541 5,113 1,246 1,312
Non-recurring
transactions.......... - - (266) (1,675) 600 - -
Other operating
expenses.............. 10,058 9,229 8,031 8,347 9,465 2,367 2,434
-------- -------- -------- -------- -------- --------- ---------
33,828 33,636 31,714 30,207 37,876 9,030 9,750
-------- -------- -------- -------- -------- --------- ---------
Operating income
(loss)................ (2,164) 2,843 4,156 9,551 10,100 2,337 2,861
Interest expense....... 5,718 5,058 3,499 3,538 4,322 1,158 982
Investment income...... (8) (445) (346) (330) (147) (24) (48)
-------- -------- -------- -------- -------- --------- ---------
Income (loss) before
income taxes and
extraordinary loss.... (7,874) (1,770) 1,003 6,343 5,925 1,203 1,927
Provision for income
taxes................. (3,110) (699) 396 2,506 2,341 475 761
-------- -------- -------- -------- -------- --------- ---------
Income (loss) before
extraordinary loss.... (4,764) (1,071) 607 3,837 3,584 728 1,166
Extraordinary loss on
extinguishment of
debt, net of income
taxes................. - - (103) - (146) - -
-------- -------- -------- -------- -------- --------- ---------
Net income (loss).... $ (4,764) $ (1,071) $ 504 $ 3,837 $ 3,438 $ 728 $ 1,166
======== ======== ======== ======== ======== ========= =========
Pro forma data:
Earnings per common
share before
extraordinary loss.... $ .24 $ .08
Shares used in
computing earnings
per common share...... 15,095 15,095
STATISTICAL DATA:
Number of
communities(2):
Owned and leased....... 21 20 19 19 20 20 20
Managed................ 2 2 2 2 2 2 2
-------- -------- -------- -------- -------- --------- ---------
Total................ 23 22 21 21 22 22 22
======== ======== ======== ======== ======== ========= =========
Number of units(2):
Owned and leased....... 2,900 2,734 2,574 2,531 2,603 2,603 2,603
Managed................ 419 419 419 419 419 419 419
-------- -------- -------- -------- -------- --------- ---------
Total................ 3,319 3,153 2,993 2,950 3,022 3,022 3,022
======== ======== ======== ======== ======== ========= =========
Average occupancy(3)... 80.9% 87.1% 90.8% 93.8% 94.5% 92.7% 95.7%
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 2,251 $ 2,473 $ 1,695 $ 1,497 $ 2,819 $ 2,694 $ 3,954
Working capital
(deficit)............. 212 849 (386) (1,638) (776) 656 (586)
Assets................. 135,674 141,151 137,308 133,016 140,917 144,835 141,577
Long-term debt......... 98,403 107,685 91,191 90,599 104,506 107,025 104,640
Stockholder's equity... 24,045 30,049 34,959 31,835 28,447 30,961 27,984
</TABLE>
- --------
(1) For accounting purposes, the combined financial information of Atria for
years 1991 and 1992 are based upon the previous fiscal reporting periods of
such entities which most closely approximate the respective calendar year.
Accordingly, operating results for the five months ended May 31, 1993 are
included in both May 31, 1993 and December 31, 1993 disclosures. Revenues
and net income for such period approximated $15.6 million and $61,000,
respectively.
(2) At end of period.
(3) Average occupancy is calculated by dividing the number of occupied units by
the total number of available units during the respective period.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Selected Combined Financial Data and the Combined Financial Statements of
Atria included elsewhere in this Prospectus set forth certain information with
respect to Atria's financial position, results of operations and cash flows
which should be read in conjunction with the following discussion and analysis.
COMPANY INFORMATION
Atria was incorporated in Delaware on May 1, 1996, as a wholly owned
subsidiary of Vencor. Vencor operates an integrated network of health care
services primarily focusing on the needs of the elderly. At or prior to
completion of this offering, Vencor will contribute to Atria substantially all
of its assisted and independent living communities in exchange for shares of
Common Stock and Atria will assume certain liabilities related to such
communities.
On September 28, 1995, Vencor consummated the Hillhaven Merger. For over a
decade prior to the Hillhaven Merger, Hillhaven and its subsidiaries operated
the assisted and independent living communities now operated by Atria. Prior to
the Hillhaven Merger, Hillhaven consummated the Nationwide Exchange on June 30,
1995. Four of the communities now operated by Atria were operated by Nationwide
until the effective date of the Nationwide Exchange, and from that date until
the consummation of the Hillhaven Merger, by Hillhaven.
Atria is a national provider of assisted and independent living communities
for the elderly and currently operates 22 communities in 13 states with a total
of 3,022 units, including 650 assisted living units and 2,372 independent
living units. Atria has nine assisted living communities containing
approximately 500 units under development, of which six communities with a
capacity of 330 units have obtained zoning approval (including two communities
currently under construction).
Substantially all revenues are derived from private pay sources and are
earned from services provided to residents under both daily residence and
ancillary service agreements. Fees related to management contracts are not
significant.
PLANNED DEVELOPMENT AND EXPANSION
Atria intends to expand its business in the future through both construction
of additional communities and acquisition of existing facilities. The Company
plans to add 60 to 85 assisted and independent living communities by the year
2000. The estimated cost to construct, equip or otherwise acquire such
communities could approximate $350 to $500 million.
The estimated cost of Atria's planned development and expansion is
significantly in excess of: (i) estimated cash flows from operations; (ii)
expected proceeds from this offering; and (iii) borrowings to be available
under a planned bank credit facility. Management believes that substantial
additional financing will be required in approximately eighteen months
following completion of this offering to complete Atria's growth plans.
Available sources of future capital may include, among other things, equity,
public or private debt, and additional bank revolving credits. However, there
can be no assurance that such financing will be available on terms which are
acceptable to Atria, nor can there be any assurance that additional financing
will not be required or sought by Atria prior to eighteen months after
completion of this offering.
Newly opened communities are expected to incur operating losses until
sufficient occupancy levels and operating efficiencies are achieved. Based upon
historical experience, management believes that a typical community could
achieve a stabilized occupancy level of 95% or higher approximately one year
from commencement of operations. Accordingly, Atria will require substantial
amounts of liquidity to
17
<PAGE>
maintain the operation of newly opened communities. In addition, if sufficient
occupancy levels related to newly opened communities are not achieved within a
reasonable period, the combined results of operations, financial position and
liquidity of Atria could be materially and adversely impacted.
Atria and Vencor have or will enter into certain agreements which will
become effective on or before the completion of this offering. These
agreements are intended to facilitate an orderly transition of Atria from a
division of Vencor to a separate publicly held entity which will be minimally
disruptive to both Atria and Vencor. See Note 6 of the Notes to Combined
Financial Statements for a description of these agreements.
ANTICIPATED CHARGE TO EARNINGS
Atria is a party to certain litigation involving a minority partner at one
of its communities. In June 1996, Atria agreed to settle such litigation and
acquire all remaining partnership interests in exchange for cash payments of
approximately $1.1 million ($630,000 net of tax) payable over three years. The
amounts related to this settlement will be charged to earnings upon execution
of a final settlement agreement. See "Business--Litigation."
RESULTS OF OPERATIONS
A summary of operations follows:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-----------------------------------------
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- --------------------
1993 1994 1995 1995 1996
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- --------- ---------
Salaries, wages and benefits......... 41.1 36.8 36.4 36.9 37.1
Supplies............................. 12.1 10.1 10.1 9.9 9.7
Other operating expenses............. 22.4 21.0 19.7 20.8 19.3
----- ----- ----- --------- ---------
75.6 67.9 66.2 67.6 66.1
----- ----- ----- --------- ---------
EBDITAR(1)......................... 24.4 32.1 33.8 32.4 33.9
Depreciation and amortization........ 12.5 11.4 10.7 11.0 10.4
Interest expense..................... 9.8 8.9 9.0 10.2 7.8
Rent................................. 1.0 0.8 0.8 0.8 0.8
Investment income.................... (1.0) (0.8) (0.3) (0.2) (0.4)
Non-recurring transactions........... (0.7) (4.2) 1.3 - -
----- ----- ----- --------- ---------
Income before income taxes and
extraordinary loss................ 2.8 16.0 12.3 10.6 15.3
Provision for income taxes........... 1.1 6.3 4.8 4.2 6.0
----- ----- ----- --------- ---------
Income before extraordinary loss... 1.7% 9.7% 7.5% 6.4% 9.3%
===== ===== ===== ========= =========
</TABLE>
- --------
(1) Income from operations before non-recurring transactions, depreciation,
interest expense, investment income, income taxes, amortization and rents.
Although EBDITAR is not a measure of operating performance calculated in
accordance with generally accepted accounting principles, it is commonly
used as an indicator within the real estate development and health care
industries. In addition, EBDITAR also serves as a measurement of leverage
capacity and debt service ability. EBDITAR should not be considered as a
measure of profitability or liquidity or as an alternative to net income,
cash flows generated by operating, investing or financing activities or
other financial statement data presented in the combined financial
statements as an indicator of financial performance.
Quarters Ended March 31, 1996 and 1995
Revenues increased 10.9% to $12.6 million in the first quarter of 1996
compared to $11.4 million in the same period last year. Excluding the effect
of a newly constructed community in February 1995, revenues increased 8.9%
primarily as a result of growth in occupancy (95.7% in the first quarter of
1996 compared to 92.7% a year ago), growth in ancillary services and price
increases.
18
<PAGE>
Compensation and supply costs as a percentage of revenues remained relatively
unchanged in the first quarter of 1996 compared to the same period a year ago,
while other operating expenses declined to 19.3% of revenues from 20.8% last
year due primarily to operating efficiencies associated with the growth in
occupancy and the fixed nature of a significant portion of such costs.
EBDITAR increased 16.2% to $4.3 million in the first quarter of 1996 compared
to $3.7 million in the same quarter of 1995, and EBDITAR margins improved to
33.9% from 32.4%. The improvement in EBDITAR was primarily attributable to
growth in revenues, efficiencies associated with growth in occupancy levels and
expansion of higher margin ancillary services.
Net income increased 60.2% to $1.2 million in the first quarter of 1996
compared to $728,000 a year ago and net margins improved to 9.3% in 1996 from
6.4% in 1995. The improvement in net income was primarily attributable to
growth in EBDITAR and a decline in interest costs as a result of net reductions
in long-term debt and certain refinancings in 1995.
In anticipation of this offering, certain allocations and estimates have been
made by management in the combined financial statements to present the
historical financial position and results of operations of Atria as a separate
entity. The operating results of Atria include certain corporate costs and
expenses of Vencor (comprised principally of information systems and various
centralized management services) aggregating $150,000 in both the first quarter
of 1996 and 1995.
Years Ended December 31, 1995, 1994 and 1993
Revenues increased 20.7% to $48.0 million in 1995 and 10.8% to $39.8 million
in 1994. Excluding the effect of newly constructed and sold communities, and
the purchase of controlling interest in two entities previously accounted for
under the equity method, revenues increased 5.9% in 1995 and 11.6% in 1994,
primarily as a result of growth in occupancy levels (94.5% in 1995 compared to
93.8% in 1994 and 90.8% in 1993), growth in ancillary services and price
increases.
Compensation and supply costs as a percentage of revenues improved slightly
in 1995 compared to 1994, while other operating expenses declined to 19.7% of
revenues from 21.0% in 1994 due primarily to operating efficiencies associated
with growth in occupancy and the fixed nature of a significant portion of such
costs. Compensation, supply costs and other operating expenses declined
significantly as a percentage of revenues in 1994 compared to 1993 primarily as
a result of accelerated growth in occupancy.
EBDITAR increased 27.0% to $16.2 million in 1995 and 45.8% to $12.8 million
in 1994, and EBDITAR margins improved to 33.8% in 1995 from 32.1% in 1994 and
24.4% in 1993. The improvement in EBDITAR was primarily attributable to growth
in revenues, efficiencies associated with growth in occupancy levels, expansion
of higher margin ancillary services and the sale of two unprofitable
communities.
Income before extraordinary loss totaled $3.6 million, $3.8 million and
$607,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Excluding the effect of non-recurring transactions, income before extraordinary
loss increased 39.3% to $3.9 million in 1995 and 533.6% to $2.8 million in
1994. The increases were primarily attributable to growth in EBDITAR. In
addition, revenue growth in both 1994 and 1995 substantially exceeded the
growth in combined depreciation, amortization and interest costs, resulting in
significant improvement in net margins in both years.
In anticipation of this offering, certain allocations and estimates have been
made by management in the combined financial statements to present the
historical financial position and results of operations of Atria as a separate
entity. The operating results of Atria include certain corporate costs and
expenses of Vencor (comprised principally of information systems and various
centralized management services) aggregating $600,000 in 1995, $570,000 in 1994
and $525,000 in 1993.
19
<PAGE>
Operating results during the past three years include certain non-recurring
transactions. Pretax income in 1995 includes a charge of $600,000 ($360,000 net
of tax) related to a writedown of undeveloped property to its estimated net
realizable value. Pretax income in 1994 includes a gain on the sale of property
aggregating $425,000 ($255,000 net of tax). In addition, settlements of certain
litigation increased pretax earnings by approximately $1.3 million ($750,000
net of tax) in 1994 and $266,000 ($160,000 net of tax) in 1993.
LIQUIDITY
Cash provided by operations totaled $3.4 million and $1.6 million for the
three months ended March 31, 1996 and 1995, respectively, and $8.5 million,
$7.6 million and $5.7 million for each of the three years ended December 31,
1995, 1994 and 1993, respectively. In all periods, cash flows from operations
substantially exceeded capital expenditures. The excess was used primarily to
repay advances from Vencor and, in the first quarter of 1995 and fiscal 1993,
reduce long-term debt.
Current liabilities exceeded current assets by $586,000 at March 31, 1996 and
$776,000, $1.6 million and $386,000 at December 31, 1995, 1994 and 1993,
respectively, primarily as a result of the timing of cash settlements of
advances from Vencor (which are included in stockholder's equity). Management
believes that cash flows from operations, the anticipated additional
capitalization from this offering, and expected consummation of a separate bank
credit facility on or about the date of consummation of this offering will be
sufficient to meet liquidity needs for approximately 18 months following
completion of this offering.
Atria plans to retain future earnings to finance the growth of its business
rather than to pay cash dividends. Payment of cash dividends in the future will
depend on the financial condition, results of operations and capital
requirements of Atria as well as other factors deemed relevant by the Board of
Directors.
CAPITAL RESOURCES
Capital expenditures during the past three years related primarily to the
development of new facilities and expansion of existing operations. Capital
expenditures totaled $509,000 and $815,000 for the three months ended March 31,
1996 and 1995, respectively, and $4.0 million, $5.7 million and $1.7 million
for each of the three fiscal years 1995, 1994 and 1993, respectively.
Excluding acquisitions and development of new facilities, management believes
that capital expenditures related to the expansion and improvement of existing
communities could approximate $3.0 million in 1996. Management believes that
its capital expenditure program is adequate to expand, improve and equip
existing communities, and expects to finance such expenditures primarily
through cash flows from operations. At March 31, 1996, two projects were under
construction, the additional cost of which to complete and equip could
approximate $7.4 million.
The combined financial statements of Atria reflect the anticipated assumption
of approximately $100 million of Vencor's long-term debt. In addition, Atria
intends to refinance all outstanding borrowings under the Vencor bank revolving
credit agreement (the balance of which approximated $5.6 million at March 31,
1996) upon completion of this offering from proceeds under a separate bank
credit agreement currently being negotiated by Atria.
The combined financial statements included in this Prospectus are presented
as if Atria had been operated as a separate entity. Accordingly, stockholder's
equity (which represents Vencor's pre-offering 100% interest) comprises both
investments by and non-interest bearing advances from Vencor. Management
expects that in connection with this offering, such amounts will be included as
part of Atria's permanent equity capitalization.
20
<PAGE>
EFFECTS OF INFLATION AND CHANGING PRICES
Atria derives substantially all of its revenues from private pay sources
within its assisted and independent living business. The terms of most rental
agreements approximate one year, generally enabling Atria to increase prices
to maintain operating margins. However, management believes that a significant
number of competing assisted and independent living communities will be
developed in markets in which Atria operates, the effect of which may limit
Atria's ability to increase prices to maintain operating margins in the
future. In addition, other market conditions, including the effect of
unfavorable real estate zoning requirements and increased government
regulation, could adversely impact Atria's ability to increase prices or
control growth in operating expenses.
OTHER INFORMATION
In the event that all or part of the previously discussed assumption of
approximately $100 million of Vencor's long-term debt does not occur prior to
the offering, Vencor would remain primarily liable for such debt. Atria and
Vencor have agreed that Atria would pay all amounts and otherwise satisfy all
obligations related to such long-term debt. In the case of any Vencor long-
term debt proposed to be assumed by Atria in the offering, to the extent that
Atria and Vencor are unable to obtain consents from holders of such debt to
the assumption by Atria of primary liability for such debt, the amount of such
debt will be reflected as a liability of Vencor in its financial statements
(although Vencor's financial statements will also reflect as an asset a
receivable from Atria in an equal amount, which will accrue interest and will
be payable on the same terms as such Vencor long-term debt). Furthermore,
Vencor may be contingently liable as guarantor of certain long-term debt
assumed by Atria in the offering.
Certain long-term debt agreements contain customary covenants which include:
(i) limitations on additional debt and capital expenditures; (ii) limitations
on sales of assets, mergers and changes in ownership; and (iii) maintenance of
certain financial ratios. Atria was in material compliance with all such
covenants at March 31, 1996.
21
<PAGE>
BUSINESS
OVERVIEW
Atria Communities, Inc. is a national provider of assisted and independent
living communities for the elderly. The Company currently operates 22
communities in 13 states with a total of 3,022 units, including 650 assisted
living units and 2,372 independent living units. The Company also has nine
assisted living communities under development with a total of approximately 500
units. To date, the Company has obtained zoning approval for six of nine
properties under development. During the year ended December 31, 1995, the
Company had revenues and net income of $48.0 million and $3.4 million,
respectively, and had an average occupancy rate of 94.5%. For the quarter ended
March 31, 1996, the Company had revenues and net income of $12.6 million and
$1.2 million, respectively, and had an average occupancy rate of 95.7%.
Substantially all of the Company's revenues are from private pay sources.
INDUSTRY BACKGROUND
The assisted and independent living industries are rapidly emerging
components of the non-acute health care system for the elderly. The assisted
and independent living industries represented approximately $10 to $12 billion
in revenue in 1995. The assisted living industry serves the long-term needs of
the elderly who do not require the more extensive medical services available in
skilled nursing facilities, yet who are no longer capable of a totally
independent lifestyle. It is estimated that 35% of the people over the age of
85 require assistance with at least one activity of daily living ("ADL"), such
as eating, grooming and bathing, personal hygiene and toileting, dressing,
transportation, walking and medication reminders. Assisted living residents
typically desire the comfort and security of having their own "home" yet
require help with two or more ADLs on a regular basis. The independent living
industry serves the long-term care needs of the elderly who require or prefer
only occasional assistance with ADLs and who no longer desire, or cannot
maintain, a totally independent lifestyle.
The Company believes that a number of significant trends will support the
continued growth of the assisted and independent living industries. These
trends include:
Favorable Demographic Trends. The Bureau of the Census estimates that the 85
and over age group is the fastest growing segment of the population and is
projected to increase approximately 42% from 1990 to 2000. The Company believes
that with a growing elderly population, the number of people who will need or
desire to reside in an assisted or independent living community will also
increase.
Cost-Containment Pressures. The Company believes its business will benefit
from the continuing efforts of the government, private insurers and managed
care organizations to contain health care costs by limiting lengths of stay,
services and reimbursement amounts in acute care hospitals. As a result of
these cost containment efforts, an increasing number of patients seek skilled
nursing facility care. Accordingly, many skilled nursing facilities are
devoting a greater portion of their capacity to residents with higher
reimbursement profiles who require more intensive nursing care. The Company
believes there will be opportunities for assisted and independent living
facilities to provide accommodations and services to residents who require
lower levels of care than may be generally provided to residents in skilled
nursing facilities.
Limited Supply of Long-Term Care Facilities. Most states have enacted
certificate of need or similar legislation which restricts the supply of
licensed nursing facility beds. These laws generally limit the construction of
new nursing facilities and the addition of beds or services to existing nursing
facilities. Construction costs, limitations on government reimbursement for
full costs of construction and start-up expenses also constrain growth in the
supply of nursing facility beds. According to a 1993 industry report, the
average occupancy rate for nursing facilities in the United States was
approximately 95%. The Company believes that the limitations on the supply of
skilled nursing facility beds will increase the need for assisted living
communities.
22
<PAGE>
Price Advantages. A 1993 industry report indicated that the annual cost per
patient for nursing facility care averaged approximately $35,000 in 1993, while
the annual per resident cost for assisted living care averaged approximately
$24,000. Because rates paid by private pay patients in skilled nursing
facilities are higher than government reimbursement rates, the comparable cost
advantage of assisted living over a private pay skilled nursing facility rate
is even greater. The Company also believes that assisted living compares
favorably with home health care, particularly when the prices associated with
housing and meal preparation are added to the prices of home health care.
Consumer Preference. The Company believes that assisted and independent
living communities provide prospective residents and their families with an
attractive alternative to skilled nursing facilities. Assisted and independent
living facilities allow residents to "age in place" and preserve their
independence in a more residential setting.
Changing Family Dynamics. As a result of the growing number of two-income
families, fewer children are able to care for elderly parents in their own
homes. Other factors such as the increase in single-parent households and the
increasing geographic dispersion of families also contribute to the inability
of many children to care for elderly parents in the home.
BUSINESS STRATEGY
The Company's predecessors have operated assisted and independent living
communities as part of a health care network for over a decade. The Company's
objective is to expand its position as a national provider of high-quality
assisted and independent living services. The Company is pursuing the following
strategies to meet this objective:
Rapid Development of Additional Assisted Living Communities and Units. The
Company intends to develop or acquire 60 to 85 additional assisted living
communities by the year 2000. The Company plans to expand its base of assisted
living communities on a national basis where Vencor has a presence and in other
high population density areas. The Company has acquired nine sites for new
assisted living communities and has received zoning approvals for six of these
sites. The Company also plans to develop additional units for the memory-
impaired and convert at least 700 of its existing independent living units to
assisted living units by the year 2000. The Company believes that it can
accelerate its development efforts by outsourcing selected development
functions to third parties, such as preliminary site selection, zoning,
architecture, and construction.
Network with Vencor. The Company intends to operate wherever practicable as
part of the Vencor health care network. The Company believes that networking
opportunities exist between assisted living facilities and long-term care
hospitals and skilled nursing facilities. Fifteen of the Company's communities
are located on or adjacent to a Vencor facility and certain of the Company's
future development efforts will focus on sites proximate to existing Vencor
facilities. The Company believes that as part of the Vencor network it will be
favorably positioned to take advantage of emerging opportunities to provide
assisted living services in a managed care environment.
Higher Acuity Service Model. The Company intends to pursue, as appropriate, a
higher acuity model of assisted living to enable the Company's residents to
"age in place." By making available such extended services as home health care
and rehabilitation to its residents, the Company believes that it will be
better able to meet the full range of its residents' needs and facilitate
longer lengths of stay. Residents will be able to continue to live in the
Company's communities unless they develop medical conditions requiring
institutional care in a skilled nursing facility or admission to an acute care
hospital. Residents currently obtain certain health care services from third
parties, including Vencor. The Company may elect to make available certain
health care services to its residents on a direct basis in the future.
23
<PAGE>
Private Pay Focus. The Company intends to focus its development and marketing
efforts on private pay, middle- and upper-income residents. The Company
believes that this market represents the largest market opportunity for
assisted living services and that private pay residents are more profitable
than residents covered by government reimbursement programs. Substantially all
of the Company's revenues are derived from private pay sources.
SERVICES PROVIDED
The Company's mission is to be the leading provider of senior living services
by delivering consistent, high-quality, innovative services to its residents
and their community. Services provided are designed to respond to residents'
individual needs, while promoting independence and dignity. Residents live in
private studios or apartments with access to basic services, such as health
screenings, blood pressure checks, security, utilities, meal service,
housekeeping and laundry services, dietary, exercise and fitness classes,
social and recreational programs, 24-hour emergency call systems and local
transportation on a van or minibus to physician offices, stores and community
events ("Basic Services").
In addition to Basic Services, assisted living residents are offered
additional services including an increased level of housekeeping, meal services
and assistance with one or more ADLs, such as eating, grooming and bathing,
personal hygiene and toileting, dressing, additional transportation, walking
and medication reminders ("Assisted Living Services"). Health-related services,
which are made available and provided according to the resident's individual
needs and in accordance with state regulatory requirements, may include
assistance with taking medication and injections, as well as health care
monitoring. The Company offers each of its residents a personalized assisted
living service plan which may include any combination of ADLs.
Residents pay a monthly fee for Basic Services and additional Assisted Living
Services are purchased based on hourly rates or in some communities are
purchased as part of an increased service package. Most residents rent units
through a one-year lease. If the resident dies or transfers to another facility
due to the need for a higher level of medical care the lease is no longer
binding on the resident.
The process of customizing services to meet the needs of residents begins
with the resident admission process, where the facility's management staff, the
resident and, if appropriate, the resident's family and physician, discuss the
resident's needs and develop an appropriate service plan. If recommended by the
resident's physician, additional health or medical services may be provided at
the facility by a third-party home health care agency or other medical provider
such as Vencor. In some states, the Company or one of its subsidiaries is a
licensed home health care provider. The service plan is reviewed, monitored and
modified on a regular basis.
In addition to Basic Services and Assisted Living Services, specially trained
staff provide other care and services specifically designed for memory-impaired
residents at two communities. These programs provide the attention, care
programs and services needed to help memory-impaired residents maintain a
higher quality of life.
The Company believes that quality care creates satisfied residents who, along
with their families, are important referral sources for the Company. The
Company has developed quality assurance programs to ensure that service quality
is maintained in its communities. The Company conducts periodic surveys of
residents to monitor satisfaction with accommodations and services. The Company
has established operational standards and performance goals for its communities
addressing such matters as food service, housekeeping, maintenance and
administration.
24
<PAGE>
THE COMPANY'S COMMUNITIES
The Company's communities vary in size from 28 to 356 units. Communities are
designed to maximize privacy in a home-like, non-institutional atmosphere. The
Company adapts its facilities to regional architectural styles and tastes
rather than replicate a "prototype" architectural design. Assisted living units
are typically studio or one bedroom units ranging in size from 375 to 525
square feet. Independent living units may range from a studio (375 to 425
square feet) to a three bedroom unit (700 to 1,000 square feet). The units
typically include a private bathroom, kitchenette, closet, living and sleeping
areas, as well as a lockable door, emergency call system, individual
temperature controls, fire alarm and sprinkler system, among other amenities.
Approximately 40% of a typical community is devoted to common areas and
amenities, including reading rooms, family or living rooms and other areas
(such as beauty salons, cafes and ice cream parlors) designed to promote
interaction among residents. The Company's communities are usually one, two or
three stories. Interior layouts are designed to promote a home-like
environment, efficient delivery of quality resident care and resident
independence.
25
<PAGE>
The table below sets forth certain information regarding communities operated
by the Company. Except as otherwise noted, the Company owns, directly or
indirectly, the following communities:
<TABLE>
<CAPTION>
NUMBER OF UNITS
---------------------------
YEAR FIRST INDEPENDENT ASSISTED
COMMUNITY LOCATION(1) OPERATED(2) LIVING LIVING TOTAL
- --------- ----------- ----------- ----------- -------- -----
<S> <C> <C> <C> <C> <C>
ARIZONA
Valley Manor............... Tucson 1975 45 24 69
Villa Campana.............. Tucson 1984 141 -- 141
Campana Del Rio............ Tucson 1988 190 24 214
Kachina Point.............. Sedona 1986 102 -- 102
CALIFORNIA
Courtyard at San Mar-
cos(3).................... San Marcos 1987 178 34 212
COLORADO
The Court at Castle Gar-
dens...................... Northglenn 1986 -- 99(4) 99
FLORIDA
Evergreen Woods............ Spring Hill 1979 161 55 216
The Heritage............... Brooksville 1992 -- 57(5) 57
Windsor Woods(6)........... Hudson 1988 127 53 180
Meridian House(7).......... Lantana 1986 140 33 173
IDAHO
Hillcrest.................. Boise 1984 115 -- 115
INDIANA
The Heritage at Wildwood... Wildwood 1995 -- 72 72
Colonial Oaks(8)........... Marion 1978 63 -- 63
KANSAS
The Hearthstone............ Topeka 1987 115 40 155
MASSACHUSETTS
Foxhill Village(8)......... Westwood 1990 329 27 356
New Pond Village(9)........ Walpole 1990 167 32 199
MISSOURI
Villa Ventura.............. Kansas City 1985 129 43 172
NEW HAMPSHIRE
The Greens................. Hanover 1984 28 -- 28
OHIO
McMillen(10)............... Newark 1986 80 -- 80
UTAH
The Crosslands............. Sandy 1986 120 -- 120
WASHINGTON
The Narrows Glen........... Tacoma 1987 142 -- 142
Laurel House............... Tacoma 1994 -- 57 57
----- --- -----
Total............... 2,372 650 3,022
===== === =====
</TABLE>
- --------
(1) All communities are within ten miles of a Vencor skilled nursing facility,
except for Meridian House, The Hearthstone and Villa Ventura.
(2) Represents the year in which the Company or a predecessor of the Company
opened or commenced operations.
(3) The Company owns a 65% interest in this community.
(4) Includes 22 units for the memory impaired.
(5) Includes 44 units for the memory impaired.
(6) The Company owns a 51% interest in this community and has an agreement in
principle to acquire the remaining 49% interest.
(7) The Company owns a 99% interest in this community.
(8) The Company manages these communities pursuant to a seven-year management
agreement (Colonial Oaks) and a five-year management agreement (Foxhill
Village). These communities are owned by unaffiliated entities.
(9) The Company leases this community from New Pond Village Associates
partnership pursuant to a 99-year lease agreement. The Company also has an
option to acquire this community in exchange for assuming certain
indebtedness and upon the satisfaction of certain conditions.
(10) The Company leases this community from an unaffiliated entity pursuant to
a five-year lease agreement.
26
<PAGE>
DEVELOPMENT PROGRAM
The Company is developing nine sites for new assisted living communities and
has received zoning approvals for six of these communities. The table below
sets forth certain information regarding the Company's development properties:
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF
DEVELOPMENT COMPLETION ASSISTED
LOCATION(1) PHASE DATE(2) LIVING UNITS
----------- ------------------ -------------- ------------
<S> <C> <C> <C>
Sedona, Arizona................. Zoned May 1997 40(3)
Tucson, Arizona................. Zoned(4) September 1997 40
Redding, California(5).......... Under construction April 1997 60
Dennis, Massachusetts........... Land acquired June 1998 40(3)
Charlotte, North Carolina....... Zoned December 1997 90(6)
Sandy, Utah..................... Under construction February 1997 63
Virginia Beach, Virginia........ Land acquired November 1997 90
Tacoma, Washington.............. Zoned September 1997 40(6)
Kenosha, Wisconsin.............. Land acquired December 1997 40
---
Total......................... 503
===
</TABLE>
- --------
(1) All properties are located within ten miles of a Vencor skilled nursing
facility, except Virginia Beach, Virginia.
(2) There can be no assurance that zoning or construction delays will not be
experienced. See "Risk Factors--Development and Construction Risks."
(3) Includes 20 units for the memory impaired.
(4) A special use permit is also required.
(5) This property is leased from Vencor pursuant to a 99-year lease, under
which Atria has an option to acquire the property for $180,000. All other
properties are owned by the Company.
(6) These communities will include some units for the memory impaired.
The Company plans to focus on expanding its base of assisted living
communities where Vencor has a presence and in other high-density population
areas. The Company currently expects to develop or acquire 60 to 85 communities
by the year 2000, including communities set forth in the table above. In
addition, the Company plans to convert at least 700 of its existing independent
living units to assisted living units by the year 2000. The Company believes
that it can accelerate its development efforts by outsourcing selected
development functions to third parties, including Vencor. While it is expected
that most of its expansion will be as a result of development, the Company also
intends to acquire existing assisted living facilities or facilities it can
reposition as assited living facilities on a selective basis. See "Risk
Factors--Development and Construction Risks."
The Company is following a disciplined development strategy that begins with
site selection. When selecting new development sites, the Company considers the
local and regional economic environment, demographics, competition, the labor
market, the legislative and regulatory environment and other factors. After
targeting a market, the Company engages independent contractors to identify
suitable real estate. After the land is acquired, the Company typically
initiates the zoning, architectural and construction aspects of development.
The Company estimates that zoning and other site approvals may take
approximately six months after a site is acquired. Once such approvals are
obtained, the Company estimates that construction time will be six to ten
months and the cost of each unit will range from $60,000 to $70,000.
Existing communities range in size from 28 to 356 units. The Company plans in
the future to develop high-quality communities typically with approximately 90
units. The Company believes that this size offers marketing and operating
advantages including economies of scale. However, the number of units in a
27
<PAGE>
community will depend, among other things on local market conditions, site
availability and site size. Although certain interior layouts will be
relatively standard, the Company intends to customize the exterior appearance
of each community to reflect local architectural styles and tastes.
Prior to the completion of construction, the Company initiates a marketing
campaign, emphasizing contacts with potential referral sources. Once opened,
the Company estimates that it will take an average of 12 months for a facility
to achieve a stabilized occupancy level of 95% or higher. See "Risk Factors--
Development and Construction Risks."
The Company also plans to acquire additional assisted living facilities or
other properties that can be repositioned as Atria assisted living communities.
In evaluating possible acquisitions, the Company considers, among other
factors: (i) location, construction quality, condition and design of the
facility; (ii) current and projected cash flows; (iii) the ability to increase
revenues, occupancy and cash flows by providing a full range of assisted living
services; (iv) costs of repositioning (including renovations, if any); and (v)
the extent to which the acquisition will complement the Company's development
program. See "Risk Factors--Acquisition Risks; Difficulties of Integration."
MANAGEMENT OF THE COMMUNITIES
An executive director typically manages the day-to-day operations at each
community, including oversight of the quality of care, marketing, coordination
of services and monitoring financial performance. The executive director is
responsible for all personnel, including management, security, staff and
independent contractors. Executive directors are compensated based on service
quality, as well as financial results. Service quality is assessed, in part,
through customer and employee satisfaction surveys.
In most cases, each community also has managers for environmental services,
care services, the business office, dietary services, activities, security,
transportation and sales and marketing. All assisted living communities employ
a licensed practical nurse. Some residents contract with third parties such as
home health agencies to provide additional services.
The Company actively recruits personnel to maintain adequate staffing levels
at its existing communities, as well as new staff for new or acquired
communities prior to opening. The Company maintains training sites in Tacoma,
Washington, and Hudson, Florida, for its executive directors and other key
personnel. The Company expects to open two new training sites by the end of
1996. Participants receive intensive training in all facets of community
management in three- to four-day sessions. Moreover, the Company offers two
different levels of training, such that participants who successfully complete
one level return subsequently for the next level of training.
Executive directors report to area executive directors. The Company has three
area executive directors, each with regional responsibility. Area executive
directors report to the Chief Operating Officer or to the Vice President of
Operations.
MARKETING
Each community employs a sales and marketing director. Before opening new
communities, the Company typically uses telemarketing, direct mail and
newspaper ads for developing awareness of such communities. Once communities
are open, the Company's marketing strategy focuses on enhancing the reputation
of the communities and creating an awareness of the Company's services among
potential referral sources, such as hospitals, rehabilitation hospitals, home
health care agencies and other health care providers located near the Company's
communities. The Company believes that satisfied residents and their families
are the most important referral sources for its established communities.
Accordingly, the Company believes that its emphasis on high-quality services
and resident satisfaction will result in a strong referral base for its
existing communities. The Company also seeks to maintain occupancy levels by
retaining residents for longer periods of time by expanding the services
available to residents, thereby allowing residents to "age in place."
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A typical assisted living resident is a female over the age of 80 whose
residence was generally within five to ten miles of the community. The decision
to relocate to one of the Company's communities is usually made by the resident
and her family.
COMPETITION
The assisted living industry is highly competitive. The Company faces
competition from numerous local, regional and national providers of assisted
living and long-term care. The Company also competes with companies providing
home-based health care. Some of the Company's competitors operate on a not-for-
profit basis or as charitable organizations. Many of the Company's competitors
are significantly larger and have greater financial resources than the Company.
The Company believes that the assisted living industry will become even more
competitive in the future. Regulatory barriers to entry into this industry are
generally not substantial. If the development of new assisted living
communities surpasses the demand for such communities in particular markets,
such markets may become saturated. The Company expects to face competition with
respect to its acquisition of additional assisted living communities and
properties. There can be no assurance that competition will not limit the
Company's ability to attract residents and expand its business and will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company believes that assisted and independent living communities compete
primarily on the basis of quality of service, services offered, reputation, a
facility's location and appearance and prices. The Company believes its
communities are distinguishable from assisted and independent living facilities
that do not cater primarily to private pay residents because of the quality of
services, amenities and physical facilities that the Company is able to offer.
In addition, a number of the Company's communities maintain both assisted and
independent living units. The Company believes that the ability of these
communities to continue to serve residents as their needs increase may be
attractive to potential residents. See "Risk Factors--Competition."
FUNDING FOR ASSISTED AND INDEPENDENT LIVING CARE
The Company currently, and for the foreseeable future, expects to rely
primarily on its residents' ability to pay the Company's charges from their own
resources. Inflation or other circumstances that adversely affect the elderly's
ability to pay for services could have an adverse effect on the Company's
business, financial condition and results of operations. Depending on the
nature of an individual's health insurance program or any long-term care
insurance policy, the resident may receive reimbursement for certain costs
under an "alternate care benefit."
Nine of the Company's communities were financed in part through the issuance
of tax-free industrial revenue bonds (the "Bonds"). At March 31, 1996, there
was $66.4 million principal amount of such Bonds outstanding with interest
rates ranging from 3.2% to 9.9% (interest rates are generally floating and
average 5.3%). Under the terms of the Bonds, the Company is required to rent
approximately 250 assisted and independent living units to individuals who have
incomes which are 80% or less of average income levels in a designated market.
In certain cases, the Company's ability to increase prices in communities with
such Bond financing (in response to higher operating costs or other
inflationary factors) could be limited if it affects the ability of the Company
to attract and retain residents with qualifying incomes.
Government payments for assisted and independent living have been limited.
Some state or local governments offer subsidies for rent or services for low-
income elderly persons. Others may provide subsidies in the form of additional
payments for those who receive Supplemental Security Income. Medicaid provides
insurance for certain financially or medically needy persons, regardless of
age, and is funded jointly by federal, state and local governments. Payments
for the services provided by the Company are not permitted under the Medicaid
program absent a waiver. While there are various federal and state
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initiatives to provide reimbursement for assisted and independent living
programs, at this time the Company believes that the level of reimbursement
under such federal and state programs would be insufficient to cover the cost
of delivering the level of service provided by the Company.
GOVERNMENT REGULATION
Changes in existing laws and regulations, adoption of new laws and
regulations and new interpretations of existing laws and regulations could have
a material impact on the Company's operations. Failure by the Company to comply
with applicable regulatory requirements could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Risk Factors--Government Regulation."
The health care industry is subject to extensive regulation and frequent
regulatory change. At this time, no federal laws or regulations specifically
regulate assisted or independent living facilities. While a number of states
have not yet enacted specific assisted living regulations, the Company's
communities are subject to regulation, licensing, certificate of need and
permitting by state and local health and social service agencies and other
regulatory authorities. While such requirements vary from state to state, they
typically relate to staffing, physical design, required services and resident
characteristics. The Company believes that such regulation will increase in the
future. In addition, health care providers are receiving increased scrutiny
under anti-trust laws as integration and consolidation of health care delivery
increases and affects competition. The Company's communities are also subject
to various zoning restrictions, local building codes and other ordinances, such
as fire safety codes. Failure by the Company to comply with applicable
regulatory requirements could have a material adverse effect on the Company's
business, financial condition and results of operations. Regulation of the
assisted living industry is evolving. The Company is unable to predict the
content of new regulations and their effect on its business. There can be no
assurance that the Company's operations will not be adversely affected by
regulatory developments.
Federal and state anti-remuneration laws, such as the Medicare/Medicaid anti-
kickback law, govern certain financial arrangements among health care providers
and others who may be in a position to refer or recommend patients to such
providers. These laws prohibit, among other things, certain direct and indirect
payments that are intended to induce the referral of patients to, the arranging
for services by, or the recommending of, a particular provider of health care
items or services. Vencor provides certain services to residents of the
Company's communities. The Medicare/Medicaid anti-kickback law has been broadly
interpreted to apply to certain contractual relationships between health care
providers and sources of patient referral. Similar state laws, which vary from
state to state, are sometimes vague and seldom have been interpreted by courts
or regulatory agencies. Violation of these laws can result in loss of
licensure, civil and criminal penalties, and exclusion of health care providers
or suppliers from participation in the Medicare and Medicaid program. There can
be no assurance that such laws will be interpreted in a manner consistent with
the practices of the Company.
The Company believes that its communities are in substantial compliance with
applicable regulatory requirements. However, in the ordinary course of
business, one or more of the Company's communities could be cited for
deficiencies. In such cases, the appropriate corrective action would be taken.
To the Company's knowledge, no material regulatory actions are currently
pending with respect to any of the Company's communities.
Under the Americans with Disabilities Act of 1990, all places of public
accommodation are required to meet certain federal requirements related to
access and use by disabled persons. A number of additional federal, state and
local laws exist which also may require modifications to existing and planned
properties to create access to the properties by disabled persons. While the
Company believes that its properties are substantially in compliance with
present requirements or are exempt therefrom, if required changes involve a
greater expenditure than anticipated or must be made on a more accelerated
basis than
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anticipated, additional costs would be incurred by the Company. Further
legislation may impose additional burdens or restrictions with respect to
access by disabled persons, the costs of compliance with which could be
substantial.
EMPLOYEES
The Company has approximately 1,150 employees of which 820 are full time and
330 are part time. Eight full-time employees are employed at the Company's
principal executive offices. None of the Company's employees are currently
represented by a labor union and the Company is not aware of any union
organizing activity among its employees. The Company believes that its
relationship with its employees is good.
LITIGATION
From time to time, the Company or its communities may be named as defendants
in, or be the subject of, litigation arising in the normal course of business.
Except as described below, there are no other pending legal proceedings or
claims that the Company believes may be material.
A lawsuit was filed on July 19, 1995 in a Washington state court by
Hillhaven Properties, Ltd., a subsidiary of the Company ("HPL"), against
Woodhaven Partners, Ltd. (which owns the Windsor Woods community), for breach
of contract for failure to pay principal and interest on four promissory notes
now in default. A minority partner owns a 49% interest in Woodhaven Partners,
Ltd. and HPL, has a 51% interest in Woodhaven Partners, Ltd. In the lawsuit,
HPL seeks approximately $9.4 million in principal, plus interest and costs
(the "Debt"). A trial has been scheduled to commence in September 1996. In
addition, the minority partner brought suit in a Florida state court in
September 1995 against HPL, First Healthcare Corporation, a subsidiary of
Vencor, and Vencor for breach of fiduciary duty, dissolution of the
partnership and forgiveness of the Debt. The Company, Vencor and the minority
partner have reached an agreement in principle to settle all litigation
relating to Windsor Woods. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Anticipated Charge to
Earnings," Note 5 of Notes to Combined Financial Statements and Note 3 of
Notes to Condensed Combined Financial Statements.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
W. Bruce Lunsford(1)(2)......... 48 Chairman of the Board
W. Patrick Mulloy, II(1)........ 43 Chief Executive Officer, President and
Director
Ralph H. Bellande............... 50 Chief Operating Officer
J. Timothy Wesley............... 36 Chief Financial Officer and Vice President
of Development
Sandra Harden Austin(3)(4)...... 48 Director
William C. Ballard Jr.(2)(4).... 55 Director
Peter J. Grua(4)(5)............. 42 Director designee
Thomas T. Ladt(2)(3)(4)......... 45 Director
R. Gene Smith(1)(2)(3).......... 61 Director
</TABLE>
- --------
(1) Member of the Executive Committee of which Mr. Lunsford is Chairman.
(2)This person also serves as a Vencor director or officer.
(3) Member of the Executive Compensation Committee of which Mr. Smith is
Chairman.
(4) Member of the Audit Committee of which Mr. Ballard is Chairman. Mr. Grua
will become a member of the Audit Committee upon his appointment to the
Board to Directors.
(5) Following completion of this offering, Mr. Grua, who has agreed to serve as
a director, will be appointed as a director of the Company.
W. Bruce Lunsford has served as a director of the Company since May 1996. He
is a certified public accountant and an attorney. Mr. Lunsford is a founder of
Vencor and has served as Vencor's Chairman of the Board, President and Chief
Executive Officer since Vencor commenced operations in 1985. He is a director
of National City Corporation, a bank holding company; Churchill Downs
Incorporated; and Res-Care, Inc., a provider of residential training and
support services for persons with developmental disabilities and certain
vocational training services.
W. Patrick Mulloy, II has served as the Chief Executive Officer, President
and a director of the Company since May 1996. From 1994 to 1996, Mr. Mulloy was
a member and of counsel to the law firm of Greenebaum Doll & McDonald PLLC.
From 1992 to 1994, Mr. Mulloy served as the Secretary of the Finance and
Administration Cabinet for the Commonwealth of Kentucky. For over ten years
prior to 1992, Mr. Mulloy engaged in the private practice of law in Louisville,
Kentucky. Mr. Mulloy has also been actively involved in commercial and multi-
family real estate acquisitions and developments through a family partnership.
Ralph H. Bellande has been the Chief Operating Officer of the Company since
May 1996. From November 1995 to May 1996, Mr. Bellande served as a Vice
President of Vencor and was responsible for managing the assisted living
operations of Vencor which are now owned by the Company. From 1987 to 1995, Mr.
Bellande was a Vice President of The Hillhaven Corporation and was responsible
for managing the assisted living operations which are now owned by the Company.
J. Timothy Wesley has been the Chief Financial Officer and Vice President of
Development for the Company since May 1996. From 1994 to May 1996, Mr. Wesley
was Director and Manager of Development at Vencor. From 1992 to 1994, Mr.
Wesley was Vice President of Strategic Planning for Home Care Affiliates, Inc.,
and from 1986 to 1992, he was employed by Humana Inc., most recently as
Director of Acquisitions.
Sandra Harden Austin has served as a director of the Company since May 1996.
Since 1994, Ms. Austin has been President of Physician Services for Caremark
International, a provider of health care
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products and services. Ms. Austin served as President and Chief Operating
Officer of University of Chicago Hospitals from 1990 to 1993. Ms. Austin is a
director of National City Corporation and Ferro Corporation, a multi-specialty
chemical manufacturer.
William C. Ballard Jr. has been a director of the Company since May 1996. Mr.
Ballard has been a director of Vencor since 1988. Since 1992, Mr. Ballard has
been of counsel to the law firm of Greenebaum Doll & McDonald PLLC. From 1981
to 1992, he served as Executive Vice President--Finance and Administration of
Humana Inc. Mr. Ballard is also a director of Mid-America Bancorp, United
Healthcare Corp., LG&E Energy Corp., Health Care REIT, Inc. and American Safety
Razor Inc.
Peter J. Grua has agreed to serve as a director and will be appointed as a
director after completion of this offering. Since 1992, Mr. Grua has been a
principal of HLM Management, an investment management company specializing in
entrepreneurial and growth companies. Prior to joining HLM Management, Mr. Grua
was a Managing Director of Alex. Brown & Sons Incorporated where he was a
research analyst from 1986 to 1992.
Thomas T. Ladt has been a director of the Company since May 1996. Mr. Ladt
has served as Executive Vice President, Operations of Vencor since February
1996. From November 1995 to February 1996, he served as President of Vencor's
Hospital Division. Mr. Ladt was Vice President of Vencor's Hospital Division
from 1993 to November 1995. From 1989 to 1993, Mr. Ladt was a Regional Director
of Operations for Vencor.
R. Gene Smith has served as a director of the Company since May 1996. Mr.
Smith has been a director of Vencor since 1985 and Vice Chairman of the Board
of Vencor since 1987. From 1987 to 1995, Mr. Smith was President of New Jersey
Blockbuster, Ltd., which held the Blockbuster Video franchise for northern New
Jersey. Since 1988, Mr. Smith has been Chairman of the Board of Taco Tico,
Inc., an operator of Mexican fast-food restaurants. Since 1993, Mr. Smith has
been Managing General Partner of Direct Programming Services, a marketer of
direct broadcast satellite television services.
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee. The members of the Executive Committee are Messrs.
Mulloy, Smith and Lunsford. The Executive Committee has been delegated all of
the powers of the Board of Directors to the extent permitted under the Delaware
General Corporation Law.
Executive Compensation Committee. The members of the Executive Compensation
Committee are Messrs. Smith and Ladt, and Ms. Austin, all of whom are non-
employee directors. The Compensation Committee makes recommendations to the
full Board of Directors concerning compensation and benefits for executive
officers of the Company.
Audit Committee. The members of the Audit Committee are Messrs. Ballard and
Ladt, and Ms. Austin, all of whom are non-employee directors. Mr. Grua will
become a member of the Audit Committee upon his appointment to the Board of
Directors. The Audit Committee, among other things, makes recommendations
concerning the engagement of independent auditors, reviews the results and
scope of the annual audit and other services provided by the Company's
independent auditors, and reviews the adequacy of the Company's internal
accounting controls.
COMPENSATION OF DIRECTORS
Directors not employed by the Company receive $500 for each board meeting
they attend. Non-employee directors also receive $250 for each committee
meeting they personally attend. In addition, non-employee directors receive a
$750 retainer for each calendar quarter they serve as a director. Directors
will be reimbursed for reasonable out-of-pocket expenses incurred in attending
Board meetings.
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NON-EMPLOYEE DIRECTORS 1996 STOCK INCENTIVE PLAN
Directors not employed by the Company will receive restricted shares of the
Common Stock and options to purchase shares of the Common Stock pursuant to
the Non-Employee Directors 1996 Stock Incentive Plan (the "Directors Plan").
The Directors Plan provides for an initial, one-time grant of 5,000 restricted
shares of Common Stock as of the date of this offering (the "Initial Grant
Date"). However, the Chairman of the Board of Directors, Mr. Lunsford, will
receive 20,000 restricted shares of Common Stock. The restrictions on all such
shares of Common Stock lapse in two equal annual installments, beginning on
the first anniversary of the Initial Grant Date. The Directors Plan also
provides for an initial grant of options to purchase shares of Common Stock as
of the date of the offering. Each non-employee director will receive an option
to purchase 10,000 shares on the Initial Grant Date, except the Chairman of
the Board of Directors, Mr. Lunsford, who will receive an option to purchase
80,000 shares. Each new non-employee director will be granted an option to
purchase 10,000 shares of Common Stock on the date of his or her election. The
Company will thereafter annually issue, beginning on the first anniversary of
the Initial Grant Date, to each of the Company's non-employee directors, an
option to purchase 1,000 shares of Common Stock. Initial grants of options to
purchase Common Stock will be at an exercise price equal to the initial public
offering price. Thereafter, all options for directors will be granted at the
fair market value of the Common Stock on the date of grant. A total of 250,000
shares are reserved for issuance under the Directors Plan. All options granted
under the Directors Plan will become exercisable in four equal annual
installments, beginning on the first anniversary of such option's date of
grant.
COMPENSATION OF EXECUTIVE OFFICERS
The Company was organized in May 1996 and its operations since that time
have related primarily to its formation and to the Contribution Transaction.
During 1996, Messrs. Mulloy, Bellande and Wesley will earn annual salaries of
$180,000, $157,500 and $90,000, respectively, exclusive of performance bonuses
which will not exceed one-third of base salary for Mr. Mulloy and one-quarter
of base salary for Mr. Bellande and Mr. Wesley.
EMPLOYEE AWARDS GRANTED
Pursuant to the Company's 1996 Stock Incentive Plan (the "1996 Plan"),
certain executive officers of the Company will receive restricted shares and
options upon completion of this offering. W. Patrick Mulloy, II, Chief
Executive Officer, President and Director, will be granted 30,000 restricted
shares of Common Stock and an option to purchase 200,000 shares of Common
Stock. Ralph H. Bellande, Chief Operating Officer, will receive 15,000
restricted shares of Common Stock and an option to purchase 75,000 shares of
Common Stock. J. Timothy Wesley, Chief Financial Officer and Vice President--
Development, will receive 5,000 restricted shares of Common Stock and an
option to purchase 35,000 shares of Common Stock. The restrictions on all of
the restricted shares of Common Stock granted pursuant to the 1996 Plan lapse
in two equal annual installments, beginning on the first anniversary of the
grant date. All options to purchase Common Stock will be granted at an
exercise price equal to the fair market value of the Common Stock on the date
the option is granted. The initial grants of options to purchase shares of
Common Stock per share will be granted at an exercise price equal to the
initial public offering price. These initial option grants will become
exercisable in four equal annual installments, beginning on the first
anniversary of the grant date.
VENCOR EMPLOYEE OPTION GRANTS
The Company expects to issue options for 90,000 shares of Common Stock to
certain Vencor employees with an exercise price equal to the initial offering
price. These options are being granted to incentivize and reward Vencor
employees who have provided, and will provide, support services to the
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Company. These options will become exercisable in four equal annual
installments, beginning on the first anniversary of the grant date. See
"Certain Transactions."
1996 STOCK INCENTIVE PLAN
The 1996 Plan provides for the granting of any of the following awards
("Employee Awards") to eligible employees of the Company and its subsidiaries:
(i) stock options which do not constitute "incentive stock options" within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended ("non-
qualified stock options"); (ii) incentive stock options; (iii) restricted
shares; and (iv) performance units. The 1996 Plan is intended to provide
incentives and rewards for employees to support the execution of the Company's
business plan and to associate the interests of employees with those of the
Company's stockholders.
The 1996 Plan will be administered by a committee composed of two or more
directors (the "Committee"). In administering the 1996 Plan, the Committee will
determine, among other things: (i) individuals to whom grants of Employee
Awards will be made; (ii) the type and size of Employee Awards; (iii) the terms
of an Employee Award including, but not limited to, a vesting schedule,
exercise price, restriction or performance criteria, and the length of any
relevant performance, restriction or option period. The Committee may also
construe, interpret and correct defects, omissions and inconsistencies in the
1996 Plan.
The Common Stock subject to the 1996 Plan will be authorized but unissued
shares. The 1996 Plan provides that 1,000,000 shares of Common Stock will be
available for grant of Employee Awards and the total number of shares of Common
Stock with respect to which stock options may be granted to any individual over
the term of the Plan may not exceed 40% of the total shares authorized for the
1996 Plan. The total number of shares of Common Stock available for awards of
restricted stock is 20% of the total shares authorized under the 1996 Plan.
Pursuant to the 1996 Plan, the number and kind of shares to which Employee
Awards are subject may be appropriately adjusted in the event of certain
changes in capitalization of the Company, including stock dividends and splits,
reclassification, recapitalization, reorganizations, mergers, consolidations,
spin-offs, split-ups, combinations or exchange of shares, and certain
distributions, and repurchases, of shares.
Stock Options. The Committee may grant stock options to eligible individuals
in the form of an incentive stock option or a non-qualified stock option. The
exercise period for any stock option will be determined by the Committee at the
time of grant but may not exceed ten years from the date of grant (five years
in the case of an Incentive Stock Option granted to a "Ten-Percent Stockholder"
as defined in the 1996 Plan). The exercise price per share of Common Stock
covered by a stock option may not be less than 100% of the fair market value of
a share of Common Stock on the date of grant (110% in the case of an incentive
stock option granted to a Ten-Percent Stockholder). The exercise price is
payable, at the Committee's discretion, in cash, in shares of already owned
Common Stock or in any combination of cash and shares. Stock options will
become exercisable in installments as determined by the Committee and as set
forth in the optionee's option agreement. Each option grant may be exercised in
whole, at any time, or in part, from time to time, after the grant becomes
exercisable.
If a participant's employment terminates by reason of death or disability,
any outstanding stock options will vest fully and be exercisable at any time
within two years following the date of death or disability (but in no event
beyond the stated term of the option). Upon an optionee's retirement, stock
options will be exercisable at any time prior to the end of the stated term of
the stock option or two years following the retirement date in the case of non-
qualified stock options and 90 days in the case of incentive stock options,
whichever is the shorter period, but only to the extent the stock options are
exercisable at retirement. Upon termination for any other reason other than for
cause, any previously vested stock options will be exercisable for the lesser
of 90 days or the balance of the stock option's stated term. In the event of
termination for cause, all options, whether or not exercisable, will terminate.
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<PAGE>
Restricted Stock. Subject to the limitations of the 1996 Plan, the Committee
may grant restricted stock to eligible individuals. Restricted stock awards are
shares of Common Stock that are subject to restrictions on transfer or other
incidents of ownership where the restrictions lapse based solely on continued
employment with the Company for specified periods or based on the attainment of
specified performance standards in either case, as the Committee may determine.
The Committee will determine all terms and conditions pursuant to which
restrictions upon restricted stock will lapse. At the discretion of the
Committee, certificates representing shares of restricted stock will be
deposited with the Company until the restriction period ends. Grantees of
restricted stock will have all the rights of a stockholder with respect to the
restricted stock and may receive dividends, unless the Committee determines
otherwise. Dividends may, at the discretion of the Committee, be deferred until
the restriction period ends and may bear interest if the Committee so
determines.
If a grantee's employment terminates by reason of death or disability prior
to the expiration of the restriction period applicable to any restricted shares
then held by the grantee, all restrictions pertaining to such shares
immediately lapse. Upon termination for any other reason, all restricted shares
are forfeited.
Performance Units. The Committee may grant performance units to eligible
individuals. Each performance unit will specify the performance goals, the
performance period and the number of performance units granted. The performance
period will be not less than one year, nor more than five years, as determined
by the Committee. Performance goals are those objectives established by the
Committee which may be expressed in terms of earnings per share, price of the
Common Stock, pre-tax profit, net earnings, return on equity or assets,
revenues or any combination of the above. Performance goals may relate to the
performance of the Company, a subsidiary, a division or other operating unit of
the Company. Performance goals may be established as a range of goals if the
Committee so desires.
If the Committee determines that the performance goals have been met, the
grantee will be entitled to the appropriate payment with respect thereto. At
the option of the Committee, payment may be made solely in shares of Common
Stock, solely in cash, or a combination of cash and shares of Common Stock.
Change in Control. Generally, in the event of a "change in control" (as
defined in the 1996 Plan) of the Company, all outstanding stock options become
fully vested and immediately exercisable in their entirety. In addition, if
provided in an optionee's agreement, the optionee will be permitted to sell the
option to the Company generally for an amount equal to the excess of (x) the
fair market value over (y) the per share exercise price for such shares under
the stock option. In addition, all restrictions on restricted stock lapse upon
a change in control and outstanding performance units become fully vested and
payable in an amount equal to the greater of: (i) the maximum amount payable
under the performance unit multiplied by a percentage equal to the percentage
that would have been earned assuming the rate at which the performance goals
have been achieved as of the date of the change in control would have continued
until the end of the performance cycle; or (ii) the maximum amount payable
multiplied by the percentage of the performance cycle completed at the time of
the change in control.
Amendments and Termination. The Board may at any time terminate and, from
time to time, may amend or modify the 1996 Plan; provided, however, that no
amendment may impair the rights of a participant with respect to outstanding
Employee Awards without the participant's consent. Any such action of the Board
may be taken without the approval of the Company's stockholders, but only to
the extent that such stockholder approval is not required by applicable law or
regulation. The 1996 Plan will terminate ten years from its effective date.
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CERTAIN TRANSACTIONS
The following agreements were entered into between the Company and Vencor:
Incorporation Agreement. To effect the Contribution Transaction and pursuant
to the Incorporation Agreement, Vencor has transferred or agreed to transfer
to the Company, or to cause its respective subsidiaries to transfer to the
Company, their respective interests in the communities. The Company has
assumed or agreed to assume all the communities' liabilities in accordance
with the Incorporation Agreement. Except as expressly set forth in the
Incorporation Agreement, no party is making any representation or warranty as
to the assets, businesses or liabilities transferred or assumed as part of the
separation, as to any consents or approvals required in connection therewith,
as to the value or freedom from counterclaim with respect to any claim of any
party, or as to the legal sufficiency of any assignment, document or
instrument delivered to convey title to any asset transferred. Except as
expressly set forth in the Incorporation Agreement, all assets are being
transferred on an "as is," "where is" basis, and the respective transferees
have agreed to bear the economic and legal risks that the conveyance is
insufficient to vest in the transferee good and marketable title, free and
clear of any security interest or adverse claim.
The Company will indemnify Vencor and its subsidiaries against certain
losses, claims, damages or liabilities including those arising out of: (i) any
inaccurate representation or breach of warranty under the Incorporation
Agreement; and (ii) any indebtedness, lease, contract or other obligation
referred to in the Incorporation Agreement. The Company will also indemnify
Vencor, as a controlling person, against any loss, claim, damage or liability
arising out of this offering, except for losses, claims, damages or
liabilities arising from information supplied in writing by Vencor for
inclusion in this Prospectus. Vencor will similarly indemnify the Company and
its subsidiaries with respect to any inaccurate representation or breach of
warranty under the Incorporation Agreement.
The Incorporation Agreement contains provisions governing the resolution of
disputes, controversies or claims (collectively, "Disputes") that may arise
between or among the parties. These provisions contemplate that efforts will
first be made to resolve such Disputes by referring the matter to senior
management or other mutually agreed representatives of the parties. If such
efforts are not successful, any party may submit such Dispute to mediation. If
such negotiations and mediation are not successful, any party may submit such
Dispute to mandatory, binding arbitration, subject to the provisions of the
Incorporation Agreement. The Incorporation Agreement contains procedures for
the selection of a sole arbitrator of such Dispute and for the conduct of the
arbitration hearing, including certain limitations on discovery rights of the
parties. These procedures are intended to produce an expeditious resolution of
any such Dispute.
In the event that any such Dispute is, or is reasonably likely to be, in
excess of $5.0 million, or in the event that an arbitration award in excess of
$10.0 million is issued in any arbitration proceeding commenced under the
Incorporation Agreement, subject to certain conditions, any party may submit
such dispute, to a court of competent jurisdiction and the arbitration
provisions contained in the Incorporation Agreement will not apply. In the
event that the parties do not agree that the amount in controversy is in
excess of $5.0 million, the Incorporation Agreement provides for arbitration
of such disagreement.
Administrative Services Agreement. The Company and Vencor have entered into
an Administrative Services Agreement pursuant to which Vencor provides certain
administrative services to the Company. The Administrative Services Agreement
is a one-year agreement which may be terminated by the Company at any time
upon 30 days' written notice to Vencor. Some of the services which will be
provided to the Company by Vencor will be finance and accounting, human
resources, risk management, legal support, market planning and information
systems support. The purpose of the Administrative Services Agreement is to
provide for the transition of the Company from being a wholly owned subsidiary
of Vencor to being a separate company. The Company, however, may extend the
Administrative Services Agreement after the
37
<PAGE>
first year on a month-to-month basis or for up to one additional year. In such
case, Vencor or the Company may terminate the Administrative Services
Agreement upon 60 days' written notice. The Company will pay Vencor
approximately $55,000 per month for such services. The Company or Vencor may
agree to increase or decrease such services, if needed, to the Administrative
Services Agreement.
Services Agreements and Sublease Agreement. The Company and subsidiaries of
Vencor have entered into Services Agreements relating to seven communities
which are contiguous to Vencor facilities. The Services Agreements pertain to
the sharing of costs relating to maintenance and lawn services, marketing,
food services, general office, housekeeping and emergency call system. These
Services Agreements may be cancelled by either party upon 90 days prior
written notice. The Company and Vencor have also entered into a two-year
Sublease Agreement covering approximately 4,000 square feet of office space
used for the Company's headquarters located in Louisville, Kentucky at an
annual rental of $48,300.
New Pond Lease. New Pond Village Associates, a partnership owned by
subsidiaries of Vencor ("New Pond"), will lease the New Pond Village
Retirement Center to Atria pursuant to the terms of a Lease which is intended
to be categorized as a finance lease for financial and tax accounting
purposes. The Lease has a term of 99 years, unless earlier terminated. Under
the Lease, the Company pays no rent as such, but is obligated to pay all ad
valorem property taxes, insurance, utilities and all payments required to be
made on the indebtedness secured by the leased property. New Pond is obligated
to use its reasonable best efforts to obtain the requisite zoning and consent
of the holder of the mortgage on the leased property to the conveyance of the
leased property to the Company. At such time as such conveyance occurs, the
Company will assume the indebtedness secured by the mortgage on the leased
property.
Redding Lease. The Company leases certain real estate in Redding, California
from Vencor pursuant to a 99-year lease. The Company has an option to acquire
this property for $180,000.
Registration Rights Agreement. The Company has granted demand and incidental
registration rights to Vencor for the registration of shares of Common Stock
owned by Vencor under the Securities Act of 1933. See "Description of Capital
Stock--Registration Rights Agreement."
Tax Sharing Agreement. Vencor and the Company have entered into a Tax
Sharing Agreement which generally provides for the manner in which the parties
will bear taxes for the short period ending upon the sale by the Company of
the Common Stock pursuant to this offering, and income tax
deficiencies/refunds resulting from future audit adjustments. The Company will
be required to pay to Vencor an amount equal to the excess of the income tax
liability which the Company would have for the short period over the amount
which the Company has previously paid (or been charged with by Vencor) with
respect to such taxes.
If additional taxes must be paid by the Company or Vencor as a result of an
adjustment made by a tax regulatory authority and as a result of that
adjustment the other party would obtain an offsetting tax benefit, the party
obtaining the tax benefit pays an amount equal to the additional tax to the
party whose income tax liability was increased. Likewise, if income taxes are
reduced as a result of an adjustment made by a tax regulatory authority and as
a result of that adjustment the other party would suffer an offsetting tax
detriment, the party whose taxes were reduced pays that amount to the other
party. The Tax Sharing Agreement also contains provisions dealing with
challenging adjustments made by tax regulatory authorities, who will bear the
expenses of any such challenge and cooperation between the parties.
Line of Credit. The Company may borrow from Vencor up to $15.0 million for a
period of one year from completion of this offering, at which time any amounts
borrowed are then due. Interest will be payable quarterly at rates equal to
prime plus 1.0%.
Although the Company was a wholly owned subsidiary of Vencor at the time it
entered into the above described transactions, the Company believes that the
terms of such agreements are no less favorable than terms which could be
obtained from an unrelated third party.
38
<PAGE>
Other Transactions. SCM Partners, a Kentucky general partnership, leases a
parking lot next to Company's headquarters in Louisville, Kentucky to Vencor
pursuant to a two-year lease. Vencor pays SCM Partners approximately $50,000
per year in connection with such lease. Mr. Mulloy owns a 10.4% interest in SCM
Partners. Vencor believes that the terms of such lease are no less favorable
than terms which could be obtained from an unrelated third party.
In the future, transactions between the Company and its officers, directors,
principal stockholders and their affiliates will be on terms no less favorable
to the Company than could be obtained from unrelated third parties and any such
transactions will be approved by a majority of the disinterested members of the
Board of Directors.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth at June 15, 1996 certain information with
respect to beneficial ownership of the Common Stock (assuming completion of
the Contribution Transaction and the issuance of the restricted shares of
Common Stock), and the common stock of Vencor, by: (i) each person known by
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock; (ii) each director and executive officer of the
Company; and (iii) all directors and executive officers of the Company as a
group. Information is provided with respect to beneficial ownership of Vencor
common stock because Vencor may be deemed to be a "parent" of the Company as
such term is defined in the rules promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act").
<TABLE>
<CAPTION>
COMPANY VENCOR
-------------------------------- ---------------------
PERCENTAGE OF
NUMBER OF COMMON STOCK NUMBER OF
SHARES ----------------- SHARES
BENEFICIALLY BEFORE AFTER BENEFICIALLY % OF
NAME OWNED(1) OFFERING OFFERING OWNED(1) CLASS
---- -------------- -------- -------- ------------ -----
<S> <C> <C> <C> <C> <C>
Sandra Harden Austin..... 5,000(2) * * * *
William C. Ballard Jr.... 5,000(2) * * 28,907(3) *
Ralph H. Bellande........ 15,000(2) * * 592(4) *
Peter J. Grua(5)......... 5,000(2) * * * *
Thomas T. Ladt........... 5,000(2) * * 83,715(6) *
W. Bruce Lunsford........ 10,020,000(7) 99.3% 66.4% 2,251,882(8) 3.2%
W. Patrick Mulloy, II.... 30,000(2) * * 1,445(9) *
R. Gene Smith............ 5,000(2) * * 1,537,117(10) 2.2%
J. Timothy Wesley........ 5,000(2) * * 938(11) *
Vencor, Inc.............. 10,000,000(12) 99.1% 66.2% - -
All executive officers
and directors
as a group (9 persons).. 10,095,000(13) 100.0% 66.9% 3,904,596 5.6%
</TABLE>
- --------
* Less than one percent.
(1) In accordance with Securities and Exchange Commission rules, a person is
deemed to have beneficial ownership of any securities as to which such
person, directly or indirectly, has or shares voting power or investment
power and of any securities with respect to which such person has the
right to acquire such voting or investment power within 60 days. Ownership
information includes the restricted shares to be awarded upon completion
of this offering. Except as otherwise noted in the accompanying footnotes,
the named persons have sole voting and investment power.
(2) Represents restricted shares of Common Stock. The restrictions lapse in
two equal annual installments beginning on the first anniversary of the
grant date.
(3) Includes an aggregate of 3,000 shares held by charitable remainder trusts
for the benefit of family members. Also includes 23,907 shares which may
be acquired by Mr. Ballard through the exercise of options.
(4) Includes 396 shares held jointly with his spouse. Mr. Bellande shares
voting and investment power with his spouse.
(5) Mr. Grua has agreed to serve as a director and will be appointed to the
Board of Directors following completion of this offering.
(6) Includes 7,029 shares held by his spouse as custodian for his children and
20,058 shares held by his spouse. With respect to these 27,087 shares, Mr.
Ladt shares voting and investment power with his spouse. Includes 24,188
shares which may be acquired by Mr. Ladt through the exercise of options.
Excludes 738 shares held in the Vencor, Inc. Retirement Savings Plan for
his benefit.
(7) Includes 10,000,000 shares held by Vencor. Mr. Lunsford is Chairman of the
Board, President and Chief Executive Officer of Vencor. Because Mr.
Lunsford has authority to direct the voting and disposition of such
shares, he may be deemed to beneficially own these shares. Mr. Lunsford
40
<PAGE>
disclaims beneficial ownership of these shares. Includes 20,000 restricted
shares of Common Stock. Restrictions on restricted shares lapse in two
equal annual installments beginning on the first anniversary of the grant
date.
(8) Includes 71,412 shares held by a private foundation with respect to which
Mr. Lunsford has sole voting power and shared investment power. Also
includes 179,159 shares which may be acquired by Mr. Lunsford through the
exercise of options. Excludes 15,465 shares held in trust for the benefit
of his children and 6,908 shares held in the Vencor, Inc. Retirement
Savings Plan for his benefit.
(9) Includes 345 shares held by his spouse. Mr. Mulloy shares voting and
investment power with his spouse.
(10) Includes 36,250 shares held by a private foundation with respect to which
Mr. Smith shares sole voting and investment power, and 140,625 shares held
by a limited partnership with respect to which he has sole voting and
investment power. Also includes 23,907 shares which may be acquired by Mr.
Smith through the exercise of options.
(11) Represents 938 shares which may be acquired by Mr. Wesley upon exercise of
options exercisable as of the day on which he ceased employment with
Vencor and became an executive officer of Atria.
(12) The address of Vencor, Inc. is 3300 Providian Center, 400 W. Market
Street, Louisville, Kentucky 40202.
(13) Includes 95,000 restricted shares of Common Stock. The restrictions lapse
in two equal annual installments beginning on the first anniversary of the
grant date.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's Restated Certificate of Incorporation provides that the
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, par value $.10 per share, and 5,000,000 shares of Preferred Stock, par
value $1.00 per share. Upon completion of this offering, 15,095,000 shares of
Common Stock will be issued and outstanding (15,845,000 shares if the
Underwriters' over-allotment option is exercised in full), and no shares of
Preferred Stock will be issued or outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share owned of
record on all matters voted upon by stockholders. Subject to the requirements
(including preferential rights) of any Preferred Stock outstanding, holders of
Common Stock are entitled to receive dividends if, as and when declared by the
Board out of funds legally available therefor. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all liabilities of the Company
and the liquidation preferences of any outstanding Preferred Stock. Holders of
the Common Stock have no preemptive rights, no cumulative voting rights and no
rights to convert their Common Stock into any other securities, and there are
no redemption or sinking fund provisions with respect to the Common Stock.
National City Bank will act as the transfer agent and registrar for the
Common Stock.
PREFERRED STOCK
The Board has the authority to issue the authorized shares of Preferred Stock
in one or more series and to fix the designations, powers, preferences, rights,
qualifications, limitations and restrictions of all shares of each such series,
including, without limitation, dividend rates, conversion rights, voting
rights, redemption and sinking fund provisions, liquidation preferences and the
number of shares constituting each such series, without any further vote or
action by the stockholders. The issuance of Preferred Stock could decrease the
amount of earnings and assets available for distribution to holders of Common
Stock or adversely affect the rights and powers, including voting rights, of
the holders of Common Stock. The issuance of Preferred Stock also could have
the effect of delaying, deterring or preventing a change in control of the
Company without further action by the stockholders.
CERTAIN CORPORATE GOVERNANCE MATTERS
The Company's Restated Certificate of Incorporation and the Amended and
Restated By-laws provide that, commencing with the 1997 annual meeting of
stockholders, the Board will be divided into three classes. Following
completion of this offering, there will be seven directors. Unless the number
of directors is increased prior to the 1997 annual meeting of stockholders, two
classes of directors will consist of two directors each and one class will
consist of three directors, with the term of office of the first class to
expire at the 1998 annual meeting of stockholders, the term of office of the
second class to expire at the 1999 annual meeting of stockholders, and the term
of office of the third class to expire at the 2000 annual meeting of
stockholders. At each succeeding annual meeting of stockholders, directors will
be elected to a three-year term of office.
The Company's Restated Certificate of Incorporation and the Amended and
Restated By-laws provide that: (i) the number of directors of the Company will
be fixed by resolution of the Board, but in no event will be less than three
nor more than 15 directors; (ii) the directors of the Company in office from
time to time will fill any vacancy or newly created directorship on the Board,
with any new director to serve in the class of directors to which he or she is
so elected; (iii) directors of the Company may be removed only for cause by the
holders of at least a majority of the Company's voting stock, provided,
however,
42
<PAGE>
that prior to the date that Vencor and its affiliates cease owning at least a
majority of the Company's Common Stock (the "Trigger Date"), cause is not
required for removal of directors; (iv) after the Trigger Date, stockholder
action can be taken only at an annual or special meeting of stockholders and
not by written consent in lieu of a meeting; and (v) except as described below,
special meetings of stockholders may be called only by the Chairman of the
Board, the President of the Company or by a majority of the total number of
directors of the Company and, prior to the Trigger Date, by Vencor, and the
business permitted to be conducted at any such meeting is limited to that
stated in the notice of the special meeting. The Amended and Restated By-laws
also require that stockholders desiring to bring any business before an annual
meeting of stockholders deliver written notice thereof to the Secretary of the
Company not fewer than 60 days nor more than 90 days in advance of the annual
meeting of stockholders; provided, however, if the date of the meeting is not
furnished to stockholders in a notice, or is not publicly disclosed by the
Company, more than 70 days prior to the meeting, notice by the stockholder, to
be timely, must be delivered to the President or Secretary of the Company not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made.
The Amended and Restated By-laws also provide that stockholders desiring to
nominate persons for election as directors must make their nominations in
writing to the President of the Company not fewer than 60 days nor more than 90
days prior to the scheduled date for the annual meeting; provided, however, if
fewer than 70 days notice or prior public disclosure of the scheduled date for
the annual meeting is given or made, notice by the stockholders, to be timely,
must be delivered to the President or Secretary of the Company not later than
the close of business on the tenth day following the day on which such notice
of the date of the meeting was mailed or such public disclosure was made. Prior
to the Trigger Date, Vencor may nominate persons for election as directors
without following the notice pending nomination procedures required of all
other stockholders.
Under applicable provisions of the Delaware General Corporation Law, the
approval of a Delaware corporation's board of directors, in addition to
stockholder approval, is required to adopt any amendment to the corporation's
certificate of incorporation, but a corporation's by-laws may be amended either
by action of its stockholders or, if the corporation's certificate of
incorporation so provides, its board of directors. The Restated Certificate of
Incorporation and Amended and Restated By-laws provide that the provisions
summarized above may not be amended by the stockholders, nor may any provision
inconsistent therewith be adopted by the stockholders, without the affirmative
vote of the holders of at least 80% of the Company's voting stock, voting
together as a single class.
The foregoing provisions of the Restated Certificate of Incorporation and
Amended and Restated By-laws may discourage or make more difficult the
acquisition of control of the Company by means of a tender offer, open market
purchase, proxy contest or otherwise. These provisions may have the effect of
discouraging certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the
Company first to negotiate with the Company. The Company's management believes
that the foregoing measures provide benefits to the Company and its
stockholders by enhancing the Company's ability to negotiate with the proponent
of any unfriendly or unsolicited proposal to take over or restructure the
Company and that such benefits outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
the corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless:
(i) before such person became an interested stockholder, the board of directors
of the corporation approved either the transaction in which the interested
stockholder became an interested stockholder or the business combination; (ii)
upon
43
<PAGE>
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time such transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) following the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least two-
thirds of the outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203, the restrictions described above
also do not apply to certain business combinations proposed by an interested
stockholder following the public announcement or notification (as required by
Section 203) of a transaction which is one of certain extraordinary
transactions involving the corporation, is with or by a person who either has
not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors, and is approved or not opposed by a majority of the
board of directors then in office. As a result of its initial ownership of all
of the outstanding Common Stock, Vencor is not subject to the restrictions
imposed upon an interested stockholder under Section 203.
REGISTRATION RIGHTS AGREEMENT
The Company has granted demand and incidental registration rights to Vencor
for the registration of shares of Common Stock owned by Vencor under the
Securities Act of 1933. Four demand registrations are permitted. The Company
will pay the fees and expenses of two demand registrations and the incidental
registrations, while Vencor will pay all underwriting discounts and
commissions. These registration rights expire five years from the completion of
this offering and are subject to certain conditions and limitations, including
the right of underwriters to limit the number of shares owned by Vencor
included in such registration.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
15,095,000 shares of Common Stock (15,845,000 shares if the Underwriters' over-
allotment option is exercised in full). The 5,000,000 shares sold in this
offering (or a maximum of 5,750,000 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction or
further registration under the Securities Act, unless held by "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act. The
remaining 10,095,000 shares outstanding are "restricted securities" as that
term is defined under Rule 144 and were issued by the Company in private
transactions in reliance upon one or more exemptions under the Securities Act.
Such restricted securities may be resold in a public distribution only if
registered under the Securities Act (which registration is contemplated with
respect to all of such restricted securities as described below) or pursuant to
an exemption therefrom, including Rule 144. Vencor, the Company and executive
officers and directors of the Company have agreed that they will not sell any
shares of Common Stock prior to the expiration of 180 days from the date of
this Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including an affiliate of the Company, who has beneficially owned
restricted securities for at least two years is entitled to sell within any
three-month period a number of shares that does not exceed the greater of the
average weekly trading volume during the four calendar weeks preceding such
sale or 1% of the then outstanding shares of the Common Stock, provided certain
manner of sale and notice requirements and requirements as to the availability
of current public information about the Company are satisfied. In addition,
affiliates of the Company must comply with the restrictions and requirements of
Rule 144, other than the holding period, to sell shares of Common Stock. A
person who is deemed not to have been an "affiliate" of the Company at any time
during the 90 days preceding a sale by such person, and who has beneficially
owned such shares for at least three years, would be entitled to sell such
shares without regard to the volume limitations described above.
44
<PAGE>
The Commission has proposed to amend the holding period required by Rule 144
to permit sales of "restricted securities" after one year rather than two years
(and two years rather than three years for "non-affiliates" under Rule 144(k)).
If such proposed amendment is adopted, restricted securities would become
freely tradable (subject to any applicable contractual restrictions) at
correspondingly earlier dates.
Subject to certain exceptions, Vencor, the Company and the Company's
executive officers and directors have agreed with the Underwriters not to sell
or otherwise dispose of any shares of Common Stock, any Common Stock issuable
upon exercise of options to purchase Common Stock or any securities convertible
into or exchangeable for shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated.
After completion of this offering, Vencor will be entitled to certain rights
with respect to the registration of 10,000,000 shares of Common Stock for sale
under the Securities Act. See "Description of Capital Stock--Registration
Rights Agreement."
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement,
the underwriters named below (the "Underwriters") through their
Representatives, Alex. Brown & Sons Incorporated, Morgan Stanley & Co.
Incorporated and J.C. Bradford & Co. have severally agreed to purchase from the
Company, the following respective numbers of shares of Common Stock at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated......................................
Morgan Stanley & Co. Incorporated....................................
J.C. Bradford & Co...................................................
---------
Total.............................................................. 5,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
initial public offering, the offering price and other selling terms may be
changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 750,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 5,000,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 5,000,000 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
Stockholders of the Company, holding in the aggregate 10,095,000 shares of
Common Stock and restricted shares, have agreed not to offer, sell or otherwise
dispose of any of such Common Stock for a period of 180 days after the date of
this Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated. See "Shares Eligible for Future Sale."
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiation among the Company and the
Representatives of the Underwriters. Among the factors considered in such
46
<PAGE>
ATRIA COMMUNITIES, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Combined Financial Statements:
Combined Statement of Income for the years ended December 31, 1993, 1994
and 1995............................................................... F-3
Combined Balance Sheet, December 31, 1994 and 1995...................... F-4
Combined Statement of Changes in Investments by and Advances from
Vencor, Inc. for
the years ended December 31, 1993, 1994 and 1995....................... F-5
Combined Statement of Cash Flows for the years ended December 31, 1993,
1994
and 1995............................................................... F-6
Notes to Combined Financial Statements.................................. F-7
Condensed Combined Financial Statements (unaudited):
Condensed Combined Statement of Income for the three months ended March
31, 1995
and 1996............................................................... F-14
Condensed Combined Balance Sheet, December 31, 1995 and March 31, 1996.. F-15
Condensed Combined Statement of Cash Flows for the three months ended
March 31, 1995 and 1996................................................ F-16
Notes to Condensed Combined Financial Statements........................ F-17
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The following report is in the form that will be signed upon the completion
of the reorganization described in Note 1 to the accompanying combined
financial statements.
/s/ Ernst & Young LLP
To the Board of Directors and Stockholders
Atria Communities, Inc.
We have audited the accompanying combined balance sheet of Atria
Communities, Inc. (formerly the assisted and independent living businesses of
Vencor, Inc.--see Note 1) as of December 31, 1994 and 1995, and the related
combined statements of income, investments by and advances from Vencor, Inc.
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Atria
Communities, Inc. at December 31, 1994 and 1995, and the combined results of
their operations and cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Louisville, Kentucky
June 14, 1996, except for Notes 1 and 7 as to which the date is , 1996
F-2
<PAGE>
ATRIA COMMUNITIES, INC.
COMBINED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Revenues............................................ $35,870 $39,758 $47,976
------- ------- -------
Salaries, wages and benefits........................ 14,735 14,638 17,455
Supplies............................................ 4,360 4,023 4,860
Rent................................................ 351 333 383
Depreciation and amortization....................... 4,503 4,541 5,113
Non-recurring transactions.......................... (266) (1,675) 600
Other operating expenses............................ 8,031 8,347 9,465
------- ------- -------
31,714 30,207 37,876
------- ------- -------
Operating income.................................... 4,156 9,551 10,100
Interest expense.................................... 3,499 3,538 4,322
Investment income................................... (346) (330) (147)
------- ------- -------
Income before income taxes and extraordinary loss... 1,003 6,343 5,925
Provision for income taxes.......................... 396 2,506 2,341
------- ------- -------
Income before extraordinary loss.................... 607 3,837 3,584
Extraordinary loss on extinguishment of debt, net of
income tax benefit of $69 in 1993 and $93 in 1995.. (103) - (146)
------- ------- -------
Net income........................................ $ 504 $ 3,837 $ 3,438
======= ======= =======
Unaudited pro forma data:
Earnings per common share:
Income before extraordinary loss................... $ .24
Extraordinary loss on extinguishment of debt....... (.01)
-------
Net income........................................ $ .23
=======
Shares used in computing earnings per common
share............................................. 15,095
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE>
ATRIA COMMUNITIES, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,497 $ 2,819
Accounts receivable less allowance for loss of $46--1994
and $89--1995............................................ 522 561
Other..................................................... 510 366
-------- --------
2,529 3,746
Property and equipment, at cost:
Land...................................................... 19,679 20,668
Buildings................................................. 111,553 122,986
Equipment................................................. 8,820 10,510
Construction in progress.................................. 1,540 73
-------- --------
141,592 154,237
Accumulated depreciation.................................. (18,637) (23,027)
-------- --------
122,955 131,210
Notes receivable........................................... 4,552 -
Intangible assets less accumulated amortization of $2,641--
1994 and
$3,294--1995.............................................. 2,114 2,173
Other...................................................... 866 3,788
-------- --------
$133,016 $140,917
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,853 $ 1,875
Salaries, wages and other compensation.................... 970 1,019
Other accrued liabilities................................. 750 784
Long-term debt due within one year........................ 594 844
-------- --------
4,167 4,522
Long-term debt............................................. 90,599 104,506
Deferred credits and other liabilities..................... 6,415 3,442
Contingencies
Stockholder's equity:
Investments by and advances from Vencor, Inc.............. 31,835 28,447
-------- --------
$133,016 $140,917
======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE>
ATRIA COMMUNITIES, INC.
COMBINED STATEMENT OF CHANGES IN INVESTMENTS BY
AND ADVANCES FROM VENCOR, INC.
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period........................ $27,219 $34,959 $31,835
Net income........................................... 504 3,837 3,438
Net cash advances by (payments to) Vencor, Inc....... 3,899 (6,811) (6,350)
Other non-cash transactions.......................... 3,337 (150) (476)
------- ------- -------
Balance at end of period.............................. $34,959 $31,835 $28,447
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-5
<PAGE>
ATRIA COMMUNITIES, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 504 $ 3,837 $ 3,438
Adjustments to reconcile net income to net cash
provided
by operating activities:
Depreciation and amortization................... 4,503 4,541 5,113
Provision for doubtful accounts................. 18 7 79
Deferred income taxes........................... 748 169 (63)
Extraordinary loss on extinguishment of debt.... 172 - 239
Non-recurring transactions...................... - (425) 600
Other........................................... (104) (745) (261)
Change in operating assets and liabilities:
Accounts receivable............................ 913 (212) (240)
Other assets................................... 111 18 234
Accounts payable............................... 436 572 53
Other accrued liabilities...................... (1,633) (179) (661)
-------- ------- -------
Net cash provided by operating activities..... 5,668 7,583 8,531
Cash flows from investing activities:
Purchase of property and equipment................ (1,716) (5,714) (4,025)
Sale of assets.................................... 3,078 672 -
Collection of notes receivable.................... 35 1,800 -
Net change in investments......................... 107 (814) 716
Other............................................. (179) 54 437
-------- ------- -------
Net cash provided by (used in) investing
activities................................... 1,325 (4,002) (2,872)
Cash flows from financing activities:
Issuance of long-term debt........................ 12,950 6,450 6,806
Repayment of long-term debt....................... (21,337) (3,348) (4,659)
Net advances from (payments to) Vencor, Inc....... 3,899 (6,811) (6,350)
Other............................................. (412) (70) (134)
-------- ------- -------
Net cash used in financing activities......... (4,900) (3,779) (4,337)
-------- ------- -------
Change in cash and cash equivalents................ 2,093 (198) 1,322
Cash and cash equivalents at beginning of period... (398) 1,695 1,497
-------- ------- -------
Cash and cash equivalents at end of period......... $ 1,695 $ 1,497 $ 2,819
======== ======= =======
Supplemental information:
Interest payments................................. $ 3,352 $ 3,667 $ 4,397
Income tax payments (refunds)..................... (366) 2,336 2,310
Non-cash transactions:
Exchange of note receivable for additional
partnership interest............................ - - 4,552
Exchange of long-term debt in lieu of cash in
connection
with sale of a facility......................... 6,471 - -
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-6
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1--ACCOUNTING POLICIES
Basis of Presentation
In May 1996, the Board of Directors of Vencor, Inc. ("Vencor") authorized
management to establish a wholly owned subsidiary, Atria Communities, Inc.
("Atria") to operate Vencor's assisted and independent living business. As part
of that transaction, management intends to consummate an initial public
offering (the "IPO") of 5,000,000 shares of Atria's common stock.
The accompanying combined historical financial statements reflect the
operations of the assisted and independent living business of Vencor which are
to be transferred to Atria at or prior to completion of the IPO. These
financial statements have been derived from the consolidated financial
statements of Vencor and are presented as if Atria had been operated as a
separate entity.
The combined financial statements have been prepared in accordance with
generally accepted accounting principles and include amounts based upon the
estimates and judgments of management. Actual amounts may differ from these
estimates.
Revenues
Revenues are recognized when services are rendered and consist of daily
resident fees and fees for other ancillary services. Agreements with residents
are generally for a term of one year. Revenues from management contracts are
recognized in the period earned in accordance with the terms of the management
agreement.
Substantially all revenues are derived from private pay sources. A summary of
revenues follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Owned and leased facilities............................ $35,515 $39,340 $47,635
Managed facilities..................................... 355 418 341
------- ------- -------
$35,870 $39,758 $47,976
======= ======= =======
</TABLE>
The terms of resident agreements at one community require the resident to
forfeit a certain percentage of the face amount of a resident mortgage bond
(purchased by the resident at the inception of the residency agreement) to
Atria upon termination of the residency agreement. These amounts are recorded
as deferred revenue at the inception of the residency agreement and recognized
as income on a straight-line basis over the estimated stay of a resident. See
Note 4.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less. Carrying values of cash and cash equivalents
approximate fair value due to the short-term nature of these instruments.
Allowance for Doubtful Accounts
A summary of the allowance for doubtful accounts follows (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period.............................. $29 $47 $ 46
Provision for doubtful accounts............................ 18 7 79
Accounts written off....................................... - (8) (36)
--- --- ----
Balance at end of period.................................... $47 $46 $ 89
=== === ====
</TABLE>
F-7
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost and include interest capitalized
on significant construction projects during the construction period as well as
other costs directly related to the development and construction of
communities.
Depreciation expense, computed by the straight-line method, was $3.7 million
in 1993, $3.8 million in 1994 and $4.4 million in 1995. Depreciable lives for
buildings range generally from 20 to 45 years. Estimated useful lives of
equipment vary from 5 to 10 years.
The Financial Accounting Standards Board (the "FASB") issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," effective for fiscal years beginning after December
15, 1995. The provisions of this statement, which will be adopted in 1996, are
not expected to have a material impact on the combined financial statements.
Intangible Assets
Intangible assets consist primarily of debt issuance costs and are amortized
by the straight-line method based upon the lives of the respective loans.
Income Taxes
Vencor and its wholly owned subsidiaries (including such entities comprising
the operations of Atria) file federal and certain state income tax returns on a
consolidated basis. Accordingly, provision for income taxes recorded in the
consolidated financial statements of Vencor have been apportioned to Atria on a
divisional basis. However, for purposes of the accompanying combined financial
statements, provision for income taxes has been recorded as if Atria were
filing separate income tax returns.
Minority Interest in Consolidated Entities
The combined financial statements include all assets, liabilities, revenues
and expenses of partnerships controlled by Atria. Minority interests in the
earnings and equity of these entities are not significant.
Earnings per Common Share
The operations of Atria are included in the consolidated financial statements
of Vencor on a divisional basis. Accordingly, historical stockholder's equity
accounts and related earnings per common share data are not presented in the
accompanying combined financial statements.
Pro forma earnings per common share are based upon the expected number of
common shares outstanding as a result of the IPO and include the issuance of
95,000 shares of restricted stock. See
Note 7.
NOTE 2--NON-RECURRING TRANSACTIONS
Results of operations for 1995 include a charge of $600,000 related to the
writedown of undeveloped property to its estimated net realizable value.
Operating results in 1994 include a gain on the sale of property aggregating
$425,000.
Settlements of certain litigation increased income before income taxes by
approximately $1.3 million in 1994 and $266,000 in 1993.
F-8
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--INCOME TAXES
A summary of provision for income taxes follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----- ------ ------
<S> <C> <C> <C>
Current:
Federal............................................ $(348) $1,965 $2,021
State.............................................. (4) 372 383
----- ------ ------
(352) 2,337 2,404
Deferred............................................ 748 169 (63)
----- ------ ------
$ 396 $2,506 $2,341
===== ====== ======
Reconciliation of federal statutory rate to effective income tax rate
follows:
<CAPTION>
1993 1994 1995
----- ------ ------
<S> <C> <C> <C>
Federal statutory rate.............................. 35.0% 35.0% 35.0%
State income taxes, net of federal income tax bene-
fit................................................ 2.6 4.1 4.0
Other items, net.................................... 1.9 0.4 0.5
----- ------ ------
Effective income tax rate.......................... 39.5% 39.5% 39.5%
===== ====== ======
</TABLE>
Effective January 1, 1993, Atria adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires, among other things, recognition of deferred income taxes using the
liability method rather than the deferred method. The effect of this change
had no material effect on net income.
A summary of deferred income taxes by source included in the combined
balance sheet at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
------------------ ------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Depreciation........................... $ - $2,441 $ - $2,954
Partnerships........................... 1,645 - 1,908 -
Compensation........................... 118 - 187 -
Other.................................. - 92 152 -
------ ------ ------ ------
$1,763 $2,533 $2,247 $2,954
====== ====== ====== ======
</TABLE>
Deferred income taxes totaling $62,000 and $79,000 at December 31, 1994 and
1995, respectively, are included in other current assets. Non-current deferred
income taxes, included principally in deferred credits and other liabilities,
totaled $832,000 and $786,000 at December 31, 1994 and 1995, respectively.
F-9
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--LONG-TERM DEBT
A summary of long-term debt at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Industrial revenue bonds, 3.2% to 9.9% (rates, generally
floating, average 5.5%) payable in periodic installments
through 2025............................................ $55,305 $ 66,456
Non-interest bearing residential mortgage bonds, payable
in periodic installments through 2040................... 32,583 33,344
Collateralized borrowings under Vencor bank revolving
credit agreement (floating rates averaging 6.9%)........ - 5,550
Subordinated debentures due 2008 (floating rates averag-
ing 7%)................................................. 3,305 -
------- --------
Total debt, average life of 24 years (rates averaging
3.9%)................................................. 91,193 105,350
Amounts due within one year.............................. 594 844
------- --------
Long-term debt......................................... $90,599 $104,506
======= ========
</TABLE>
Under the terms of a residency agreement at one community, residents are
required to purchase a residential mortgage bond which entitles them to occupy
a residential unit and to receive services and use the community as described
in the agreement. The face amount of each bond is equal to the market value of
the residential unit to be occupied by the resident. The bonds represent non-
interest bearing loans to the Company and are non-transferrable. The first
maturity date of each bond is January 1, 2040; however, the Company is required
to redeem a bond within 180 days of the termination of a residency agreement,
at which time Atria is required to repay the residential mortgage bond to the
resident less a fee of up to 20% of the face amount of the bond.
Maturities of long-term debt in years 1997 through 2000 are $849,000,
$852,000, $854,000 and $857,000, respectively.
Certain long-term debt agreements contain customary covenants which include
(i) limitations on additional debt and capital expenditures, (ii) limitations
on sales of assets, mergers and changes in ownership and (iii) maintenance of
certain financial ratios.
The estimated fair value of Atria's long-term debt was $78.0 million and
$91.8 million at December 31, 1994 and 1995, respectively, compared to carrying
amounts aggregating $91.2 million and $105.4 million. The estimate of fair
value is based upon the quoted market prices for the same or similar issues of
long-term debt, or on rates available to Atria for debt of the same remaining
maturities.
Upon consummation of the IPO, Atria intends to refinance all outstanding
borrowings under the Vencor bank revolving credit agreement in the table above
through proceeds under a separate bank credit agreement currently being
negotiated by Atria.
NOTE 5--CONTINGENCIES
Management continually evaluates contingencies based upon the best available
evidence. In addition, allowances for loss are provided currently for disputed
items that have continuing significance, such as deductions that continue to be
claimed on tax returns.
Management believes that allowances for loss have been provided to the extent
necessary and that its assessment of contingencies is reasonable. Management
believes that resolution of contingencies will not materially affect Atria's
liquidity, financial position or results of operations.
F-10
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--CONTINGENCIES (CONTINUED)
Principal contingencies are described below:
Atria is a party to certain litigation involving a minority partner at one of
its communities. In June 1996, Atria agreed to settle such litigation and
acquire all remaining partnership interests in exchange for cash payments
approximating $1.1 million ($630,000 net of tax) payable over three years. The
amounts related to this settlement will be charged to earnings upon execution
of final settlement agreements.
The combined financial statements of Atria reflect the anticipated assumption
of approximately $100 million of Vencor's long-term debt. In the event that all
or part of the assumption does not occur prior to the IPO, Vencor would remain
primarily liable for such debt. Atria and Vencor have agreed that Atria would
pay all amounts and otherwise satisfy all obligations related to such long-term
debt. In the case of any Vencor long-term debt proposed to be assumed by Atria
in the IPO, to the extent that Atria and Vencor are unable to obtain consents
from holders of such debt to the assumption by Atria of primary liability for
such debt, the amount of such debt will be reflected as a liability of Vencor
in its financial statements (although Vencor's financial statements will also
reflect as an asset a receivable from Atria in an equal amount, which will
accrue interest and will be payable on the same terms as such Vencor long-term
debt). Furthermore, Vencor may be contingently liable as guarantor of certain
long-term debt assumed by Atria in the IPO.
NOTE 6--TRANSACTIONS WITH VENCOR
Atria and Vencor or its subsidiaries have or will enter into certain
arrangements which will become effective on or before the completion of the
IPO. The agreements are intended to facilitate an orderly transition of Atria
from a division of Vencor to a separate publicly held entity which will be
minimally disruptive to both Atria and Vencor. A summary of such arrangements
follows:
Administrative Services--Vencor will provide to Atria for a period of one
year various administrative services in such areas as finance and accounting,
human resources, risk management, legal support, market planning and
information systems support. Atria may extend the Administrative Services
Agreement for up to one additional year, subject to termination by either party
upon 60 days prior written notice.
Shared Services--Atria and subsidiaries of Vencor will share certain costs at
seven communities relating to marketing and certain administrative services.
These agreements may be cancelled by either party upon 90 days prior written
notice.
Guarantees--Vencor will guarantee certain long-term debt aggregating $2.0
million to be assumed by Atria.
Leases--Atria will lease certain properties from Vencor, including its
headquarters office space.
Line of Credit--Atria may borrow from Vencor up to $15.0 million for a period
of one year from the consummation of the IPO, at which time any amounts
borrowed are then due. Interest will be payable quarterly at rates equal to
prime plus 1.0%.
Income Taxes--A tax sharing agreement will provide for risk-sharing
arrangements in connection with various income tax related issues.
Registration Rights--Atria has granted demand and piggyback registration
rights to Vencor with respect to registration under the Securities Act of 1933
of Atria Common Stock owned by Vencor. Four demand registrations are permitted.
Atria will pay the fees and expenses of two demand registrations and the
piggyback registrations, while Vencor will pay all underwriting discounts and
commissions. The registration rights expire five years from the completion of
the IPO and are subject to certain conditions and limitations, including the
right of underwriters of an offering to limit the number of shares owned by
Vencor included in such registration.
F-11
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--TRANSACTIONS WITH VENCOR (CONTINUED)
Liabilities and Indemnifications--Atria will assume all contractual
liabilities relating to the assets transferred by Vencor to Atria.
In anticipation of the IPO, certain allocations and estimates have been made
by management in the combined financial statements to present the historical
financial position and results of operations of Atria as a separate entity. The
operating results of Atria include certain corporate costs and expenses of
Vencor (comprised principally of information systems and various centralized
management services) aggregating $525,000 in 1993, $570,000 in 1994 and
$600,000 in 1995.
NOTE 7--CAPITAL STOCK
Atria's Restated Certificate of Incorporation authorizes 50,000,000 shares of
common stock (par value $.10 per share) and 5,000,000 shares of preferred stock
(par value $1.00 per share). Upon consummation of the IPO, 15,095,000 shares of
common stock are expected to be issued and outstanding. No shares of preferred
stock will be issued in connection with the IPO.
The accompanying combined financial statements are presented as if Atria had
been operated as a separate entity. Accordingly, stockholder's equity (which
represents Vencor's pre-IPO 100% interest) comprises both investments by and
non-interest bearing advances from Vencor. Management expects that in
connection with the IPO, such amounts will be included as part of Atria's
permanent equity capitalization.
Atria has established certain stock compensation plans under which options to
purchase common stock may be granted to officers, key employees and directors
who are not employees of Atria. Options may be granted at not less than market
price on the date of grant, and the initial options to be granted will become
exercisable as to one-fourth of the shares annually over a four-year period and
are exercisable for a period ending ten years after grant. The plans also
provide that awards of restricted stock may be distributed to officers, key
employees and certain directors. The initial restricted stock to be granted
will vest one-half annually over a two-year period. No options have been
granted and no restricted shares have been awarded under the plans.
Upon consummation of the IPO, the Board of Directors of Atria intends to
grant approximately 639,500 stock options (to be granted at a value equal to
the IPO price) and award approximately 95,000 restricted shares.
Atria will account for stock option grants in accordance with APB Opinion No.
25 ("APB 25"), "Accounting for Stock Issued to Employees". In October 1995, the
FASB issued Statement No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which provides an alternative to APB 25 and allows for a fair
value-based method of accounting for employee stock options and similar equity
instruments. However, for companies that continue to account for stock-based
compensation arrangements under APB 25, SFAS 123 requires disclosure of the pro
forma effect on net income and earnings per share of the fair value-based
accounting for these arrangements. These disclosure requirements are effective
for Atria beginning in 1996.
NOTE 8--EMPLOYEE BENEFIT PLANS
Atria participates in Vencor's defined contribution retirement plans covering
employees who meet certain minimum eligibility requirements. Benefits are
determined as a percentage of a participant's contributions and are generally
vested based upon length of service. Retirement plan expense was $58,000 for
1993, $66,000 for 1994 and $77,000 for 1995. Amounts equal to retirement plan
expense are funded annually.
Upon consummation of the IPO, Atria will continue to participate in a
substantial number of Vencor employee benefit plans.
F-12
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--ACCRUED LIABILITIES
A summary of other accrued liabilities at December 31 follows (dollars in
thousands):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Taxes other than income........................................... $579 $697
Interest.......................................................... 145 70
Other............................................................. 26 17
---- ----
$750 $784
==== ====
</TABLE>
NOTE 10--FAIR VALUE DATA
A summary of fair value data at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
---------------- ----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Cash and cash equivalents (Note 1)......... $ 1,497 $ 1,497 $ 2,819 $ 2,819
Notes receivable........................... 4,552 4,249 - -
Long-term debt, including amounts due
within one year (Note 4).................. 91,193 78,028 105,350 91,822
</TABLE>
F-13
<PAGE>
ATRIA COMMUNITIES, INC.
CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Revenues...................................................... $11,367 $12,611
------- -------
Salaries, wages and benefits.................................. 4,198 4,677
Supplies...................................................... 1,125 1,227
Rent.......................................................... 94 100
Depreciation and amortization................................. 1,246 1,312
Other operating expenses...................................... 2,367 2,434
------- -------
9,030 9,750
------- -------
Operating income.............................................. 2,337 2,861
Interest expense.............................................. 1,158 982
Investment income............................................. (24) (48)
------- -------
Income before income taxes.................................... 1,203 1,927
Provision for income taxes.................................... 475 761
------- -------
Net income.................................................. $ 728 $ 1,166
======= =======
Pro forma data:
Earnings per common share.................................... $ .08
Shares used in computing earnings per common share........... 15,095
</TABLE>
The accompanying notes are an integral part of the condensed combined financial
statements.
F-14
<PAGE>
ATRIA COMMUNITIES, INC.
CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1995 AND MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 2,819 $ 3,954
Accounts receivable less allowance for loss of $89--
1995
and $93--1996......................................... 561 605
Other.................................................. 366 301
-------- --------
3,746 4,860
Property and equipment, at cost:
Land................................................... 20,668 20,672
Buildings.............................................. 122,986 123,110
Equipment.............................................. 10,510 10,777
Construction in progress............................... 73 187
-------- --------
154,237 154,746
Accumulated depreciation............................... (23,027) (24,166)
-------- --------
131,210 130,580
Intangible assets less accumulated amortization of
$3,294--1995 and
$3,457--1996........................................... 2,173 2,011
Other................................................... 3,788 4,126
-------- --------
$140,917 $141,577
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable....................................... $ 1,875 $ 2,081
Salaries, wages and other compensation................. 1,019 1,078
Other accrued liabilities.............................. 784 1,442
Long-term debt due within one year..................... 844 845
-------- --------
4,522 5,446
Long-term debt.......................................... 104,506 104,640
Deferred credits and other liabilities.................. 3,442 3,507
Contingencies
Stockholder's equity:
Investments by and advances from Vencor, Inc........... 28,447 27,984
-------- --------
$140,917 $141,577
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed combined financial
statements.
F-15
<PAGE>
ATRIA COMMUNITIES, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 728 $ 1,166
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 1,246 1,312
Deferred income taxes...................................... (44) 35
Other...................................................... 103 31
Change in operating assets and liabilities:
Accounts receivable....................................... (290) (51)
Other assets.............................................. (13) 30
Accounts payable.......................................... (382) 206
Other accrued liabilities................................. 257 696
------- -------
Net cash provided by operating activities................ 1,605 3,425
Cash flows from investing activities:
Purchase of property and equipment.......................... (815) (509)
Net change in investments................................... 716 -
Other....................................................... 248 (288)
------- -------
Net cash provided by (used in) investing activities......... 149 (797)
Cash flows from financing activities:
Issuance of long-term debt.................................. 1,390 1,277
Repayment of long-term debt................................. (1,736) (1,069)
Net payments to Vencor, Inc................................. (123) (1,628)
Other....................................................... (88) (73)
------- -------
Net cash used in financing activities.................... (557) (1,493)
------- -------
Change in cash and cash equivalents.......................... 1,197 1,135
Cash and cash equivalents at beginning of period............. 1,497 2,819
------- -------
Cash and cash equivalents at end of period................... $ 2,694 $ 3,954
======= =======
Supplemental information:
Interest payments........................................... $ 894 $ 617
Income tax payments......................................... 578 761
Non-cash transactions:
Exchange of note receivable for additional partnership
interest.................................................. 4,552 -
</TABLE>
The accompanying notes are an integral part of the condensed combined financial
statements.
F-16
<PAGE>
ATRIA COMMUNITIES, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying combined financial statements are presented in a condensed
format and consequently do not include all of the disclosures normally
required by generally accepted accounting principles or those normally made in
Atria's annual financial statements. Accordingly, the reader of these
financial statements may wish to refer to Atria's audited combined financial
statements for the year ended December 31, 1995 contained elsewhere in this
Prospectus for further information.
The financial information has been prepared in accordance with Atria's
customary accounting practices and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for a
fair statement of interim results. All such adjustments are of a normal and
recurring nature.
NOTE 2--EARNINGS PER COMMON SHARE
The operations of Atria are included in the consolidated financial
statements of Vencor on a divisional basis. Accordingly, historical
stockholder's equity accounts and related earnings per common share data are
not presented in the accompanying combined financial statements.
Pro forma earnings per common share are based upon the expected number of
common shares outstanding as a result of the IPO and include the issuance of
95,000 shares of restricted stock.
NOTE 3--CONTINGENCIES
Management continually evaluates contingencies based upon the best available
evidence. In addition, allowances for loss are provided currently for disputed
items that have continuing significance, such as deductions that continue to
be claimed on tax returns.
Management believes that allowances for loss have been provided to the
extent necessary and that its assessment of contingencies is reasonable.
Management believes that resolution of contingencies will not materially
affect Atria's liquidity, financial position or results of operations.
Principal contingencies are described below:
Atria is a party to certain litigation involving a minority partner at one
of its communities. In June 1996, Atria agreed to settle such litigation and
acquire all remaining partnership interests in exchange for cash payments
approximating $1.1 million ($630,000 net of tax) payable over three years. The
amounts related to this settlement will be charged to earnings upon execution
of final settlement agreements.
The combined financial statements of Atria reflect the anticipated
assumption of approximately $100 million of Vencor's long-term debt. In the
event that all or part of the assumption does not occur prior to the IPO,
Vencor would remain primarily liable for such debt. Atria and Vencor have
agreed that Atria would pay all amounts and otherwise satisfy all obligations
related to such long-term debt. In the case of any Vencor long-term debt
proposed to be assumed by Atria in the IPO, to the extent that Atria and
Vencor are unable to obtain consents from holders of such debt to the
assumption by Atria of primary liability for such debt, the amount of such
debt will be reflected as a liability of Vencor in its financial statements
(although Vencor's financial statements will also reflect as an asset a
receivable from Atria in an equal amount, which will accrue interest and will
be payable on the same terms as such Vencor long-term debt). Furthermore,
Vencor may be contingently liable as guarantor of certain long-term debt
assumed by Atria in the IPO.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURIS-
DICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company and its Predecessors......................................... 13
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Combined Financial Data......................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 22
Management............................................................... 32
Certain Transactions..................................................... 37
Principal Stockholders................................................... 40
Description of Capital Stock............................................. 42
Shares Eligible for Future Sale.......................................... 44
Underwriting............................................................. 46
Legal Matters............................................................ 47
Experts.................................................................. 47
Available Information.................................................... 47
Index to Combined Financial Statements................................... F-1
</TABLE>
-----------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,000,000 Shares
ATRIA COMMUNITIES, INC.
Common Stock
------------
PROSPECTUS
------------
Alex. Brown & Sons
INCORPORATED
Morgan Stanley & Co.
INCORPORATED
J.C. Bradford & Co.
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses to be borne
by the Company in connection with the offering described in the Registration
Statement:
<TABLE>
<S> <C>
Registration Fee.................................................. $ 29,742
Legal Fees and Expenses........................................... 250,000*
Accounting Fees and Expenses...................................... 200,000*
Printing and Engraving Expenses................................... 150,000*
Blue Sky Registration Fees and Expenses........................... 35,000*
Transfer Agent's Fees............................................. 10,000*
NASD Listing Fees................................................. 9,125
Miscellaneous Expenses............................................ 66,133*
--------
Total........................................................... $750,000*
========
</TABLE>
*Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. Elimination of Certain Liability. Pursuant to Article IX of the
registrant's Restated Certificate of Incorporation ("Article IX"), a director
of the registrant shall not be personally liable to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the registrant or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General registrant Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to permit further elimination or limitation of
the personal liability of directors, then the liability of a director of the
registrant shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended. Any
repeal or modification of Section A of Article IX shall not adversely effect
any right or protection of a director of the registrant existing at the time
of such repeal or modification.
B. Right to Indemnification. Subject to Section C of Article XI of the
registrant's Restated Certificate of Incorporation, each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was
a director or officer of the registrant or is or was serving at the request of
the registrant as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless
by the registrant to the fullest extent authorized by the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the registrant to provide broader indemnification rights
than said law permitted the registrant to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, excise taxes under the Employee Retirement Income Security Act of 1974,
as in effect from time to time ("ERISA"), penalties and amounts to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith. The registrant may, by action of its Board of Directors, provide
indemnification to other employees or agents of the registrant with the same
scope and effect as the indemnification of directors and officers pursuant to
Article IX.
C. Procedure for Indemnification. Any indemnification under Article IX
(unless ordered by a court) shall be made by the registrant only as authorized
in the specific case upon a determination that
II-1
<PAGE>
indemnification is proper in the circumstances because the indemnitee has met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware, as the same exists or hereafter may be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the registrant to provide broader indemnification rights then said law
permitted the registrant to provide prior to such amendment). Such
determination shall be made (i) by the Board of Directors by a majority vote
of a quorum consisting of directors who are not parties to such action, suit
or proceeding (the "Disinterested Directors"), or (ii) if such a quorum of
Disinterested Directors is not obtainable, or, even if obtainable, a quorum of
Disinterested Directors so directs, by independent legal counsel and a written
opinion, or (iii) by the stockholders. The majority of Disinterested Directors
may, as they deem appropriate, elect to have the registrant indemnify any
other employee, agent or other person acting for or on behalf of the
registrant.
D. Advances for Expenses. Costs, charges and expenses (including attorneys'
fees) incurred by a director or officer of the registrant, or such other
person acting on behalf of the registrant as determined in accordance with
Section C of Article IX, in defending a civil or criminal action, suit or
proceeding shall be paid by the registrant in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer or other person to repay all amounts so
advanced in the event that it shall ultimately be determined that such
director, officer or other person is not entitled to be indemnified by the
registrant as authorized in Article IX or otherwise.
E. Right of Claimant to Bring Suit. If a claim under Sections of Article IX
is not paid in full by the registrant within 30 days after a written claim has
been received by the registrant, the claimant may at any time thereafter bring
suit against the registrant to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the registrant)
that the claimant has not met the standard of conduct which make it
permissible under the General Corporation Law of the State of Delaware for the
registrant to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the registrant. Neither the failure of the
registrant (including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the
circumstances because the claimant has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an
actual determination by the registrant (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
F. Other Rights; Continuation of Right to Indemnification. The
indemnification and advancement of expenses provided by Article IX shall not
be deemed exclusive of any other rights to which a claimant may be entitled
under any law (common or statutory) by-law, agreement, vote of stockholders or
Disinterested Directors or otherwise, both as to action in his or her official
capacity and as to any action in another capacity while holding office or
while employed by or acting as agent for the registrant, and shall inure to
the benefit of the estate, heirs, executors and administrators of such person.
All rights to indemnification under Article IX shall be deemed to be a
contract between the registrant and each director and officer of the
registrant who serves or served in such capacity at any time while Article IX
is in effect. Any repeal or modification of Article IX or any repeal or
modification of relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable law shall not in any way diminish
any rights to indemnification of such director, officer or the obligations of
the registrant arising hereunder with respect to any action, suit or
proceeding arising out of, or relating to, any actions, transactions or facts
occurring prior to the final adoption of such modification or repeal. For the
purposes of Article IX, references to "the registrant" include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation, so that any person who is or was a director or officer
of
II-2
<PAGE>
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article IX of the
registrant's Restated Certificate of Incorporation, with respect to the
resulting or surviving corporation, as such person would if such person had
served the resulting or surviving corporation in the same capacity.
G. Insurance. The registrant may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the registrant
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the registrant
would have the power to indemnify such person against such expense, liability
or loss under the General Corporation Law of the State of Delaware.
H. Severability. If any provision or provisions of Article IX shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of Article
IX (including, without limitation, each portion of any paragraph of Article IX
containing any such provision held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (2) to the fullest extent
possible, the provisions of Article IX of the registrant's Restated
Certificate of Incorporation (including, without limitation, each such portion
of any paragraph of Article IX containing any such provision held to be
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEMS 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Index to and Description of Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- --------
<S> <C> <C>
1 Form of Underwriting Agreement............................................
3.1 Restated Certificate of Incorporation.....................................
3.2 Amended and Restated By-laws..............................................
4* Specimen Common Stock Certificate.........................................
5.1* Opinion of Greenebaum Doll & McDonald PLLC as to legality of the
securities being registered..............................................
10.1 Form of Registration Rights Agreement.....................................
10.2 Form of Incorporation Agreement...........................................
10.3 Form of Administrative Services Agreement.................................
10.4 Form of Tax Sharing Agreement.............................................
10.5* Form of 1996 Stock Ownership Incentive Plan...............................
10.6* Form of Non-Employee Directors 1996 Stock Incentive Plan..................
10.7 Mortgage and Trust Indenture dated as of November 1, 1990, by and between
New Pond Village Associates and the First National Bank of Boston, as
Trustee..................................................................
10.8 Indenture of Trust and Agreement dated as of December 1, 1985, by and
among The Redevelopment Agency of the City of San Marcos, San Marcos
Retirement Village, The First National Bank of Boston, as Trustee, and
Security Pacific National Bank...........................................
10.9* Form of Services Agreements...............................................
10.10* Form of Sublease Agreement................................................
10.11* Form of Voting Agreement..................................................
10.12* Form of Redding Lease.....................................................
10.13 Form of New Pond Village Associates Lease.................................
10.14 Form of Line of Credit....................................................
10.15* Foxhill Village Management Agreement......................................
21 Subsidiaries of the Registrant............................................
23.1 Consent of Greenebaum Doll & McDonald PLLC (included in Exhibit 5.1)......
23.2 Consent of Ernst & Young LLP..............................................
24 Power of Attorney (included on Signature Page of the Registration
Statement)................................................................
27** Financial Data Schedule...................................................
</TABLE>
- --------
*To be filed by amendment
**Included only in the EDGAR version.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
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 by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) For the purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a 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(b) under the Securities Act 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 the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, in the City of Louisville, Commonwealth of Kentucky, on June 26,
1996.
Atria Communities, Inc.
/s/ W. Patrick Mulloy, II
By: _________________________________
W. PATRICK MULLOY, II
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints W. Patrick Mulloy, II, Jill L. Force,
and June N. King, and each of them as such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and stead,
in any and all capacities, to sign all amendments (including post-effective
amendments) to this Registration Statement and any registration statement
related to the offering contemplated by this Registration Statement that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission and any
State or other regulatory authority, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
SIGNATURE TITLE DATE
/s/ W. Bruce Lunsford Chairman of the Board June 26,
_________________________________ 1996
W. BRUCE LUNSFORD
/s/ W. Patrick Mulloy, II Chief Executive Officer, June 26,
_________________________________ President and Director 1996
W. PATRICK MULLOY, II
/s/ J. Timothy Wesley Chief Financial Officer, June 26,
_________________________________ Vice President of 1996
J. TIMOTHY WESLEY Development and
Secretary (Chief
Financial and
Accounting Officer)
/s/ Sandra Harden Austin Director June 26,
_________________________________ 1996
SANDRA HARDEN AUSTIN
/s/ William C. Ballard Jr. Director June 26,
_________________________________ 1996
WILLIAM C. BALLARD JR.
/s/ Thomas T. Ladt Director June 26,
_________________________________ 1996
THOMAS T. LADT
/s/ R. Gene Smith Director June 26,
_________________________________ 1996
R. GENE SMITH
II-5
<PAGE>
Exhibit 1
5,750,000 Shares
ATRIA COMMUNITIES, INC.
Common Stock
($.10 Par Value)
FORM OF UNDERWRITING AGREEMENT
------------------------------
__________, 1996
Alex. Brown & Sons Incorporated
Morgan Stanley Co. Incorporated
J.C. Bradford & Co.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Atria Communities, Inc., a Delaware corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as representatives (the "Representatives") an
aggregate of 5,000,000 shares of the Company's Common Stock, $.10 par value (the
"Firm Shares"). The respective amounts of the Firm Shares to be so purchased by
the several Underwriters are set forth opposite their names in Schedule I
hereto. The Company also proposes to sell at the Underwriters' option an
aggregate of up to 750,000 additional shares of the Company's Common Stock (the
"Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
<PAGE>
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to each of the Underwriters as follows:
(a) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and
has been filed with the Commission. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of the Rules and Regulations) contained therein and the
exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by
the Company pursuant to Rule 462 (b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of
the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed prior
to the time it becomes effective or filed pursuant to Rule 424(a) under the
Act that is delivered by the Company to the Underwriters for delivery to
purchasers of the Shares, together with the term sheet or abbreviated term
sheet filed with the Commission pursuant to Rule 424(b)(7) under the Act.
Each preliminary prospectus included in the Registration Statement prior to
the time it becomes effective is herein referred to as a "Preliminary
Prospectus."
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. Each of the
subsidiaries of the Company as listed in Exhibit 21 to Item 16(a) of the
Registration Statement (collectively, the "Corporate Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. The Corporate
Subsidiaries are the only subsidiaries, direct or indirect, of the Company.
The Company and each of the Corporate Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their
business requires such qualification. The outstanding shares of capital
stock of each of the Corporate Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and are owned by the
Company or another Corporate Subsidiary free and clear of all liens,
encumbrances and equities and claims; and no options, warrants or other
2
<PAGE>
rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Corporate Subsidiaries are outstanding.
(c) Each of the limited partnerships of which a Corporate Subsidiary
is general partner, as listed in Exhibit 21 to Item 16(a) of the
Registration Statement (collectively, the "Limited Partnerships," and
together with the Corporate Subsidiaries, the "Subsidiaries") has been duly
organized and is an existing limited partnership in good standing under the
laws of the jurisdiction of its organization, with the power and authority
to own or lease its properties and conduct its business as described in the
Registration Statement. Each of the Limited Partnerships is duly qualified
to transact business in all jurisdictions in which the conduct of its
business requires such qualification; except for jurisdictions in which the
failure to so qualify, together with all such other failures, would not
have a material adverse effect upon the business, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole. The capital contributions
with respect to the outstanding units of each of the Limited Partnerships
have been made to the Limited Partnerships. All outstanding limited
partnership interests in the Limited Partnerships were issued and sold in
compliance with all applicable Federal and state securities laws. The
general and limited partnership interests therein held directly or
indirectly by the Company are owned free and clear of all liens,
encumbrances and equities and claims, except (i) for encumbrances disclosed
in the Prospectus, and (ii) for encumbrances relating to any indebtedness
disclosed in the Prospectus. To the knowledge of the Company, each limited
partnership agreement pursuant to which the Company or a Subsidiary holds
an interest in a Limited Partnership is in full force and effect and
constitutes the legal, valid and binding agreement of the parties thereto,
enforceable against such parties in accordance with the terms thereof.
There has been no material breach of or default under, and no event which
with notice or lapse of time would constitute a material breach of or
default under, such agreements by the Company or any Subsidiary or, to the
Company's knowledge, any other party to such agreements. Except to the
extent disclosed in the Prospectus, each of the assisted and independent
living facilities, and each of the properties held for development,
described in the Prospectus as owned by the Company is owned and operated
either by a Corporate Subsidiary or by a Limited Partnership in which a
Corporate Subsidiary owns at least 50% of the outstanding partnership
interests.
(d) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
the Shares to be issued and sold by the Company have been duly authorized
and when issued and paid for as contemplated herein will be validly issued,
fully paid and non-assessable; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof.
Neither the filing of the Registration Statement nor the offering or sale
of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to
the registration of any shares of Common Stock.
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(e) Except as disclosed in the Prospectus, and with respect to any
Limited Partnership, as contained in the applicable limited partnership
agreement, there are no outstanding warrants, option, convertible
securities or other commitments of sale related to or entitling any person
to purchase or otherwise acquire any securities or interest in any
Subsidiary. Except as disclosed in the Prospectus and, with respect to any
Limited Partnership, as contained in the applicable limited partnership
agreement, there are no consensual encumbrances or restrictions on the
ability of any Subsidiary (i) to pay any dividends or make any
distributions on such Corporate Subsidiary's capital stock or such Limited
Partnership's partnership interests or to pay any indebtedness owed to the
Company or any other Subsidiary, (ii) to make any loans or advances to, or
investments in, the Company or any other Subsidiary, or (iii) to transfer
any of its properties or assets to the Company or any other Subsidiary.
(f) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(g) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares
nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and
will conform, to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and
will not contain, any untrue statement of a material fact and do not omit,
and will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus
and any amendments and supplements thereto do not contain, and will not
contain, any untrue statement of material fact; and do not omit, and will
not omit, to state any 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; provided, however, that the
Company makes no representations or warranties as to information contained
in or omitted from the Registration Statement or the Prospectus, or any
such amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use in the
preparation thereof.
(h) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the
results of operations and cash flows of the Company and the consolidated
Subsidiaries, at the indicated dates and for the indicated periods. Such
financial statements and related schedules have been prepared in accordance
with generally accepted principles of accounting, consistently applied
throughout the periods involved, except as disclosed herein, and all
adjustments necessary
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for a fair presentation of results for such periods have been made. The
summary financial and statistical data included in the Registration
Statement presents fairly the information shown therein and such data has
been compiled on a basis consistent with the financial statements presented
therein and the books and records of the company. The pro forma financial
statements and other pro forma financial information included in the
Registration Statement and the Prospectus present fairly the information
shown therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements, have been
properly compiled on the pro forma bases described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
(i) Ernst & Young LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement,
are independent public accountants as required by the Act and the Rules and
Regulations.
(j) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which
if determined adversely to the Company or any of its Subsidiaries might
result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries taken as a
whole or to prevent the consummation of the transactions contemplated
hereby, except as set forth in the Registration Statement.
(k) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material in amount. The Company
and the Subsidiaries occupy their leased properties under valid and binding
leases conforming in all material respects to the description thereof set
forth in the Registration Statement.
(l) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become
due and are not being contested in good faith. All tax liabilities have
been adequately provided for in the financial statements of the Company.
(m) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its
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Subsidiaries taken as a whole, whether or not occurring in the ordinary
course of business, and there has not been any material transaction entered
into or any material transaction that is probable of being entered into by
the Company or the Subsidiaries, other than transactions in the ordinary
course of business and changes and transactions described in the
Registration Statement, as it may be amended or supplemented. The Company
and the Subsidiaries have no material contingent obligations which are not
disclosed in the Company's financial statements which are included in the
Registration Statement.
(n) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws, limited partnership agreement or
under any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it, or any of its properties,
is bound and which default is of material significance in respect of the
condition, financial or otherwise of the Company and its Subsidiaries taken
as a whole or the business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company
and the Subsidiaries taken as a whole. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any Subsidiary is a party, or of the Charter or by-
laws of the Company or any order, rule or regulation applicable to the
Company or any Subsidiary of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(o) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue Sky
laws) has been obtained or made and is in full force and effect.
(p) The Company and each of the Subsidiaries holds all material
licenses, certificates, permits and other approvals from governmental
authorities (collectively, "Permits") which are necessary to own their
properties and to conduct their businesses, including, without limitation,
such Permits as are required (i) under such federal and state healthcare
laws as are applicable to the Company and the Subsidiaries and (ii) with
respect to those facilities operated by the Company or any Subsidiary that
participate in Medicare and/or Medicaid, to receive reimbursement
thereunder, except where such failure to have or hold such Permits,
together with all other such failures, would not have a material adverse
effect upon the business, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries
taken
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<PAGE>
as a whole; the Company and each of the Subsidiaries have fulfilled and
performed all of their material obligations with respect to such Permits,
and no event or change in condition has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any
such Permit, such in each case to such qualifications as may be set forth
in the Prospectus. During the period for which financial statements are
included in the Prospectus, denials by third party payers of claims for
reimbursement for services rendered by the Company have not had a material
adverse effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole, and any such denials are either under appeal
or the Company has ceased seeking reimbursement for the services of
supplies to which they relate.
(q) Neither the Company nor any of the Subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the
Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks
or copyrights owned by or licensed to the Company.
(r) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of
the Shares.
(s) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940
and the rules and regulations of the Commission thereunder.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles 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.
(u) The Company and each of its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(v) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as
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<PAGE>
amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred with
respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect
to incur liability under (i) Title IV of ERISA with respect to termination
of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension
plan" for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(w) The property, assets and operations of the Company and the
Subsidiaries comply in all material respects with all applicable federal,
state or local law, common law, doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation relating to environmental matters
(the "Environmental Laws"), except to the extent that failure to comply
with such Environmental Laws would not have a material adverse effect on
the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and the Subsidiaries taken as
a whole. None of the property, assets or operations of the Company and the
Subsidiaries is the subject of any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release
into the environment of any substance regulated by, or form the basis of
liability under, any Environmental Laws (a "Hazardous Material"), or is in
contravention of any Environmental Law that would have a material adverse
effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and
Subsidiaries taken as a whole. Neither the Company nor any Subsidiary has
received any notice or claim, nor are there pending, reasonably anticipated
or, or to the Company's knowledge, threatened lawsuits against them with
respect to violations of an Environmental Law or in connection with the
release of any Hazardous Material into the environment, in each case which,
individually or in the aggregate, would have a material adverse effect on
the condition (financial or other), business, properties, prospects, net
worth or results of operations of the Company and the Subsidiaries taken as
a whole. Neither the Company nor any Subsidiary has any material contingent
liability in connection with any release of Hazardous Material into the
environment.
(x) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the
Company's business with Cuba or with any person or affiliate located in
Cuba changes in any material way, the Company
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<PAGE>
will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
2. Purchase, Sale and Delivery of the Firm Shares.
----------------------------------------------
(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, the Company agrees
and the Underwriters and each Underwriter agrees, severally and not jointly, to
purchase, at a price of $_____ per share, the number of Firm Shares set forth
opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in New
York Clearing House funds by certified or bank cashier's checks drawn to the
order of the Company for the shares to be sold by it and to the order of the
Company against delivery of certificates therefor to the Representatives for the
several accounts of the Underwriters. Such payment and delivery are to be made
at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third business day
after the date of this Agreement or at such other time and date not later than
five business days thereafter as you and the Company shall agree upon, such time
and date being herein referred to as the "Closing Date." (As used herein,
"business day" means a day on which the New York Stock Exchange is open for
trading and on which banks in New York are open for business and not permitted
by law or executive order to be closed.) The certificates for the Firm Shares
will be delivered in such denominations and in such registrations as the
Representatives request in writing not later than the second full business day
prior to the Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the
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<PAGE>
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as the number of Firm Shares being
purchased by such Underwriter bears to the total number of Firm Shares, adjusted
by you in such manner as to avoid fractional shares. The option with respect to
the Option Shares granted hereunder may be exercised only to cover over-
allotments in the sale of the Firm Shares by the Underwriters. You, as
Representatives of the several Underwriters, may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
Company. To the extent, if any, that the option is exercised, payment for the
Option Shares shall be made on the Option Closing Date in New York Clearing
House funds by certified or bank cashier's check drawn to the order of the
Company against delivery of certificates therefor at the offices of Alex. Brown
& Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland.
3. Offering by the Underwriters.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deems it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
------------------------
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations, (B) not
file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives shall
have reasonably objected in writing or which is not in compliance with the
Rules and Regulations.
(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become
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effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the use of the Prospectus or
of the institution of any proceedings for that purpose. The Company will
use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representatives may reasonably have designated in
writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company
will, from time to time, prepare and file such statements, reports, and
other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representatives may reasonably
request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period
when delivery of a Prospectus is required under the Act, as many copies of
the Prospectus in final form, or as thereafter amended or supplemented, as
the Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits
filed therewith, and will deliver to the Representatives such number of
copies of the Registration Statement (including such number of copies of
the exhibits filed therewith that may reasonably be requested), and of all
amendments thereto, as the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event
shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if it is necessary at any time to amend
or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the
Prospectus as so
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amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with
the law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail,
covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement, which earning statement shall
satisfy the requirements of Section 11(a) of the Act and Rule 158 of the
Rules and Regulations and will advise you in writing when such statement
has been so made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of
all other documents, reports and information furnished by the Company to
its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or
the Securities Exchange Act of 1934, as amended. The Company will deliver
to the Representatives similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which
are not consolidated in the Company's financial statements.
(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 180 days
after the date of this Agreement, directly or indirectly, by the Company
otherwise than hereunder or with the prior written consent of Alex. Brown &
Sons Incorporated.
(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the The NASDAQ National Market System.
(j) The Company has caused each officer and director and specific
shareholders of the Company to furnish to you, on or prior to the date of
this agreement, a letter or letters, in form and substance satisfactory to
the Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any shares of Common Stock
of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Shares or
derivative of Common Shares owned by such person or request the
registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition of) for a period of 180
days after the date of this Agreement, directly or indirectly, except with
the prior written consent of Alex. Brown & Sons Incorporated ("Lockup
Agreements").
(k) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale
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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 shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the price
of any securities of the Company.
5. Costs and Expenses.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Shares; the Listing Fee of the
NASDAQ Stock Market; and the expenses, including the fees and disbursements of
counsel for the Underwriters, incurred in connection with the qualification of
the Shares under State securities or Blue Sky laws. The Company agrees to pay
all costs and expenses of the Underwriters, including the fees and disbursements
of counsel for the Underwriters, incident to the offer and sale of directed
shares of the Common Stock by the Underwriters to employees and persons having
business relationships with the Company and its Subsidiaries. The Company shall
not, however, be required to pay for any of the Underwriters expenses (other
than those related to qualification under NASD regulation and State securities
or Blue Sky laws) except that, if this Agreement shall not be consummated
because the conditions in Section 6 hereof are not satisfied, or because this
Agreement is terminated by the Representatives pursuant to Section 11 hereof, or
by reason of any failure, refusal or inability on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on its part to be performed, unless such failure to
satisfy said condition or to comply with said terms be due to the default or
omission of any Underwriter, then the Company shall reimburse the several
Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to
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<PAGE>
market the Shares or in contemplation of performing their obligations hereunder;
but the Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of its covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing
Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinions of Greenebaum
Doll & McDonald, PLLC, counsel for the Company, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters
(and stating that it may be relied upon by counsel to the Underwriters) to
the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement; each of the Subsidiaries has been duly organized and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all
jurisdictions in which the conduct of their business requires such
qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of the Company and the
Subsidiaries taken as a whole; and the outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable and are owned by
the Company or a Subsidiary; and, to the best of
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<PAGE>
such counsel's knowledge, the outstanding shares of capital stock of
each of the Subsidiaries is owned free and clear of all liens,
encumbrances and equities and claims, and no options, warrants or
other rights to purchase, agreements or other obligations to issue or
other rights to convert any obligations into any shares of capital
stock or of ownership interests in the Subsidiaries are outstanding.
(ii) Each of the Limited Partnerships has been duly organized and
is an existing limited partnership in good standing under the laws of
the jurisdiction of its organization, with the power and authority to
own, lease and operate its properties and to conduct its business as
described in the Registration Statement and Prospectus, and is duly
qualified to conduct its business; each of the Limited Partnerships is
in good standing as a foreign limited partnership in each jurisdiction
in which the nature of its properties or the conduct of its business
requires such qualification, except where the failure so to qualify
does not have a materially adverse effect upon the business of the
Company and the Subsidiaries taken as a whole; the limited partnership
interests in the Limited Partnerships held directly or indirectly by
the Company are free and clear of all liens, encumbrances and equities
and claims, except (a) for those encumbrances disclosed in the
Prospectus, (b) for encumbrances relating to indebtedness disclosed in
the Registration Statement or Prospectus and (c) to the extent
provided in the applicable limited partnership agreement; each limited
partnership agreement pursuant to which the Company or a Subsidiary
holds a general partnership interest in a Limited Partnership is in
full force and effect and constitutes the legal, valid and binding
agreement of the parties thereto, enforceable against such parties in
accordance with the terms thereof, except as enforcement thereof may
be limited by equitable principles or by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally. There has
been no material breach of or default under, and no event which with
notice or lapse of time would constitute a material breach of or
default under, such agreements by the Company or any Subsidiary or any
other party to such agreements.
(iii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly
authorized; the outstanding shares of the Company's Common Stock have
been duly authorized and validly issued and are fully paid and non-
assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares, assuming
they are in the form filed with the Commission, are in due and proper
form; the shares of Common Stock, including the Option Shares, if any,
to be sold by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and non-assessable
when issued and paid for as contemplated by this Agreement; and no
preemptive rights of stockholders exist with respect to any of the
Shares or the issue or sale thereof.
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<PAGE>
(iv) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities
of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company
or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell
or otherwise issue to them, or to permit them to underwrite the sale
of, any of the Shares or the right to have any Common Shares or other
securities of the Company included in the Registration Statement or
the right, as a result of the filing of the Registration Statement, to
require registration under the Act of any shares of Common Stock or
other securities of the Company.
(v) Except (a) as described in or contemplated by the
Prospectus, and (b) with respect to any Limited Partnership, as
contained in the applicable limited partnership agreement, to such
counsel's knowledge, there are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities or commitments of
sale related to or entitling any person to purchase or otherwise
acquire any shares of capital stock, or partnership or other ownership
interest in, any Subsidiary.
(vi) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending
or threatened under the Act.
(vii) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the applicable rules and
regulations thereunder (except that such counsel need express no
opinion as to the financial statements and related schedules).
(viii) The statements under the captions in the Prospectus,
insofar as such statements constitute a summary of documents referred
to therein or matters of law, fairly summarize in all material
respects the information called for with respect to such documents and
matters.
(ix) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are
not so filed or described as
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<PAGE>
required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all
material respects.
(x) Such counsel is not aware that the Company nor any of the
Subsidiaries is in violation of its certificate or articles of
incorporation or bylaws, or other organizational documents or is in
default in the performance of any material obligation, agreement or
condition contained in any evidence of indebtedness, except as may be
contained in the Prospectus.
(xi) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.
(xii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the Charter or by-laws
of the Company, or any agreement or instrument known to such counsel
to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries may be bound.
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xiv) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the
NASD or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
(xv) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.
(xvi) Except as disclosed in the Prospectus, such counsel is not
aware of any holder of any security of the Company or any other person
who has the right, contractual or otherwise, to have any securities of
the Company included in the Registration Statement, except for any
such rights as shall have been waived.
(xvii) To such counsel's knowledge, the Company and each of the
Subsidiaries have all necessary Permits (except where the failure to
have such
17
<PAGE>
Permits, individually or in the aggregate, would not have a material
adverse effect on the business, operations or financial condition of
the Company and the Subsidiaries taken as a whole), to own their
respective properties and to conduct their respective businesses as
now being conducted, and as described in the Registration Statement
and Prospectus, including, without limitation, such Permits as are
required (a) under such federal and state healthcare laws as are
applicable to the Company and the Subsidiaries and (y) with respect to
those facilities owned or operated by the Company or any Subsidiary
that participate in Medicare and/or Medicaid, to receive reimbursement
thereunder.
In rendering such opinion Greenebaum Doll & McDonald, PLLC may rely as
to matters governed by the laws of states other than Kentucky and Delaware
or Federal laws on local counsel in such jurisdictions, provided that in
each case Greenebaum Doll & McDonald, PLLC shall state that they believe
that they and the Underwriters are justified in relying on such other
counsel. In addition to the matters set forth above, such opinion shall
also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that (i) the
Registration Statement, at the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Act) and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to
the Rules and Regulations and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made,
not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Greenebaum Doll & McDonald, PLLC may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representatives shall have received from Alston & Bird,
counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (iii), (iv), (v), (xii) and (xiv) of Paragraph
(b) of this Section 6, and that the Company is a duly organized and validly
existing corporation under the laws of the State of Delaware. In rendering
such opinion may rely as to all matters governed other than by the laws of
the States of Georgia or Kentucky or Federal laws on the opinion of counsel
referred to in Paragraph (b) of this Section 6. In addition to the matters
set forth above, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads them to
believe that (i) the Registration Statement, or any amendment thereto, as
of the time it became effective under the Act (but after giving effect to
any modifications incorporated therein pursuant to Rule 430A under the Act)
as of the Closing Date or the Option Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
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<PAGE>
statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the
light of the circumstances under which they are made, not misleading
(except that such counsel need express no view as to financial statements,
schedules and statistical information therein). With respect to such
statement, Alston & Bird may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(d) The Representatives shall have received at or prior to the Closing
Date from _______________ a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the State
securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(e) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to you, of Ernst & Young, LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating that in their opinion the financial statements and schedules
examined by them and included in the Registration Statement comply in form
in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations; and containing such
other statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company
to the effect that, as of the Closing Date or the Option Closing Date, as
the case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registrations
Statement has been issued, and no proceedings for such purpose have
been taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
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<PAGE>
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and such Registration
Statement and Prospectus did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole, whether or not arising
in the ordinary course of business.
(g) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters
as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the NASDAQ National Market System.
(i) The Lockup Agreements described in Section 4 (j) are in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in
all material respects satisfactory to the Representatives and to Alston &
Bird, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representatives by notifying the Company of such termination in
writing or by telegram at or prior to the Closing Date or the Option
Closing Date, as the case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
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7. Conditions of the Obligations of the Company.
--------------------------------------------
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter or
any such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company 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 upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances
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<PAGE>
under which they were made; and will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation) the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such
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<PAGE>
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law then each indemnifying party shall contribute to such amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company 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. The relative fault
shall be determined by reference to, among other things, 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 on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were 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 account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) 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
subsection
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(d), (i) no Underwriter shall be required to contribute any amount in excess of
the underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company, you, as Representatives of
the Underwriters, shall use your reasonable efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not
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<PAGE>
exceed 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case
may be, covered hereby, the Company or you as the Representatives of the
Underwriters will have the right, by written notice given within the next 36-
hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company except to the extent provided in Section 8 hereof. In the event of a
default by any Underwriter or Underwriters, as set forth in this Section 9, the
Closing Date or Option Closing Date, as the case may be, may be postponed for
such period, not exceeding seven days, as you, as Representatives, may determine
in order that the required changes in the Registration Statement or in the
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. Notices.
-------
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
Mr. Steven Schuh; with a copy to Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland 21202. Attention: General Counsel; if to
the Company, to
Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attn: W. Patrick Mulloy, II
11. Termination.
-----------
This Agreement may be terminated by you by notice to the Company as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a
25
<PAGE>
prospective material adverse change in or affecting the condition,
financial or otherwise, of the Company and its Subsidiaries taken as a
whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company
and its Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak or escalation of hostilities
or declaration of war or national emergency or other national or
international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the
United States would, in your reasonable judgment, make it impracticable to
market the Shares or to enforce contracts for the sale of the Shares, or
(iii) suspension of trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations
of the Company, (v) declaration of a banking moratorium by United States or
New York State authorities, (vi) any downgrading in the rating of the
Company's debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Exchange
Act); (vii) the suspension of trading of the Company's common stock by the
Commission on the NASDAQ Stock Market or (viii) the taking of any action by
any governmental body or agency in respect of its monetary or fiscal
affairs which in your reasonable opinion has a material adverse effect on
the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
------------------------------------
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
26
<PAGE>
14. Miscellaneous.
-------------
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers, and (c) delivery of and payment for the Shares under
this Agreement.
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.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
27
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
ATRIA COMMUNITIES, INC.
By:
-----------------------------------
Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
J.C. BRADFORD & CO.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By:
Authorized Officer
28
<PAGE>
SCHEDULE I
Schedule of Underwriters
Number of Firm Shares
Underwriter to be Purchased
- ----------- ---------------------
Alex. Brown & Sons Incorporated
Morgan Stanley & Co. Incorporated
J.C. Bradford & Co.
----------
Total
----------
29
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
ATRIA ASSISTED LIVING COMMUNITIES, INC.
Atria Assisted Living Communities, Inc., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
The name of the Corporation (which is hereinafter referred to as the
"Corporation") is "Atria Assisted Living Communities, Inc." The original
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on May 1, 1996.
This Restated Certificate of Incorporation has been duly proposed by
resolutions adopted and declared advisable by the Board of Directors of the
Corporation, duly adopted by the sole stockholder of the Corporation and duly
executed and acknowledged by the officers of the Corporation in accordance with
Sections 103, 242 and 245 of the General Corporation Law of the State of
Delaware.
The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Atria Communities, Inc.
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware.
<PAGE>
ARTICLE IV
CAPITAL STOCK
The Corporation shall be authorized to issue 55,000,000 shares of
capital stock, of which 50,000,000 shares shall be designated Common Stock,
having a par value of $.10 per share, and 5,000,000 shares shall be designated
Preferred Stock, having a par value of $1.00 per share. The voting powers,
designations and relative rights and preferences of the two classes of capital
stock are set forth below. Except as otherwise provided by law or by the
resolution or resolutions adopted by the Board of Directors designating the
rights, powers, and preferences of any series of Preferred Stock, the Common
Stock shall have the exclusive right to vote for the election of directors and
for all other purposes, and holders of Preferred Stock shall not be entitled to
receive notice of any meeting of stockholders at which they are not entitled to
vote.
A. COMMON STOCK.
------------
1. POWERS, RIGHTS AND PREFERENCES. The Common Stock shall be without
distinction as to powers, rights and preferences and as to the qualifications,
limitations or restrictions thereof. At every annual or special meeting of
stockholders of the Corporation, every holder of Common Stock shall be entitled
to one vote, in person or by proxy, for each share of Common Stock standing in
such holder's name on the stock transfer records of the Corporation in
connection with all matters on which stockholders are generally entitled to
vote. The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof.
2. DIVIDENDS. After the requirements regarding preferential
dividends on Preferred Stock, if any, have been met and after the Corporation
has complied with all the requirements, if any, regarding the setting aside of
sums as sinking funds or redemption or purchase accounts, and subject further to
any preferential rights, if any, of the Preferred Stock, then, but not
otherwise, the holders of Common Stock shall be entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors.
3. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, after payment or provision for payment of the debts and
other liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock may be entitled, the holders of Common
Stock shall be entitled to share ratably, in proportion to the number of shares
of Common Stock held by each, in the remaining net assets of the Corporation.
B. PREFERRED STOCK.
---------------
1. ISSUANCE BY BOARD RESOLUTION; SERIES. The Board of Directors is
authorized to adopt, from time to time, a resolution or resolutions providing
for the issuance of one or more series of Preferred Stock, to establish the
number of shares to be included in each such series, and to fix the designation,
powers, privileges and relative, participating, optional or other special rights
of the shares of each such series and the qualifications, limitations and
restrictions thereof.
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<PAGE>
2. PREFERENCES AND RIGHT. The authority of the Board of Directors
with respect to each series shall include, but not be limited to, determination
of the following:
a. the designation of the series, which may be by distinguishing
number, letter or title;
b. the number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in a resolution of the
Board of Directors providing for such series or the certificate of designations
recorded with the Secretary of State of the State of Delaware relating to such
series) increase or decrease (but not below the number of shares thereof then
outstanding);
c. the rate and times at which, and the terms and conditions of
which, dividends on the shares of the series shall be paid, whether the
dividends shall be cumulative or non-cumulative, and if cumulative, from what
date or dates, and the preferences or relation, if any, of such dividends to the
dividends payable on any shares of any other series or class of the Corporation;
d. the price or prices (or method of determining such price or
prices) at which, the form of payment of such price or prices (which may be
cash, property or rights, including securities of the same or another
corporation or other entity) for which, the period or periods within which and
the terms and conditions upon which the shares of such series may be redeemed,
in whole or in part, at the option of the Corporation or at the option of the
holder or holders thereof or upon the happening of a specified event or
specified events, if any;
e. the obligation, if any, of the Corporation to purchase or
redeem shares of such series pursuant to a sinking fund or otherwise and the
price or prices at which, the form of payment of such price or prices (which may
be cash, property or rights, including securities of the same or another
corporation or other entity) for which, the period or periods within which and
the terms and conditions upon which the shares of such series shall be redeemed
or purchased, in whole or in part, pursuant to such obligation;
f. the amount payable out of the assets of the Corporation to the
holders of shares of the series in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation;
g. provisions, if any, for the conversion or exchange of the
shares of such series, at any time or times at the option of the holder or
holders thereof or at the option of the Corporation or upon the happening of a
specified event or specified events, into shares of any other class or classes
or any other series of the same or any other class or classes of stock, or any
other security, of the Corporation or any other corporation or other entity, and
the conversion price or prices, or the rate or rates of exchange, and any
adjustments thereof at which such conversion or exchange may be made, and any
other terms and conditions of such conversion or exchange;
-3-
<PAGE>
h. restrictions on the issuance of shares of the same series or
of any other class or series, if any; and
i. the voting rights, if any, of the holders of shares of the
series, including the right to vote as a separate class or as one class with the
holders of any other series of Preferred Stock or Common Stock, or both;
j. whether any series of Preferred Stock shall have priority over
or parity with or be junior to Preferred Stock of any other series, or shall be
entitled to the benefit of limitations restricting (i) the creation of
indebtedness of the Corporation, (ii) the issuance of shares of any other class
or series having priority over or being on a parity with the shares of such
series, or (iii) the payment of dividends on, the making of other distributions
with respect to, or the purchase or redemption of shares of any other class or
series on parity or ranking junior to the Preferred Stock of any such series as
to dividends or to other distributions, and the terms of any such restrictions,
or any other restrictions with respect to shares of any class or series on
parity with or ranking junior to Preferred Stock of such series in any respect;
and
k. any other powers, preferences, privileges and relative,
participating, optional or other special rights of such series and the
qualifications, limitations or restrictions thereof, to the full extent now or
hereafter permitted by law.
C. REGISTERED HOLDERS . The Corporation shall be entitled to treat
the person in whose name any share of its capital stock is registered as the
owner thereof for all purposes and shall not be bound to recognize any equitable
or other claim to, or interest in, such share on the part of any other person,
whether or not the Corporation shall have notice thereof, except as expressly
provided by applicable law.
D. RECLASSIFICATION OF STOCK. Effective as of the filing of this
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware pursuant to Section 103 of the General Corporation Law of the State
of Delaware, the 100 shares of Common Stock, having a par value of $1.00 per
share, of the Corporation, representing all the issued and outstanding capital
stock of the Corporation ("Outstanding Common Stock") shall, without any action
on the part of the holder thereof, be converted into 100 shares of Common Stock,
having a par value of $.10 per share, all of which shall be fully paid and
nonassessable. Upon the surrender of certificates representing shares of
Outstanding Common Stock, the Corporation or any agent of the Corporation
appointed for such purpose shall issue in exchange therefor one or more
certificates representing the shares into which the shares of capital
Outstanding Common Stock have been converted in accordance with the foregoing.
ARTICLE V
STOCKHOLDER ACTION
A. STOCKHOLDER ACTION. Effective as of the time at which Vencor,
Inc., a Delaware corporation, and its affiliates shall cease to be the
beneficial owner of an aggregate of at least a majority of the then outstanding
shares of Common Stock (the "Trigger Date"), any action
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<PAGE>
required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders.
B. CALL OF SPECIAL MEETINGS; BUSINESS. Effective as of the Trigger
Date, except as otherwise required by law and subject to the rights of the
holders of any series of Preferred Stock, special meetings of stockholders of
the Corporation for any purpose or purposes may be called only by (1) the Board
of Directors pursuant to a resolution stating the purpose or purposes thereof
approved by a majority of the total number of Directors which the Corporation
would have if there were no vacancies (the "Whole Board"), (2) by the Chairman
of the Board of Directors of the Corporation, or (3) by the President of the
Corporation and, effective as of the Trigger Date, any power of stockholders to
call a special meeting is specifically denied. No business other than that
stated in the notice shall be transacted at any special meeting.
ARTICLE VI
BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The Board of Directors may
exercise all such authority and powers of the Corporation and do all such lawful
acts and things as are not by statute or this Restated Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
A. NUMBER OF DIRECTORS; CLASSES. The number of directors of the
Corporation (except as otherwise fixed by or pursuant to the provisions of
Article IV hereof relating to the rights of the holders of any class or series
of Preferred Stock to elect additional directors under specified circumstances)
shall be fixed from time to time exclusively pursuant to a resolution adopted by
a majority of the Whole Board, but in no event shall be less than three nor more
than fifteen. Commencing with the 1997 annual meeting of stockholders, the
directors shall be divided into three classes, which shall be as nearly equal in
number as possible, with the term of office of the first class to expire at the
annual meeting of stockholders to be held in 1998, the term of office of the
second class expiring at the annual meeting of stockholders to be held in 1999,
and the term of office of the third class to expire at the annual meeting of
stockholders to be held in 2000, with each class to hold office until its
successor is duly elected and qualified. At each succeeding annual meeting of
stockholders, directors elected to succeed those directors whose terms then
expire shall be elected for a full term of office to expire at the third
succeeding annual meeting of stockholders after their election or thereafter
when their respective successors in each case shall have been duly elected and
qualified. If the number of directors fixed by or pursuant to resolution of the
Board of Directors is changed at any time, any newly created directorships or
any decrease in directorships shall be so apportioned among the classes by the
Board of Directors so as to make all classes as nearly equal in number as
possible; provided, however, no decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
B. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES; STOCKHOLDER
PROPOSAL OF BUSINESS. Advance notice of stockholder nominations for the
election of directors and of the
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<PAGE>
proposal of business by stockholders at the annual meeting of the Corporation
shall be given in the manner provided in the By-Laws of the Corporation, as
amended and in effect from time to time.
C. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the rights,
if any, of any series of Preferred Stock to elect directors under specified
circumstances, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been duly elected and qualified.
D. REMOVAL. Subject to the rights, if any, of any series of
Preferred Stock to elect directors under specified circumstances, any director
may be removed from office only for cause by the affirmative vote of the holders
of at least a majority of the voting power of all shares of the Corporation
entitled to vote generally in the election of directors (the "Voting Stock")
then outstanding, voting together as a single class; provided, however, that
prior to the Trigger Date, any director or directors may be removed from office,
with or without cause, by the affirmative vote of at least a majority of the
voting power of all Voting Stock then outstanding, voting together as a single
class.
E. ELECTION OF DIRECTORS. Unless and except to the extent that the
By-Laws of the Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
ARTICLE VII
BY-LAWS
The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation. Any By-Laws made by the Board of
Directors under the powers conferred hereby may be amended or repealed by the
stockholders at any annual or special meeting of stockholders, by the
affirmative vote of the holders of a majority of the voting power of all capital
stock issued and outstanding and entitled to vote at such meeting.
Notwithstanding the foregoing and anything contained in this Restated
Certificate of Incorporation to the contrary, any proposed alteration or repeal
of, or the adoption of any By-Law inconsistent with, Sections 2.2, 2.9, 2.10 or
2.13 of Article 2 of the By-Laws or with Section 3.2, 3.9 or 3.11 of Article
3 of the By-Laws, by the stockholders shall require the affirmative vote of the
holders of at least 80% of the voting power of all Voting Stock then
outstanding, voting together as a single class.
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<PAGE>
ARTICLE VIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and, except as set forth in Article IX, all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Restated Certificate of
Incorporation, in its present form or as hereafter amended, are granted subject
to the right reserved in this Article. Notwithstanding anything contained in
this Restated Certificate of Incorporation to the contrary, the affirmative vote
of the holders of at least 80% of the Voting Stock then outstanding, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal Article V, VI, VII, VIII or IX of the
Restated Certificate of Incorporation.
ARTICLE IX
LIMITED LIABILITY; INDEMNIFICATION
A. ELIMINATION OF CERTAIN LIABILITY. A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is hereby amended to
permit further elimination or limitation of the personal liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended. Any repeal or modification of this Article
IX.A. shall not adversely effect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
B. RIGHT TO INDEMNIFICATION. Subject to Article IX.C., each person
who was or is made a party or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes under the Employee
Retirement
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<PAGE>
Income Security Act of 1974, as in effect from time to time ("ERISA"), penalties
and amounts to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith. The Corporation may, by action of its Board of
Directors, provide indemnification to other employees or agents of the
Corporation with the same scope and effect as the indemnification of directors
and officers pursuant to this Article IX.
C. PROCEDURE FOR INDEMNIFICATION. Any indemnification under this
Article IX (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the General Corporation Law of the State of
Delaware, as the same exists or hereafter may be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights then said law permitted
the Corporation to provide prior to such amendment). Such determination shall
be made (i) by the Board of Directors by a majority vote of a quorum consisting
of directors who are not parties to such action, suit or proceeding (the
"Disinterested Directors"), or (ii) if such a quorum of Disinterested Directors
is not obtainable, or, even if obtainable, a quorum of Disinterested Directors
so directs, by independent legal counsel and a written opinion, or (iii) by the
stockholders. The majority of Disinterested Directors may, as they deem
appropriate, elect to have the Corporation indemnify any other employee, agent
or other person acting for or on behalf of the Corporation.
D. ADVANCES FOR EXPENSES. Costs, charges and expenses (including
attorneys' fees) incurred by a director or officer of the Corporation, or such
other person acting on behalf of the Corporation as determined in accordance
with Article IX.C, in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of a undertaking by or on behalf of the
director, officer or other person to repay all amounts so advanced in the event
that it shall ultimately be determined that such director, officer or other
person is not entitled to be indemnified by the Corporation as authorized in
this Article IX or otherwise.
E. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Article IX.B.
or Article IX.D. is not paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standard of conduct which make it
permissible under the General Corporation Law of the State of Delaware for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standards of conduct set forth in
the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel
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<PAGE>
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
F. OTHER RIGHTS; CONTINUATION OF RIGHT TO INDEMNIFICATION. The
indemnification and advancement of expenses provided by this Article IX shall
not be deemed exclusive of any other rights to which a claimant may be entitled
under any law (common or statutory), By-Law, agreement, vote of stockholders or
Disinterested Directors or otherwise, both as to action in his or her official
capacity and as to any action in another capacity while holding office or while
employed by or acting as agent for the Corporation, and shall inure to the
benefit of the estate, heirs, executors and administrators of such person. All
rights to indemnification under this Article IX shall be deemed to be a contract
between the Corporation and each director and officer of the Corporation who
serves or served in such capacity at any time while this Article IX is in
effect. Any repeal or modification of this Article IX or any repeal or
modification of relevant provisions of the General Corporation Law of the State
of Delaware or any other applicable law shall not in any way diminish any rights
to indemnification of such director, officer or the obligations of the
Corporation arising hereunder with respect to any action, suit or proceeding
arising out of, or relating to, any actions, transactions or facts occurring
prior to the final adoption of such modification or repeal. For the purposes of
this Article IX, references to "the Corporation" include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation, so that any person who is or was a director or officer of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article IX, with respect to
the resulting or surviving corporation, as such person would if such person had
served the resulting or surviving corporation in the same capacity.
G. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
H. SEVERABILITY. If any provision or provisions of this Article IX
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(1) the validity, legality and enforceability of the remaining provisions of
this Article IX (including, without limitation, each portion of any paragraph of
this Article IX containing any such provision held to be invalid, illegal or
unenforceable, that is not itself held to be invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (2) to the fullest
extent possible, the provisions of this Article IX (including, without
limitation, each such portion of any paragraph of this
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<PAGE>
Article IX containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
IN WITNESS WHEREOF, said Atria Assisted Living Communities, Inc. has
caused this Restated Certificate of Incorporation to be signed by W. Patrick
Mulloy, II, its Chief Executive Officer and President, and attested by J.
Timothy Wesley, its Secretary, this 19th day of June, 1996.
ATRIA ASSISTED LIVING
COMMUNITIES, INC.
By:
----------------------------------------
W. Patrick Mulloy, II, Chief Executive
Officer and President
ATTEST:
By:
-----------------------------
J. Timothy Wesley, Secretary
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
ATRIA COMMUNITIES, INC.
ARTICLE 1
OFFICES
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1.1 REGISTERED OFFICE. The registered office of the Corporation shall be
in the City of Wilmington, County of New Castle, State of Delaware.
1.2 OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE 2
STOCKHOLDERS
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2.1 ANNUAL MEETING. The annual meeting of the stockholders of the
Corporation, for the election of directors, the consideration of financial
statements and other reports, and the transaction of such other business as may
properly be brought before such meeting, shall be held no later than six months
following the end of the Corporation's fiscal year. The meeting shall be held
at such time and on such date as may be designated by the Board of Directors of
the Corporation. In the event the annual meeting is not held or if directors
are not elected at the annual meeting, a special meeting may be called and held
for that purpose.
2.2 SPECIAL MEETINGS. Except as otherwise required by law and subject to
the rights of the holders of any class or series of Preferred Stock, special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by (i) the Board of Directors pursuant to a resolution stating the
purpose or purposes thereof approved by a majority of the total number of
Directors which the Corporation would have if there were no vacancies (the
"Whole Board"), (ii) by the Chairman of the Board of Directors of the
Corporation, or (iii) by the President of the Corporation. In addition, prior
to the Trigger Date (as defined in the Certificate of Incorporation), the
Corporation will call a special meeting of stockholders promptly upon request by
Vencor, Inc., a Delaware corporation ("Vencor"), or any of its affiliates, in
each case, if such entity is a stockholder of the Corporation. No business
other than that stated in the notice of the Special Meeting shall be transacted
at any special meeting.
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2.3 PLACE OF MEETING. All meetings of the stockholders for the election
of directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place either within or without the State of
Delaware as shall be stated in the notice of such meeting.
2.4 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written notice of the
annual meeting or a special meeting stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at such person's address as it appears on the stock transfer books
of the Corporation. Such further notice shall be given as may be required by
law. When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. Only such business shall be conducted at a
special meeting of stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. Any previously scheduled
meeting of the stockholders may be postponed, and any special meeting of the
stockholders may be cancelled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting of
stockholders.
2.5 STOCKHOLDERS LIST. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city, town or
village where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
2.6 QUORUM; ADJOURNMENTS. At any meeting of stockholders, the holders of
a majority of the issued and outstanding shares of stock entitled to vote at the
meeting of stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at all meetings of
stockholders, except as otherwise provided by statute or by the Corporation's
Restated Certificate of Incorporation as the same may be amended from time to
time ("Certificate of Incorporation"). If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the chairman of the
meeting or a majority of the stockholders entitled to vote at the meeting,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without
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notice other than announcement at the meeting, until a quorum shall be
present or represented by proxy.
2.7 VOTING. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the shares of stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-Laws a different vote is required, in which case such
express provision shall govern and control the decision of such question.
2.8 PROXIES. At each meeting of the stockholders, each stockholder shall
be entitled to vote in person or by proxy the shares of capital stock having
voting power held by such stockholder, but no proxy shall be voted after three
years from its date, unless the proxy provides for a longer period.
2.9 INTRODUCTION OF BUSINESS AT A MEETING OF STOCKHOLDERS. At an annual
or special meeting of stockholders, only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before an annual or special meeting of stockholders. To be properly brought
before a special meeting of stockholders and acted upon at the meeting, business
must be specified in the notice of the special meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, the Chairman of
the Board or the President, or if prior to the Trigger Date given at the
direction of Vencor, pursuant to Section 2.2 of these By-Laws. At an annual
meeting of stockholders, only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly brought before the
annual meeting of stockholders (a) by, or at the direction of, the Board of
Directors, (b) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice of the annual meeting, who is entitled to
vote at the annual meeting and who otherwise complies with all procedures and
requirements set forth in this By-Law, or (c) prior to the Trigger Date only, by
Vencor or any of its affiliates that is a stockholder of the Corporation. For
business to be properly brought before an annual meeting of stockholders by a
stockholder, the stockholder must have given timely notice thereof in writing to
the President or Secretary of the Corporation. To be timely, a stockholder's
notice must be received at the principal executive offices of the Corporation
not fewer than 60 days nor more than 90 days prior to the scheduled date of the
annual meeting regardless of any postponement, deferral or adjournment of that
meeting to a later date; provided, however, that if less than 70 days' notice or
prior public disclosure of the date of the annual meeting is made or given to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the earlier of (1) the day
on which such notice of the date of the meeting was mailed or (2) the day on
which such public disclosure was made.
A stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before an annual meeting of stockholders (1) a brief
description of the business desired to be brought before the annual meeting, (2)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business and any other stockholders known by such
stockholder to be supporting such proposal, (3) the class and number of shares
of the Corporation which are beneficially owned by such stockholder on the date
of
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such stockholder's notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such stockholder's
notice, and (4) any material interest of the stockholder in such proposal.
Notwithstanding anything in the By-Laws to the contrary, no business shall
be conducted at a meeting of stockholders except in accordance with the
procedure set forth in this Section 2.9. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that the business was
not properly brought before the meeting in accordance with the procedures
described by the By-Laws, and if he should so determine, he shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be considered.
2.10 NOMINATION OF DIRECTORS. Only persons nominated in accordance with
the procedures set forth in this section shall be eligible for election as
directors. Nominations of persons for election to the board may be made at a
meeting of stockholders (1) by or at the direction of the Board of Directors,
(2) prior to the Trigger Date, by Vencor or any of its affiliates that is a
stockholder of the Corporation, or (3) by any stockholder of the Corporation
entitled to vote for the election of directors at such meeting who complies with
the notice procedures set forth in this Section 2.10. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the President or Secretary of the
Corporation. To be timely, a stockholder's notice must be received at the
principal executive offices of the Corporation not fewer than 60 days nor more
than 90 days prior to the scheduled date of a meeting, regardless of any
postponement, deferral or adjournment of that meeting to a later date; provided,
however, that if fewer than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so delivered or received not later than the close of
business on the tenth day following the earlier of (1) the day on which such
notice of the date of such meeting was mailed or (2) the day on which such
public disclosure was made.
A stockholder's notice shall set forth (1) as to each person whom the
stockholder proposes to nominate for election or reelection as a director (a)
the name, age, business address and residence address of such person, (b) the
principal occupation or employment of such person, (c) the class and number of
shares of the Corporation which are beneficially owned by such person on the
date of such stockholder's notice and (d) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (2) as to the
stockholder giving the notice (a) the name and address, as they appear on the
Corporation's books, of such stockholder and any other stockholders known by
such stockholder to be supporting such nominees and (b) the class and number of
shares of the Corporation which are beneficially owned by such stockholder on
the date of such stockholder's notice and by any other stockholders known by
such stockholder to be supporting such nominees on the date of such
stockholder's notice.
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No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with procedures set forth in this section. The
chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by the By-Laws, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
This Section 2.10 shall not apply to the election of a director to a
directorship which may be filled by the Board of Directors under the General
Corporation Law of the State of Delaware.
2.11 PROCEDURE FOR ELECTION OF DIRECTORS; REQUIRED VOTE. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by ballot, and, subject to the rights of the holders of any
series of Preferred Stock to elect directors under an applicable preferred stock
designation, a plurality of the votes cast thereat shall elect directors.
Except as otherwise provided by law, the Certificate of Incorporation, these By-
Laws, or in the designation of rights of holders of any series of Preferred
Stock in all matters other than the election of directors, the affirmative vote
of a majority of the voting power of the shares present in person or represented
by proxy at the meeting and entitled to vote on the matter shall be the act of
the stockholders.
2.12 INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS. The Board of
Directors by resolution shall appoint, or shall authorize an officer of the
Corporation to appoint, one or more inspectors, which inspector or inspectors
may include individuals who serve the Corporation in other capacities,
including, without limitation, as officers, employees, agents or
representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspector(s)
to replace any inspector who fails to act. If no inspector or alternate has
been appointed to act or is able to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging such person's duties, shall take
and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of such person's ability. The
inspector(s) shall have the duties prescribed by law. The Chairman of the
meeting shall fix and announce at the meeting the date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting.
2.13 NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Effective as of the
Trigger Date, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by such
holders.
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ARTICLE 3
BOARD OF DIRECTORS
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3.1 GENERAL POWERS. The business and affairs of the Corporation shall be
managed under the direction of its Board of Directors. The Board of Directors
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute, by the Certificate of Incorporation or by these
By-Laws required or directed to be exercised or done by the stockholders.
3.2 NUMBER, CLASSIFICATION AND TERM OF OFFICE. Except as otherwise fixed
by or pursuant to the provisions of Article IV of the Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the number of
the Directors of the Corporation shall be fixed from time to time exclusively
pursuant to a resolution adopted by a majority of the Whole Board (as defined in
the Certificate of Incorporation), but in no event shall be less than three nor
more than fifteen. Commencing with the 1997 annual meeting of stockholders, the
directors shall be divided into three classes, which shall be as nearly equal in
number as possible with the term of office of the first class elected to expire
at the annual meeting of stockholders to be held in 1998, the term of office of
the second class to expire at the annual meeting of stockholders to be held in
1999, and the term of office of the third class to expire at the annual meeting
of stockholders to be held in 2000, with each class to hold office until its
successor is duly elected and qualified. At each succeeding annual meeting of
stockholders after the 1997 annual meeting of stockholders, directors elected to
succeed those directors whose terms then expire shall be elected for a full term
of office to expire at the third succeeding annual meeting of stockholders after
their election or thereafter when their respective successors in each case are
duly elected and qualified. Any director elected to a particular class by the
stockholders or directors shall be eligible, upon resignation or expiration of
their term, to be elected to a different class.
3.3 PLACE OF MEETING. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware.
3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held, within or without the State of Delaware, without other notice
than this By-Law immediately after, and at the same place as, the annual meeting
of stockholders. The Board of Directors may, by resolution, provide the time
and place, within or without the State of Delaware, for the holding of
additional regular meetings without other notice than such resolution.
3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the President or a
majority of the Board of Directors then in office. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings. Notice of each special meeting shall be given to each
director, at least three days before the day on which the meeting is to be held,
in accordance with Article IV of these By-Laws. Each such notice shall state
the time and place either within or without the State of Delaware of the meeting
but need not state the purpose thereof, except as otherwise provided by the
General Corporation
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Law of the State of Delaware or by these By-Laws. Notice of any meeting of
the Board need not be given to any director who is present at such meetings; and
any meeting of the Board of Directors shall be a legal meeting without any
notice thereof having been given if all of the directors then in office are
present at the meeting unless a director attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meetings is not lawfully called or convened.
3.6 ACTION BY CONSENT OF BOARD OF DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all members of the Board of Directors
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
3.7 CONFERENCE TELEPHONE MEETINGS. Members of the Board of Directors
or any committee thereof may participate in a meeting of the Board of Directors
or such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at such meeting.
3.8 QUORUM. At all meetings of the Board of Directors, a majority of
directors then in office shall constitute a quorum for the transaction of
business, and the act of the majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors, except as
may be otherwise specifically provided by the General Corporation Law of the
State of Delaware or by the Certificate of Incorporation. If a quorum shall not
be present at any meeting of the Board of Directors, a majority of the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting until a quorum shall be present. The directors
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough directors to leave less
than a quorum.
3.9 VACANCIES. Except as otherwise provided for or fixed by or pursuant
to the provisions of Article IV of the Certificate of Incorporation relating to
the rights of the holders of any series of Preferred Stock to elect directors
under specified circumstances, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of Directors constituting the Board of Directors shall shorten the term of any
incumbent Director.
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3.10 COMMITTEES.
a. The Board of Directors may, by resolution adopted by a majority of
the whole Board of Directors, designate one or more committees, each committee
to consist of one or more directors of the Corporation. The Board of Directors
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
In addition, in the absence or disqualification of the member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers over business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under Sections 251 and 252 of the General Corporation Law of the
State of Delaware, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets,
recommending to the stockholders the dissolution of the Corporation or
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the Resolution so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership or merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
b. A majority of any committee may determine its action and fix the
time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Section 3.5 of these By-Laws. The Board shall have power
at any time to fill vacancies in, to change the membership of, or to dissolve
any such committee.
3.11 REMOVAL. Subject to the rights of any series of Preferred Stock
to elect Directors under specified circumstances, any Director may be removed
from office only for cause by the affirmative vote of the holders of at least a
majority of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock") then outstanding,
voting together as a single class; provided, however, that prior to the Trigger
Date, any director or directors may be removed from office, with or without
cause, by the affirmative vote of the holders of at least a majority of the
voting power of all Voting Stock then outstanding, voting as a single class.
3.12 RECORDS. The Board of Directors shall cause to be kept a record
containing the minutes of the proceedings of the meetings of the Board and of
the stockholders, appropriate stock books and registers and such books of
records and accounts as may be necessary for the proper conduct of the business
of the Corporation.
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3.13 COMPENSATION. The Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE 4
NOTICES
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4.1. NOTICES. Whenever, under the provisions of the General Corporation
Law of the State of Delaware or of the Certificate of Incorporation or of these
By-Laws, notice is required to be given to any director or stockholder, such
notice shall be in writing, and shall be hand-delivered or sent by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given orally, in person or by
telephone, or by telegram or telex, and such notice shall be deemed to be given
upon transmission, in the case of a notice by telegram, or upon receipt of the
answer back of the telex machine of the receiving party, in the case of a notice
by telex.
4.2. WAIVER OF NOTICE. Whenever any notice is required to be given under
the provisions of the General Corporation Law of the State of Delaware, the
Certificate of Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto. Neither the
business to be transacted at, nor the purpose of, any annual or special meeting
of the stockholders or the Board of Directors or committee thereof need be
specified in any waiver of notice of such meeting.
ARTICLE 5
OFFICERS
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5.1. OFFICERS. The Corporation may have such officers as the Board of
Directors may determine from time to time, including a Chairman of the Board,
Vice-Chairman, Chief Executive Officer, President, one or more Vice Presidents,
a Secretary, a Treasurer, and, if the Board shall so determine, an Assistant
Secretary and an Assistant Treasurer. Any two or more offices may be held by
the same person. Such other officers and agents shall be appointed in such
manner, have such duties and hold their offices for such terms, as may be
determined by resolution of the Board of Directors.
5.2. ELECTION OF OFFICERS. The officers shall be elected by the Board of
Directors at the first meeting of the Board of Directors after each annual
meeting of stock-
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holders. Each officer shall hold office at the pleasure of the Board of
Directors until his or her successor shall have been duly elected and qualified,
or until his or her death, or until he or she shall have resigned or shall have
been removed or disqualified in the manner hereinafter provided.
5.3. RESIGNATION. Any officer may resign at any time by giving written
notice of his resignation to the Board of Directors or to the Chairman of the
Board of the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon receipt by the Board of Directors or
Chairman of the Board. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
5.4. REMOVAL. Any officer may be removed, either with or without cause,
at any time, by action of the Board of Directors or the Chairman of the Board.
5.5. CHAIRMAN OF THE BOARD. If the Board of Directors designates a
Chairman of the Board, he shall preside at all meetings of the stockholders and
of the Board of Directors. Unless the Board of Directors designates otherwise,
the Chairman shall be the Chief Executive Officer of the Corporation. He may
sign certificates for shares of stock of the Corporation, any deeds, mortgages,
bonds, contracts or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these By-
Laws to some other officer or agent of the Corporation, or shall be required by
law to be otherwise signed or executed. The Chairman of the Board shall, in
general, perform all duties incident to the office of chairman of the board and
such other duties as may be set forth in the By-Laws or may be prescribed by the
Board of Directors from time to time.
5.6. PRESIDENT. The President shall perform all duties instant to the
office of President and such other duties as may from time to time be assigned
to him or her by the Board of Directors or the Chairman of the Board. At the
request of the Chairman of the Board or in his or her absence, or in the event
of the Chairman of the Board's inability or refusal to act, the President shall
perform the duties of the Chairman of the Board, and, when so acting, shall have
the powers of and be subject to the restrictions placed upon the Chairman of the
Board in respect of the performance of such duties, unless the Board of
Directors otherwise designates.
5.7. CHIEF EXECUTIVE OFFICER. If the Board appoints a Chief Executive
Officer, he or she shall have direct charge of the business of the Corporation,
subject to the general control of the Board of Directors, and shall be the chief
executive officer of the Corporation unless otherwise determined by the Board of
Directors. The Chief Executive Officer shall have direct charge of the daily
operational aspects of the Corporation's business, unless otherwise determined
by the Board of Directors, and shall have such other duties as may be assigned
to him or her from time to time by the Board of Directors or its Chairman.
5.8. VICE-PRESIDENT. Each Vice President shall perform all such duties as
from time to time may be assigned to him or her by the Board of Directors, the
Chairman of the Board, the President or the Chief Executive Officer. At the
request of the President, or in
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the absence of the President, or in the event of his or her inability or refusal
to act, the Vice-President (or, in the event there be more than one Vice-
President, the Vice-Presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election), shall perform all the duties of the President and, when so acting,
shall have the power of and be subject to the restrictions placed on the
President in respect of the performance of such duties.
5.9. TREASURER. The Treasurer shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation; deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such banks, trust
companies and other depositories as shall be designated by the Board of
Directors or pursuant to its direction; and, in general, perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him or her by the Chairman of the Board, the President, the
Chief Executive Officer or the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall supervise the investments of
the Corporation's funds. The Treasurer shall render to the President and to the
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all transactions as Treasurer and of the financial
condition of the Corporation.
5.10. SECRETARY. The Secretary shall (a) attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record and
keep, or cause to be recorded and kept, the minutes of the corporate meetings in
one or more books provided for that purpose, and shall perform like duties for
the standing committees when required; (b) see that all notices are duly given
in accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal, if any, of the Corporation;
(d) keep a register of the mailing address of each stockholder; (e) sign with
the Chairman of the Board, President or Vice-President certificates for shares
of stock of the Corporation; (f) have general charge of the stock transfer books
of the Corporation; and (g) in general, perform all duties as from time to time
may be assigned to him or her by the Chairman of the Board, the President, the
Chief Executive Officer or the Board of Directors.
5.11 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there shall be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as from time to time
may be assigned by the Board of Directors.
5.12 ASSISTANT SECRETARY. The Assistant Secretary, or if there shall be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there shall be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties
-11-
<PAGE>
and exercise the powers of the Secretary and shall perform such other duties as
from time to time may be assigned by the Board of Directors.
5.13. POWERS AND DUTIES. In the absence of any officer of the
Corporation, or for any other reason the Board of Directors may deem sufficient,
the Board of Directors may delegate for the time being, the powers or duties of
such officer, or any of them, to any other officer or to any director. The
Board of Directors may from time to time delegate to any officer authority to
appoint and remove subordinate officers and to prescribe their authority and
duties.
5.14 OFFICERS' BOND OR OTHER SECURITY. If required by the Board of
Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of such officer's duties, in such amount and with
such surety as the Board of Directors may require.
5.15. COMPENSATION. The compensation of the officers shall be fixed from
time to time by the Board of Directors. Nothing contained herein shall preclude
any officer from serving the Corporation in any other capacity, including that
of director, or from serving any of its stockholders, subsidiaries or affiliated
corporations in any capacity, and receiving proper compensation therefor.
ARTICLE 6
CERTIFICATES OF STOCK
---------------------
6.1. STOCK CERTIFICATES. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by, the Chairman of the Board, the President or a Vice-President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares of stock owned by the holder
in the Corporation. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the designations,
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 shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in Section 202 of the General Corporation Law of the State of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each stockholder who so requests the designations, 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.
6.2 FACSIMILE SIGNATURES. Where a certificate of stock is countersigned
(a) by a transfer agent other than the Corporation or its employee, (b) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case
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<PAGE>
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue.
6.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
6.4 TRANSFER OF STOCK. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its records;
provided, however, that the Corporation shall be entitled to recognize and
enforce any lawful restriction on transfer. Whenever any transfer of stock
shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of transfer if, when the certificates are presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
6.5 TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint,
or authorize any officer or officers to appoint, one or more transfer agents and
one or more registrars.
6.6 REGULATIONS. The Board of Directors may make such additional rules
and regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
6.7. FIXING THE RECORD DATE . In order that the Corporation may determine
the holders of stock of the Corporation entitled to notice of or to vote at any
meeting of stockholders or any adjournments thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board of Directors
may fix a record date which shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date, as applicable, shall
not be more than sixty nor less than ten days before the date of the meeting of
stockholders, nor more than sixty days prior to any other action. If no record
date is fixed, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders, or entitled to the benefit of any
such other action, shall be determined pursuant to Section 203 of the General
Corporation Law of the State of Delaware. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any
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<PAGE>
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
6.8. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares of stock to receive dividends and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares of stock, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
ARTICLE 7
GENERAL PROVISIONS
------------------
7.1 AUDITS. The accounts, books and records of the Corporation shall be
audited upon the conclusion of each fiscal year by an independent certified
public accountant selected by the Board of Directors, and it shall be the duty
of the Board of Directors to cause such audit to be done annually.
7.2 BOOKS AND RECORDS. The books and records of the Corporation may be
kept outside the State of Delaware at such place or places as may from time to
time be designated by the Board of Directors.
7.3 CHECKS, NOTES, DRAFTS, ETC.. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
7.4 DIVIDENDS. Subject to the provisions of statute and the Certificate
of Incorporation, dividends upon the shares of capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of stock of the
Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
7.5 EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all contracts,
deeds, bonds, mortgages and other obligations or instruments, and such authority
may be general or confined to specific instances.
7.6 FISCAL YEAR. The Board of Directors of the Corporation shall have the
power to fix, and from time to time change, the fiscal year of the Corporation.
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<PAGE>
7.7 RESERVES. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Board of Directors may, from time to time, in its absolute discretion, determine
to be proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors may deem to be conducive to the
interests of the Corporation. The Board of Directors may modify or abolish any
such reserve in the manner in which it was created.
7.8 SEAL. The seal of the Corporation shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
7.9 VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board or the
President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes which the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation, any of whose shares of
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one or more
attorneys or agents are appointed, the Chairman of the Board or the President
may instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President may,
or may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation or under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the circumstances.
ARTICLE 8
AMENDMENTS
----------
These By-Laws may be amended or repealed or new by-laws adopted as provided
by the Certificate of Incorporation.
The foregoing By-Laws are a true and correct
copy of the By-Laws, as amended, as of June
13, 1996.
--------------------------------------------
J. Timothy Wesley, Secretary
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<PAGE>
Exhibit 10.1
ATRIA COMMUNITIES, INC.
FORM OF
REGISTRATION RIGHTS AGREEMENT
___________, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Certain Definitions.................................................... 1
1.1 Affiliates........................................................ 1
1.2 Common Shares..................................................... 1
1.3 Person............................................................ 1
1.4 Register; Registered; Registration................................ 2
1.5 Registrable Shares................................................ 2
1.6 Registration Expenses............................................. 2
1.7 Rule 144.......................................................... 2
1.8 Securities Act.................................................... 2
1.9 Selling Expenses.................................................. 2
2. Transferability........................................................ 2
2.1 Restrictions on Transferability................................... 2
2.2 Restrictive Legend................................................ 2
2.3 Notice of Proposed Transfers...................................... 3
3. Registration Rights.................................................... 3
3.1 Requested Registration............................................ 3
3.2 Atria Registration................................................ 6
3.3 Holdback Agreement................................................ 7
3.4 Expenses of Registration.......................................... 7
3.5 Registration Procedures........................................... 8
3.6 Indemnification................................................... 9
3.7 Information by Vencor............................................. 11
3.8 Rule 144 Reporting................................................ 11
3.9 Termination of Atria's Obligations................................ 12
4. No Transfer of Registration Rights..................................... 12
5. Dispute Resolution..................................................... 12
6. Miscellaneous.......................................................... 12
6.1 Governing Law..................................................... 12
6.2 Counsel........................................................... 12
6.3 Delays or Omissions............................................... 12
6.4 Entire Agreement.................................................. 12
6.5 Binding Effect.................................................... 13
6.6 Notices........................................................... 13
6.7 Headings.......................................................... 13
6.8 Counterparts...................................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.9 Severability of Provisions....................................... 14
6.10 Exhibits......................................................... 14
6.11 Number; Gender................................................... 14
6.12 Amendment........................................................ 14
</TABLE>
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into
this ____ day of ____, 1996, by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria"), and VENCOR, INC., a Delaware corporation ("Vencor").
RECITALS:
--------
A. Pursuant to the terms of that certain Incorporation Agreement dated
June __, 1996, Atria issued ______________ shares of its Common Stock, $.10 par
value per share, to Vencor and certain Affiliates (defined in Section 11) of
Vencor.
B. Atria has filed a Registration Statement of Form S-1 with the
Securities and Exchange Commission (the "Commission") in connection with the
initial public offering of its Common Shares (the "IPO").
C. Atria and Vencor desire to set forth in a single agreement the
registration rights to be granted to Vencor incident to Vencor's and its
Affiliates acquiring the Common Shares.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1 AFFILIATES. "Affiliates" shall mean, with respect to Vencor, any
other person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, Vencor,
including, without limitation, any subsidiary of Vencor. With respect to any
other specified person herein, Affiliate shall mean any other person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or under common control with, such specified person.
1.2 COMMON SHARES. "Common Shares" shall mean the shares of Atria's
Common Stock issued to Vencor and its Affiliates pursuant to the Incorporation
Agreement.
1.3 PERSON. "Person" shall mean any individual, partnership,
corporation, trust or other entity.
1.4 REGISTER; REGISTERED; REGISTRATION. "Register," "registered" and
"registration" shall refer to a registration effected by preparing and filing a
registration
<PAGE>
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement by the Commission.
1.5 REGISTRABLE SHARES. "Registrable Shares" shall mean (i) the
Common Shares, and (ii) all shares of Atria's Common Stock issued as a dividend
on, or other distribution with respect to, or in exchange or in replacement of,
the Common Shares, excluding in all cases, however (including exclusion from the
calculation of the number of outstanding Registrable Shares), any Registrable
Shares sold or otherwise disposed of by Vencor or any of its Affiliates (except
any sale, distribution or other distribution by such Affiliates to Vencor),
including, without limitation, any sale or other disposition in a registration
pursuant to this Agreement or in any transaction pursuant to Rule 144 (as
defined herein).
1.6 REGISTRATION EXPENSES. "Registration Expenses" shall mean all
expenses incurred by Atria in complying with Sections 3.1 and 3.2, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for Atria, blue sky fees and expenses, and the
expense of any special consents, advice or similar audit services of independent
auditors incident to or required by any such registration (but excluding the
compensation of regular employees of Atria which shall be paid in any event by
Atria).
1.7 RULE 144. "Rule 144" shall mean 17 CFR (S) 230.144 as
promulgated by the Commission pursuant to the Securities Act.
1.8 SECURITIES ACT. The "Securities Act" shall mean the Securities
Act of 1933, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
1.9 SELLING EXPENSES. "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of shares of Atria's
Common Stock, including Registrable Shares, in any sale pursuant to a
Registration by Atria pursuant to this Agreement.
2. TRANSFERABILITY.
2.1 RESTRICTIONS ON TRANSFERABILITY. The Common Shares shall not be
transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act, or, in the case of Section 3.8 hereof, to assist in an orderly
distribution.
2.2 RESTRICTIVE LEGEND. Each certificate representing the Common
Shares or securities issued in respect of the Common Shares, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
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<PAGE>
AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES ARE "RESTRICTED SECURITIES" AS DEFINED IN THE
RULE 144 PROMULGATED UNDER THE ACT AND MAY NOT BE SOLD OR OFFERED
FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, (ii) IN COMPLIANCE WITH RULE 144
AND AN EXEMPTION UNDER APPLICABLE STATE SECURITIES LAWS, OR (iii)
PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION
THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SUCH
SALE, OFFER OR DISTRIBUTION.
2.3 NOTICE OF PROPOSED TRANSFERS. Prior to any proposed transfer of
any Common Shares, unless there is an effective registration statement under the
Securities Act covering the proposed transfer, Vencor shall give written notice
to Atria of its intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall be accompanied (except that the requirements set forth in the
balance of this sentence need not be complied with where the proposed
transaction complies with Rule 144 so long as Atria is furnished with evidence
of compliance with such rule) by either (i) an unqualified written opinion of
legal counsel which shall be reasonably satisfactory to Atria addressed to
Atria's counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration of the Securities Act, (ii) a
"no action" letter from the Commission to the effect that the distribution of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, or (iii) such
other showing that may be reasonably satisfactory to legal counsel to Atria,
whereupon Vencor shall be entitled to transfer such Restricted Securities in
accordance with the terms of a notice delivered to Atria. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 2.2., except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for Atria such legend is not required in order to establish compliance with any
provisions of the Securities Act or applicable state securities laws.
3. REGISTRATION RIGHTS.
3.1 REQUESTED REGISTRATION.
a. GRANT OF REGISTRATION RIGHTS. If Vencor shall, at any time
and from time to time, request Atria in writing to register under the Securities
Act any Registrable Shares, Atria shall use its reasonable best efforts to cause
the prompt registration of all Registrable Shares specified in such request, and
in connection therewith shall prepare and file on such appropriate form as
Atria, in its reasonable discretion, shall determine, a registration statement
under the Securities Act to effect such registration (including, without
limitation, the execution of an undertaking to file post-effective amendments,
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<PAGE>
appropriate qualification under applicable Blue Sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act).
b. CONDITION TO EXERCISE OF REQUESTED REGISTRATION RIGHTS.
Notwithstanding anything in Section 3.1 to the contrary, Atria shall not be
obligated to effect any such registration, or take other specified actions with
respect to, or cooperate in any offering of, Registrable Shares upon the request
of Vencor pursuant to Section 3.1:
i. in any particular jurisdiction in which Atria would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless Atria is already subject to
service in such jurisdiction and except as may be required by the Securities
Act;
ii. within 180 days immediately following the effective
date of the registration statement pertaining to the IPO of Atria;
iii. after Atria has effected four registrations pursuant to
this Section 3.1 that have been declared or ordered effective; or
iv. if the number of Registrable Shares included in
Vencor's request are fewer than 1,000,000 Registrable Shares, or the aggregate
value (as defined herein) of the Registrable Shares included in Vencor's request
is less than $15,000,000. For purposes hereof, the term "value" shall mean, as
applicable, (a) the average of the closing bid prices for the Common Stock of
Atria as listed on the NASDAQ system or such other system on which the Common
Stock of Atria is traded for the five trading days immediately preceding the
date of Vencor's request, or (b) the average of the closing prices listed for
the Common Stock of Atria on the exchange on which the Common Stock of Atria is
listed for the five trading days immediately preceding the date of Vencor's
request.
c. WRITTEN NOTICE. Any requests by Vencor for registration of
Registrable Shares pursuant to Section 3.1 shall (i) specify the number of
Registrable Shares which it intends to offer and sell, (ii) express the
intention of Vencor to offer or cause the offering of such Registrable Shares,
(iii) describe the nature or method of the proposed offer and sale thereof, (iv)
contain the undertaking of Vencor to provide all such information regarding its
holdings and the proposed manner of distribution thereof as may be required (A)
to permit Atria to comply with all applicable laws and regulations, all
requirements of the Commission and any other regulatory or self-regulatory body,
any other body having jurisdiction, and any securities exchange on which the
Registrable Shares are to be listed, and (B) to obtain acceleration of the
effective date of any registration statement filed in connection therewith, and
(v) in the case of an underwritten public offering, specify the managing
underwriter or underwriters of such Registrable Shares, which shall be selected
by Atria.
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<PAGE>
d. DELAY OF REGISTRATION. If at the time of the request to
register the Registrable Shares Atria notifies Vencor, within five days of
Vencor's request, that Atria is engaged or has fixed plans to engage within 30
days of the time of the request in an underwritten public offering of securities
for Atria's own account and Atria determines in good faith that such offering
would be materially adversely affected by the registration so requested, Atria
may delay filing a registration statement and may withhold efforts to cause the
registration statement to become effective; provided, however, that Atria shall
only be entitled to postpone for a reasonable period of time, not to exceed 90
days, the filing of any registration statement otherwise required to be prepared
and filed by Atria pursuant to Section 3.1. In addition, notwithstanding
anything herein to the contrary, Atria may delay filing a registration statement
and may withhold efforts to cause the registration statement to become
effective, if Atria determines in good faith that such registration might (i)
interfere with or affect the negotiation or completion of any transaction that
is being contemplated by Atria at the time the right to delay is exercised, or
(ii) involve initial or continuing disclosure obligations that might not be in
the best interests of Atria stockholders. If, after a registration statement
becomes effective, Atria advises Vencor that Atria considers it appropriate for
the registration statement to be amended, Vencor shall suspend any further sales
of its registered shares until Atria advises it that the registration statement
has been amended. The 270 day time period referred to in Section 3.5, during
which the registration statement must be kept current after its effective date,
shall be extended for an additional number of days equal to the number of days
during which the right to sell registered shares was suspended pursuant to the
preceding sentence, but in no event will Atria be required to update the
registration statement subsequent to 545 days after the effective date of the
registration statement.
e. UNDERWRITING. If Vencor intends to distribute the
Registrable Shares, which are covered by its request for registration pursuant
to Section 3.1, by means of an underwriting, Vencor shall so advise Atria as a
part of its request. Atria shall, together with Vencor, enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Atria. Notwithstanding any other provision of
this Section 3.1.e., if the managing underwriter or underwriters determine that
the underwriting would be materially adversely affected by inclusion in such
underwriting of all of the Registrable Shares requested by Vencor and so advises
Vencor in writing, then Vencor shall reduce accordingly the number of
Registrable Shares that will be included in the registration and underwriting.
No Registrable Shares excluded from the underwriting by reason of the managing
underwriter's or underwriters' marketing or other limitations shall be included
in such registration. Should Vencor disapprove of the terms of the
underwriting, Vencor may elect to withdraw therefrom by written notice to Atria
and the managing underwriter or underwriters.
If the managing underwriter or underwriters have not limited the number of
Registrable Shares to be underwritten, Atria may include securities for its own
account in such registration if the managing underwriter or underwriters so
agree and if the number of Registrable Shares which would otherwise have been
included in such registration and underwriting will not thereby be limited.
-5-
<PAGE>
3.2 ATRIA REGISTRATION.
a. GRANT OF PIGGYBACK REGISTRATION RIGHT. If Atria shall, at
any time and from time to time, propose to register any of its Common Shares for
its own account, in connection with an underwritten public offering of Common
Shares solely for cash (other than a registration statement filed on Form S-4 or
any other form filed in connection with any acquisition, merger, consolidation
or stock exchange, a registration statement filed solely in connection with
director or employee benefit plans of Atria, or Atria's IPO) Atria shall:
i. give 10 days advance written notice of the proposed
registration (which shall include a list of the jurisdictions in which Atria
intends to attempt to qualify such Common Shares under the applicable Blue Sky
or other state securities laws); and
ii. include in such registration (and any related
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Shares specified in a written request
or requests by Vencor, made within 10 days after receipt of such written notice
from Atria.
Notwithstanding anything herein to the contrary, Atria may at any time
prior to the effectiveness of any such registration statement, in its sole
discretion and without the consent of Vencor, abandon the proposed registration
in which Vencor had requested to participate.
b. UNDERWRITING. If the registration of which Atria gives
notices is for a registered public offering involving an underwriting, Atria
shall so advise Vencor as a part of the written notice given pursuant to Section
3.2.a.i. In such event the right of Vencor to register its Registrable Shares
pursuant to Section 3.2 shall be conditioned upon Vencor's participation in such
underwriting and the inclusion of Vencor's Registrable Shares in the
underwriting to the extent provided herein. Vencor shall (together with Atria
and any other stockholders (hereinafter, the "Additional Selling Stockholders")
proposing to offer and sell their shares of Atria Common Stock through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Atria.
Notwithstanding any other provision of this Section 3.2, if the managing
underwriter or underwriters determine that such offering would be materially
adversely affected by inclusion in such underwriting of all of the Registrable
Shares requested by Vencor, the managing underwriter or underwriters may exclude
a portion of such Registrable Shares from such registration and underwriting.
Atria shall so advise Vencor of the managing underwriter's or underwriters'
determination to exclude a portion of the Registrable Shares from such
registration and underwriting within five days after Vencor delivers its request
pursuant to Section 3.2.b., and the number of shares of Common Stock of Atria
that may be included in the registration and underwriting shall be allocated
among Vencor and the Additional Selling Stockholders in proportion, as nearly as
practicable, to the respective amounts of shares of Common Stock of Atria owned
by Vencor and each of the Additional Selling Stockholders at the time of filing
the registration statement. No Registrable Shares excluded from the underwriting
by reason of the managing underwriter's underwriters' determination shall be
included in
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<PAGE>
such registration. If Vencor disapproves of the terms of any such underwriting,
Vencor may elect to withdraw therefrom all or a portion of the Registrable
Shares included in its request for registration by written notice to Atria and
the managing underwriter or underwriters, and the Registrable Shares so
withdrawn from the underwriting shall also be withdrawn from such registration.
If, however, one or more Additional Selling Stockholders withdraw shares of
Common Stock from the underwriting and registration, and by virtue of such
withdrawal of such shares and Vencor's withdrawal of Registrable Shares from
such registration, a greater number of shares of Common Stock may be included in
such registration (up to the maximum of any limitation imposed by the managing
underwriter or underwriters), then Atria shall offer to Vencor and the
Additional Selling Stockholders who have elected to include their shares of
Common Stock in the registration the right to include additional shares of
Common Stock, as applicable, in the registration in the same proportions as were
used above in determining the underwriter limitation.
3.3 HOLDBACK AGREEMENT. Vencor agrees, that upon request of Atria or
the managing underwriter or underwriters in any underwritten offering of any
such Registrable Shares, not to make or cause any offering, sale or other
disposition, directly or indirectly, of any Common Shares (or any other
securities of Atria) without the prior approval of the underwriters for such
period of time (not to exceed 180 days) from the effective date of such
registration as may be requested by Atria or the managing underwriter or
underwriters. In addition, Vencor agrees, that upon request of Atria or the
managing underwriter or underwriters in any underwritten offering and
registration of shares of Common Stock (or other securities of Atria) in which
Vencor (having been given notice and the opportunity as required by Section 3.2)
declines to participate, not to make or cause any offering, sale or other
disposition, directly or indirectly, of any Common Shares (or other securities
of Atria) held by it (other than any such Common Shares sold or otherwise
disposed of pursuant to a previously registered and underwritten offering)
without the prior approval of the managing underwriter or underwriters (but not
to exceed a period of time from the effective date of such registration as the
managing underwriter or underwriters shall have requested of all "affiliates"
(as defined in Rule 144) of Atria).
3.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with two registrations under Section 3.1 and all registrations under
Section 3.2 shall be borne by Atria. All Registration Expenses incurred in
connection with registrations under Section 3.1 that are subsequent to the
second such registration shall be borne by Vencor. All Selling Expenses
incurred in connection with any underwritten registration under Sections 3.1
shall be borne exclusively by Vencor unless Atria, pursuant to Section 3.1.e.,
includes shares of Common Stock for its own account in such registration, in
which event the Selling Expenses incurred in connection with such underwritten
registration shall be borne by Vencor and Atria pro rata on the basis of the
number of shares of Common Stock registered by each of Vencor and Atria. All
Selling Expenses incurred in connection with any registration under Section 3.2
shall be borne by Vencor and each Additional Selling Stockholder that
participates in the registration, pro rata on the basis of the number of shares
of Common Stock registered by each of Vencor and the Additional Selling
Stockholders. Vencor shall pay the fees and expenses of its legal counsel, but
if and only to the extent that such legal counsel is in addition to counsel as
may be retained to
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represent both parties in connection with any registration or other matter
relating to this Agreement.
3.5 REGISTRATION PROCEDURES. In each registration effected by
Atria pursuant to this Section 3, Atria will keep Vencor advised in writing as
to the initiation of each such registration and as to the completion thereof. At
its expense, Atria will:
i. keep such registration effective for a period of 270
days or until Vencor has completed the distribution described in the
Registration Statement relating thereto, whichever first occurs; provided,
however, the 270 day time period shall be extended for an additional number of
business days equal to the number of business days during which the right to
sell registered shares was suspended or delayed by Atria pursuant to Section
3.1.d., or Section 3.3 of this Agreement, but in no event will Atria be required
to update the registration statement subsequent to 545 days after the effective
date of the registration statement;
ii. prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
iii. furnish to Vencor such numbers of copies of a
prospectus, including a preliminary prospectus, that conforms to the
requirements of the Securities Act, the registration statement, and such other
documents (including any exhibits thereto or documents referred to therein) as
Vencor may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by it;
iv. use its reasonable best efforts to register and
qualify the Registrable Shares covered by such registration statement under such
other securities or state securities laws of such jurisdictions as shall be
reasonably requested by Vencor; provided, that Atria shall not be required in
connection therewith or as a condition thereto to qualify to do business,
subject itself to taxation, or to file a general consent to service of process
in any such states or jurisdictions;
v. in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter or underwriter of such
offering; provided, that the form of underwriting agreement must be reasonably
acceptable to Atria and Vencor with respect to secondary distributions. Vencor
shall also enter into and perform its obligations under such an agreement;
vi. at the closing, furnish unlegended certificates
representing ownership of the Registrable Shares being sold in such
denominations as Vencor or the managing underwriter or underwriters shall
request;
vii. instruct the transfer agent and registrar to release
any stop transfer order with respect to the Registrable Shares being sold;
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<PAGE>
viii. promptly notify Vencor of the happening of any event
as a result of which any registration statement or any preliminary prospectus or
the prospectus included in such registration statement, as then in effect, or
any other offering document, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and prepare and furnish to Vencor as many copies of a supplement to or
an amendment of such offering document which shall correct such untrue statement
or eliminate such omission, as Vencor shall request; and
ix. take such actions and execute and deliver such other
documents as may be necessary to give full effect to the rights of Vencor under
this Agreement.
3.6 INDEMNIFICATION.
a. ATRIA INDEMNITY. In the case of each registration
contemplated by this Agreement, Atria will indemnify Vencor, each of its
officers and directors, each underwriter and each person who controls any
underwriter, and each person, if any, who controls Vencor or any such
underwriter within the meaning of Section 15 of the Securities Act, and each
person affiliated with or retained by Vencor and who may be subject to liability
under any applicable securities laws, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, to which they
may become subject under the Securities Act or other federal or state law,
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other similar document (including any related
registration statement, notification or the like) incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, or (ii) any violation by Atria of any federal, state or common law made or
regulation applicable to Atria in connection with any such registration,
qualification or compliance, and will reimburse Vencor, each of its officers and
directors, the underwriter, and each person controlling Vencor, for any legal
and any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, as incurred;
provided, that Atria will not be liable, and shall have no indemnification
obligation hereunder, in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission, made in reliance on and in conformity with written information
furnished to Atria by an instrument duly executed by Vencor, and stated to be
specifically for use therein.
b. INDEMNITY BY VENCOR. Vencor will, if Registrable Shares
held by Vencor are included in the securities as to which such registration is
being effected, indemnify Atria, each of its officers and directors, each
underwriter and each person who controls any underwriter, and each person, if
any, who controls Atria or any such underwriter within the meaning of Section 15
of the Securities Act, and each person affiliated with or retained by Atria and
who may be subject to liability under any applica-
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<PAGE>
ble securities laws, against all claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to which they may become
subject under the Securities Act or other federal or state law, arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other similar document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and will reimburse Atria, such directors, officers, persons,
underwriters or control persons, for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to Atria by an instrument duly
executed by Vencor and stated to be specifically for use therein.
c. PROCEDURE FOR INDEMNIFICATION.
i. The party seeking indemnification ("Indemnitee") shall
promptly (within 20 days if a third party has commenced actual litigation
against the Indemnitee) give notice to the party from which indemnification is
sought ("Indemnitor") after the Indemnitee has knowledge of any claim against
the Indemnitor as to which recovery may be sought against the Indemnitee
pursuant to this Section 3.6, or of the commencement of any legal proceedings
against the Indemnitee as to such claim after the Indemnitee has knowledge of
such proceedings, whichever shall first occur, and shall permit the Indemnitor,
at the Indemnitor's cost, to assume the defense of any such claim or any
litigation resulting from such claim; provided, Indemnitee shall have the right
to consent to the counsel selected by Indemnitor to defend any such claim (which
consent shall not be unreasonably withheld by Indemnitee). Such notice shall
specify in reasonable detail the facts known to the Indemnitee giving rise to
such indemnification rights and, if possible, an estimate of the amount of
liability which could result therefrom. The right of the Indemnitee to
indemnification hereunder shall be deemed agreed to unless, within ten days
after the receipt of such notice, the Indemnitee is notified in writing by the
Indemnitor that it disputes the right to indemnification as set forth in such
notice. Failure by the Indemnitor to notify the Indemnitee of the Indemnitor's
election to defend such action within ten days after notice thereof shall have
been given to the Indemnitor, or notification to the Indemnitee by the
Indemnitor that the Indemnitee's right to indemnification is being disputed,
shall be deemed a waiver by the Indemnitor of its right to defend such action.
If the Indemnitee shall be so notified of such dispute of such right to
indemnification, the dispute resolution procedures of Section 8 of the
Incorporation Agreement shall apply. The failure of the Indemnitee to give
notice as provided herein shall relieve the Indemnitor of its obligations under
this Section 3.6.c. only to the extent that such failure to give notice shall
materially adversely prejudice the Indemnitor in the defense of any such claim
or any such litigation, but in no event shall such failure relieve the
Indemnitor from any other liability which the Indemnitor may then have or may
subsequently have to the Indemnitee. The Indemnitor shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of any
judgment (except with the consent of the Indemnitee)
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or enter into any settlement (except with the consent of the Indemnitee) which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnitee of a release from all liability in respect of
such claim or litigation.
ii. If the Indemnitor shall not assume the defense of any
such claim or litigation resulting therefrom, the Indemnitee may defend against
such claim or litigation in such manner as it may deem appropriate. The
Indemnitee may settle such claim or litigation on such terms as it may deem
appropriate and the Indemnitor shall promptly reimburse the Indemnitee for the
amount of such settlement, and all expenses, legal or otherwise, incurred by the
Indemnitee in connection with the defense against, or settlement of, such claim
or litigation. If no settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for the amount of any
judgment rendered with respect to such claim or in such litigation, and of all
expenses, legal or otherwise, incurred by the Indemnitee in the defense against
such claim or litigation. Notwithstanding the foregoing, if the Indemnitor has
disputed the Indemnitee's right to indemnification in accordance with the
provisions of Section 3.6.c.i., the Indemnitor shall not be obligated to pay the
Indemnitee the amounts provided for in this Section 3.6.c.ii. until such dispute
has been resolved and it has been determined that the Indemnitor is required to
make such indemnification.
3.7 INFORMATION BY VENCOR. Vencor shall furnish to Atria such
information regarding Vencor and, as necessary, its Affiliates and the
distribution proposed by Vencor as Atria may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 3.7.
3.8 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of Atria, Atria agrees
to:
a. use its reasonable best efforts to facilitate the sale of
the Restricted Securities to the public, without registration under the
Securities Act, pursuant to Rule 144, provided that this shall not require Atria
to file reports under the Securities Act and the Securities and Exchange Act of
1934, as amended ("Exchange Act") at anytime prior to Atria's being otherwise
required to file such reports;
b. make and keep public information available, as those terms
are understood and defined in Rule 144 at all times after 90 days after the
effective date of the first registration under the Securities Act filed by Atria
for an offering of its securities to the general public;
c. use its reasonable best efforts to then file with the
Commission in a timely manner all reports and other documents required of Atria
under the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements);
d. so long as Vencor owns any Restricted Securities to furnish
to Vencor forthwith upon request a written statement by Atria as to the
compliance with the
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reporting requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by Atria for an
offering of its securities to the general public), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of Atria,
and such other reports and documents so filed by Atria as Vencor may reasonably
request in availing itself of any rule or regulation of the Commission allowing
Vencor to sell any such securities without registration.
3.9 TERMINATION OF ATRIA'S OBLIGATIONS. The obligation of Atria to
register the Registrable Shares pursuant to Section 3.1 or 3.2 of this Agreement
shall expire on the earlier of (i) the date when Vencor ceases beneficially to
own any Registrable Shares, or (ii) the date which is the fifth anniversary of
the date the registration statement for the IPO is declared effective by the
Commission.
4. NO TRANSFER OF REGISTRATION RIGHTS. The registration rights granted
under Sections 3.1 and 3.2 of this Agreement may not be assigned or otherwise
conveyed by Vencor.
5. DISPUTE RESOLUTION. If any dispute arises between Vencor and Atria
with respect to their rights or obligations under the terms of this Agreement,
Vencor and Atria agree to follow the dispute resolution procedure set forth in
Section 8 of the Incorporation Agreement.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Kentucky.
6.2 COUNSEL. Atria shall select and employ legal counsel to
represent the parties in the registration of shares of Common Stock under this
Agreement. If, in the judgment of Vencor, it would be appropriate to do so,
Vencor may select counsel to represent it in connection with the registration.
Vencor shall be solely responsible for the fees and expenses of any separate
counsel so selected, and Atria shall have no responsibility or liability
whatsoever with respect thereto.
6.3 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to Vencor, upon any breach or default by Atria under
this Agreement, shall impair any such right, power or remedy of Vencor nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereunder occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of Vencor or any breach
or default under this Agreement, or any waiver on the part of Vencor of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies,
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either under this Agreement, or by law or otherwise afforded to Vencor, shall be
cumulative and not alternative.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements, correspondence, arrangements and
understandings relating to the subject matter hereof.
6.5 BINDING EFFECT. All of the terms, provisions and conditions hereof
shall be binding upon and shall inure to the benefit of and be enforceable by
the parties hereto, and their respective heirs, personal representatives,
successors and assigns. Nothing in this Agreement shall entitle any person to
any claim, cause of action, remedy or right of any kind.
6.6 NOTICES. All notices and other communications required or
permitted hereunder shall be sufficiently given if in writing and personally
delivered against a written receipt, if delivered to a reputable express
messenger service (such as Federal Express, UPS or DHL Carrier) for overnight
delivery, when transmitted by confirmed telephone facsimile (fax) or sent by
registered, express or certified U.S. mail, postage prepaid, addressed as
follows:
To Atria: Atria Communities, Inc.
515 W. Market Street
Louisville, Kentucky 40202
Attention: W. Patrick Mulloy, II, President
and Chief Executive Officer
If to Vencor: Vencor, Inc.
3300 Providian Center
500 W. Market Street
Louisville, Kentucky 40202
Attention: Jill L. Force, Esq., Vice
President and General Counsel
or to such other address as either party hereto shall furnish to the other in
writing. Notices shall be deemed given when personally delivered, when delivered
to an express messenger service, when transmitted by confirmed fax or when
deposited in the U.S. mail in accordance with the foregoing provisions. However,
the time period in which a response to any such notice, demand or request must
be given shall commence to run from the date of personal delivery, the date of
delivery by a reputable messenger service, the date on the confirmation of a
fax, or the date on the return receipt, as applicable.
6.7 HEADINGS. The headings in this Agreement are included for purposes
of convenience only and shall not be considered a part of the Agreement in
construing or interpreting any provision hereof.
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6.8 COUNTERPARTS. This Agreement may be executed in counterparts and
each such executed counterpart shall be deemed an original instrument. It shall
not be necessary in making proof of this Agreement or the terms of this
Agreement to produce or account for more than one of such counterparts.
6.9 SEVERABILITY OF PROVISIONS. If any provision of this Agreement or
the application thereof to any person or entity or circumstance shall to any
extent be held in any proceeding to be invalid or unenforceable, the remainder
of this Agreement, or the application of such provision to persons or entities
or circumstances other than those to which it was held to be invalid or
unenforceable, shall not be affected thereby, and shall be valid and enforceable
to the fullest extent permitted by law, but only if and to the extent such
enforcement would not materially and adversely frustrate the parties' essential
objectives as expressed herein.
6.10 EXHIBITS. All Exhibits to this Agreement shall be deemed to be
incorporated herein by reference and made a part hereof as if set out in full
herein.
6.11 NUMBER; GENDER. Unless the context clearly states otherwise, the
use of the singular or plural in this Agreement shall include the other and the
use of any gender shall include all others.
6.12 AMENDMENT. This Agreement may be amended, modified, superseded,
or canceled only by a written instrument signed by all of the parties hereto and
any of the terms, provisions and conditions hereof may be waived, only by a
written instrument signed by the waiving party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ATRIA COMMUNITIES, INC.
By:
---------------------------------------
W. Patrick Mulloy, II, President and
Chief Executive Officer
VENCOR, INC.
By:
---------------------------------------
Title:
------------------------------------
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Exhibit 10.2
FORM OF
INCORPORATION AGREEMENT
-----------------------
THIS INCORPORATION AGREEMENT ("AGREEMENT") is made and entered into as of
the _____ day of June, 1996 by and among (i) ATRIA COMMUNITIES, INC., a Delaware
corporation ("CORPORATION"), (ii) VENCOR, INC., a Delaware corporation
("VENCOR"), (iii) FIRST HEALTHCARE CORPORATION, a Delaware corporation ("FHC"),
(iv) NATIONWIDE CARE, INC., an Indiana corporation ("NATIONWIDE"), and (v) NEW
POND VILLAGE ASSOCIATES, a Massachusetts general partnership ("NEW POND").
RECITALS:
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A. The Corporation is a newly formed corporation formed for the purpose
of acquiring substantially all of the assisted living and independent living
communities of Vencor and its affiliates ("DIVISION").
B. The parties desire to convey the Division to the Corporation in
connection with an initial public offering of shares of the Corporation's common
stock, par value $.10 per share ("COMMON STOCK").
C. The parties desire to enter into this Agreement to set forth their
understanding with respect to the manner in which the Corporation will acquire
the Division in exchange for shares of Common Stock and the assumption of
certain liabilities related thereto.
AGREEMENT:
- ---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. TRANSFER OF RETIREMENT HOUSING DIVISION. As part of a single plan, on
the Closing Date (as hereinafter defined) Vencor, FHC, Nationwide and New Pond
(collectively, the "TRANSFERORS") will convey the assets referred to below,
which constitute substantially all of the assets of the Division, to the
Corporation in connection with the Corporation's initial public offering, in
consideration for the issuance by the Corporation of its Common Stock to the
Transferors as provided in Section 3, and the assumption by the Corporation of
the liabilities associated with the Division referred to in Section 4, all in a
transaction designed to meet the requirements of section 351(a) of the Internal
Revenue Code of 1986, as amended ("CODE"). Such transfers shall be as follows:
(a) Vencor shall do the following:
(i) Transfer to the Corporation a 98% limited partner interest in
Lantana Partners Limited Partnership, a Florida limited partnership.
<PAGE>
(ii) Transfer to the Corporation 2,000 shares of Common Stock of
Phillippe Enterprises, Inc., an Indiana corporation, being all of the issued and
outstanding shares of Phillippe Enterprises, Inc.
(iii) Cancel, and cause all of its affiliated entities to cancel,
all intercompany receivables of such entities which relate to the Division,
except for a $14 million receivable of Vencor. On the Closing Date, the
entity(s) indebted to Vencor shall execute a promissory note in favor of Vencor
in such amount, such note to bear interest at the London InterBank Offered Rate
(LIBOR) plus .75 percentage points and shall be payable six months from the
Closing Date.
(b) FHC shall transfer to the Corporation the following:
(i) 1,000 shares of Common Stock of Hillhaven Properties, Ltd.,
an Oregon corporation ("HPL"), being all of the issued and outstanding shares of
HPL.
(ii) A 98% general partner interest in Castle Gardens Retirement
Center Partnership, a Colorado general partnership ("CASTLE GARDENS").
(iii) A 68.6% limited partner interest in Hillcrest Retirement
Center, Ltd., an Oregon limited partnership ("HILLCREST RETIREMENT").
(iv) A 98% limited partner interest in Sandy Retirement Center
Limited Partnership, an Oregon limited partnership ("SANDY RETIREMENT").
(v) A 10% limited partner interest in Topeka Retirement Center,
Ltd., a Missouri limited partnership ("TOPEKA RETIREMENT").
(vi) A 99% limited partner interest in Twenty-Nine Hundred
Associates Limited Partnership, a Florida limited partnership ("TWENTY-NINE
HUNDRED").
(vii) All of the real property and personal property which
constitutes the Valley Manor Retirement Apartments in Tucson, Arizona ("VALLEY
MANOR").
(viii) All of the real property and personal property which
constitutes the Villa Ventura Retirement in Kansas City, Missouri ("VILLA
VENTURA").
(ix) All of the real property and personal property which
constitutes The Greens in Hanover, New Hampshire ("THE GREENS").
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(x) All of the real property and personal property which
constitutes McMillan Center in Newark, Ohio ("MCMILLAN CENTER").
(xi) All of the real property more particularly described in
Exhibit A attached hereto and made a part hereof ("REAL PROPERTY").
(c) Nationwide shall transfer to the Corporation the following:
(i) A 99% general partner interest in Evergreen Woods, Ltd., a
Florida limited partnership ("EVERGREEN WOODS").
(ii) All of the real property and personal property which
constitutes the Heritage at Wildwood in Wildwood, Indiana.
(iii) All of its right, title and interest in and to that
certain Management Agreement dated September 1, 1989 between Nationwide
Management, Inc. and Wesleyan Retirement Center, Inc. with respect to Colonial
Oaks in Marion, Indiana ("MANAGEMENT AGREEMENT").
(iv) $4,500,000.
(d) New Pond shall do the following:
(i) Transfer to the Corporation $9,500,000.
(ii) Transfer to the Corporation all of the assets constituting
New Pond Retirement Center ("NEW POND CENTER") other than those assets which are
secured by that certain Mortgage and Trust Indenture by and between New Pond and
First National Bank of Boston, as Trustee, dated November 1, 1990, Securing
Resident Mortgage Bonds (New Pond Village Project) Series A ("NEW POND
MORTGAGE").
(iii) Enter into a Lease with the Corporation in the form of
Exhibit B attached hereto and made a part hereof pursuant to which New Pond
leases to the Corporation all of the assets secured by the New Pond Mortgage.
2. OTHER TRANSFERS.
---------------
(a) In addition to the transfers provided for in Section 1(b), FHC
shall transfer to HPL the following:
(i) A 1% limited partner interest in Evergreen Woods.
(ii) All of the real property and personal property which
constitutes Villa Campana Retirement in Tucson, Arizona ("VILLA CAMPANA").
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(b) FHC, shall cause the following to occur:
(i) HPL to transfer to Nationwide the following:
(A) A 2% general partner interest in St. George Nursing Home
Limited Partnership, an Oregon limited partnership.
(B) A 1% general partner interest in Stockton Healthcare
Center Limited Partnership, an Oregon limited partnership.
(C) A 1% general partner interest in Hillhaven Indiana
Partnership, an Indiana general partnership.
(D) A 1% general partner interest in Hillhaven/Westfield
Partnership, a Washington general partnership.
(E) A 1% general partner interest in New Pond.
(ii) HPL to transfer to FHC the real property located in Tulsa,
Oklahoma more particularly described in Exhibit C attached hereto and made a
part hereof.
(iii) Evergreen Woods to transfer all of the assets and
liabilities relating to the skilled nursing home facility owned by it to
to Nationwide.
3. ISSUANCE OF COMMON STOCK. In consideration of the transfer of the
assets by the Transferors provided for in Secton 1 he Closing Date the
Corporation shall issue an aggregate of 9,909,900 shares of its Common Stock to
the Transferors, such shares to be allocated among them as they shall agree on
or before the Closing Date. All such shares of Common Stock shall be fully
paid and nonassessable.
4. ASSUMPTION OF LIABILITIES. In part consideration for the transfer
of the assets by the Trnsferors to the Corporation as provided for in Sction
1,on the Closing Date the Corporation will enter inot approprate assumption
agreements with each of the Transferors with respect to the following:
(a) With respect to Vencor, any and all liabilities which Vencor may
have had as a partner of Lantana.
(b) With respect to FHC, all of FHC's liabilities with respect to the
following:
(i) All of its liability as a partner of Castle Gardens,
Hillcrest Retirement, Sandy Retirement, Topeka
4
<PAGE>
Retirement, Twenty-Nine Hundred, San Marcos, Evergreen Woods and New Pond.
(ii) All of its liabilities and obligations with respect to
Valley Manor, Villa Ventura, The Greens, McMillan Center and Villa Campana.
(iii) All of its liabilities and obligations with respect to the
Real Property.
(c) With respect to Nationwide, the following:
(i) All of its liabilities as a partner of Evergreen Woods.
(ii) All of its liabilities and obligations with respect to
Heritage at Wildwood.
(iii) All of its liabilities and obligations with respect to the
Management Agreement.
(d) With respect to New Pond, all of its liabilities and obligations
with respect to New Pond Center.
The liabilities and obligations to be assumed by the Corporation pursuant to the
provisions of this Section 4 shall include all of the liabilities referred to
therein, whether or not reflected on the books and records of the Transferor or
the entity whose ownership is being transferred, and whether known or unknown,
accrued or unaccrued, absolute, contingent or otherwise.
5. CLOSING DATE. The closing of the transactions contemplated by this
Agreement shall occur on the day immediately following the day that all of the
conditions precedent of the Transferors and the Corporation have been met or
waived by the party entitled to the benefit thereof, but in all events no later
than the date the Registration Statement with respect to the Corporation's
initial public offering becomes effective.
6. REPRESENTATIONS AND WARRANTIES.
(a) Each of the Transferors hereby represent to Atria with respect to
themselves as follows:
(i) It is a corporation or partnership, as applicable, duly
organized and validly existing.
(ii) It has the full corporate or partnership power and
authority, as applicable, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
(iii) This Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms.
5
<PAGE>
(iv) It owns the stock and partnership interests to be
transferred by it to the Corporation pursuant to the terms of this Agreement
free and clear of all liens and encumbrances, other than restrictions contained
in the partnership agreement with respect to a particular partnership.
(v) All of the partnerships whose interests are to be
transferred pursuant to terms of this Agreement are duly organized and validly
existing.
Except as specifically warranted in this Section 6 (a), the Transferors make no
representations and warranties to the Corporation whatsoever regarding the
assets transferred, or the assets of the entities whose ownership is being
transferred, including, but not limited to, the warranty of merchantability or
fitness for a particular use, which is specifically disclaimed. The Corporation
acknowledges that all of the assets to be conveyed by the Transferors to the
Corporation will be conveyed "as is, where is."
(b) The Corporation hereby represents, warrants and covenants with
and to the Transferors as follows:
(i) The Corporation is a corporation duly organized and
validly existing.
(ii) The Corporation has the full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(iii) This Agreement constitutes the valid and legally binding
obligation of the Corporation, enforceable in accordance with its terms.
(iv) The Common Stock to be issued by the Corporation to the
Transferors pursuant to the terms of this Agreement will be duly authorized,
fully paid and nonassessable.
(v) As of the Closing Date, the Corporation will have 100
shares of Common Stock issued and outstanding, all of which will be owned by
Vencor.
(vi) The Corporation will not take any action which would cause
the transfers provided for in Section 1 not to qualify for tax-free treatment
under section 351 of the Code.
(vii) On the Closing Date, it will hire all of the employees of
the Transferors associated with the Division transferred.
(c) All of the representations and warranties provided for in this
Section 6 shall survive the Closing Date and the delivery of the closing
documents on the Closing Date.
6
<PAGE>
7. CONDITIONS PRECEDENT.
(a) The obligation of the Transferors to consummate the transactions
contemplated hereby is subject to the satisfaction of the following conditions
(any of which may be waived by the Transferors in writing):
(i) All the terms, covenants and conditions of this Agreement
to be complied with and performed by the Corporation on or before the Closing
Date shall have been fully complied with and performed in all respects.
(ii) All the representations and warranties made by the
Corporation herein shall be true and correct in all respects on and as of the
Closing Date.
(iii) All consents required for the valid and effective transfer
of the assets to be transferred in accordance with Sections 1 and 2 shall have
been obtained and the consent to the assumption by the Corporation of the debts
to be assumed by the Corporation pursuant to Section 4 shall have been
obtained.
(iv) There shall be no pending or threatened litigation against
any of the parties hereto concerning or relating to the transactions
contemplated hereby.
(v) The approval of all administrative agencies, if any, whose
approval of the transactions contemplated hereby is necessary or desirable shall
have been obtained.
(vi) The Corporation and Vencor shall have entered into a
Registration Rights Agreement in the form of Exhibit D attached hereto and made
a part hereof.
(b) The obligation of the Corporation to consummate the transactions
contemplated hereby is subject to the satisfaction of the following conditions
(any of which may be waived by the Corporation in writing):
(i) All the terms, covenants and conditions of this Agreement
to be complied with and performed by the Transferors on or before the Closing
Date shall have been fully complied with and performed in all respects.
(ii) All the representations and warranties made by the
Transferors herein shall be true and correct in all respects on and as of the
Closing Date.
(iii) All required consents necessary for the valid and
effective transfer of the assets to be transferred to the Corporation in
accordance with the provisions of Section 1 shall have been obtained.
(iv) The Corporation shall have obtained title insurance (or
endorsed commitment) insuring that all the real property to be transferred to
the Corporation pursuant to
7
<PAGE>
the provisions of Section 1, and all real property owned by the entities
interests in which are to be transferred to the Corporation in accordance with
Section 1, are vested in the Corporation or such entities, respectively, free
and clear of all mortgages, liens and encumbrances except those reasonably
acceptable to the Corporation.
(v) The conditions referred to in Sections 7(a) (iv) and 7 (a)
(v) shall have been complied with.
(vi) Vencor and the Corporation shall have entered into a Tax
Sharing Agreement substantially in the form of Exhibit E attached hereto and
made a part hereof.
(vii) The Corporation and Vencor shall have entered into an
Administrative Services Agreement substantially in the form of Exhibit F
attached hereto and made a part hereof.
8. DISPUTE RESOLUTION.
(a) In the event that any dispute arises among the parties with
respect to their rights and obligations under the terms of this Agreement or any
agreement entered into as a result of this Agreement ("DISPUTE"), the parties
agree that the provisions of this Section 8 shall be their sole and exclusive
remedy. The parties shall first attempt to settle such Dispute by having senior
management or other mutually agreed upon representatives of the parties address
the issue. Such shall occur within 20 days of the giving of notice by a party
that a Dispute exists and that such party desires the Dispute to be resolved by
senior management in accordance with the provisions of this Section 8(a).
(b) If the above referred to parties are unable to resolve the
Dispute within 60 days of the giving of the notice referred to in Section 8 (a),
then either of the parties shall have the right to submit the Dispute to
mediation. Such mediation shall be conducted in accordance with the Center for
Public Resources Model Procedure for Mediation of Business Disputes. If
mediation proves unsuccessful in resolving the Dispute within 60 days of the
initiation of the mediation procedure, then either party may require that the
Dispute be resolved by binding arbitration if the Dispute involves less than $5
million. If the parties disagree as to whether the Dispute involves less than $5
million, such issue may be resolved by binding arbitration. All arbitrations
provided for herein shall be conducted under the commercial rules of the
American Arbitration Association using a single arbitrator mutually agreed to by
the parties or, if the parties cannot agree on the arbitrator, then the
arbitrator shall be selected by the American Arbitration Association. It is
intended that the arbitrator actively manage the arbitration with a view to
achieving a just, speedy and cost effective resolution of the Dispute. Except as
provided in Section 8 (d), the decision of the arbitrator shall be final and
binding upon the parties and the prevailing party in
8
<PAGE>
such arbitration shall be entitled to a judgment on such award in any court of
competent jurisdiction. The parties hereby acknowledge that except as provided
in Section 8(d), this provision constitutes a waiver of their right to commence
a lawsuit with respect to any Dispute.
(c) Any party involved in the arbitration may request limited
document production from the other party or parties of specific and expressly
relevant documents, with the reasonable expenses of the producing party incurred
in such production paid by the requesting party. Any such discovery (which
rights to documents shall be substantially less than document discovery rights
prevailing under the Federal Rules of Civil Procedure) shall be conducted
expeditiously and shall not cause the arbitration hearing to be adjourned except
upon consent of all parties involved in the arbitration or upon an extraordinary
showing of cause demonstrating that such adjournment is necessary to permit
discovery essential to a party to the proceeding. Depositions, interrogatories
or other forms of discovery (other than the document production set forth above)
shall not occur except by consent of all of the parties to the arbitration.
Disputes concerning the scope of document production and enforcement of the
document production requests will be determined by written agreement of the
parties involved or, failing such agreement, will be referred to the arbitrator
for resolution. All discovery requests will be subject to the parties' rights to
claim any applicable privilege. The arbitrator will adopt procedures to protect
the proprietary rights of the parties and to maintain the confidential treatment
of the arbitration proceedings (except as may be required by law). Subject to
the foregoing, the arbitrator shall have the power to issue subpoenas to compel
the production of documents relevant to the Dispute.
(d) Notwithstanding the provisions of Section 8(b), if any
arbitration award, exclusive of interest, exceeds $10 million, then such award
shall not be final and binding upon the parties unless the party in whose favor
the award was rendered agrees to accept $10 million in full settlement within 15
days after the rendering of the decision by the arbitrator. If the party in
whose favor the award was rendered does not so agree within such 15-day period,
then the party against which such award was rendered shall have a period of 60
days following the end of the 15-day period referred to above in which to
commence a legal proceeding in a court of competent jurisdiction with respect to
the Dispute which was the subject of such arbitration award. If no legal
proceedings are commenced within such 60 day period, then the arbitration award
shall become final and binding upon the parties.
(e) Each party shall bear its own attorneys' fees and other costs and
expenses involved in resolving a Dispute. The costs of mediation and arbitration
shall be borne equally by the parties to the mediation or arbitration.
9
<PAGE>
9. INDEMNIFICATION
(a) Each Transferor hereby agrees to indemnify the Corporation for,
and to hold the Corporation harmless from the following:
(i) Any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty or nonfulfillment of any agreement or
covenant on the part of that Transferor, whether contained in this Agreement or
in any document furnished in connection with the transactions contemplated
hereby; and
(ii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to the foregoing, including
attorney's fees.
(b) The Corporation hereby agrees to indemnify each Transferor for,
and to hold each Transferor harmless from, the following:
(i) Any and all liabilities and obligations assumed, or to be
assumed, by the Corporation in accordance with the terms hereof;
(ii) Any and all damages or deficiencies resulting from any
misrepresentations, breach of any warranty or nonfulfillment of any agreement or
covenant on the part of the Corporation, whether contained in this Agreement or
in any document furnished in connection with the transactions contemplated
hereby; and
(iii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to any of the foregoing,
including attorneys' fees.
(c) The party seeking indemnification ("INDEMNITEE") shall promptly
(within 20 days if a third party has commenced actual litigation against the
Indemnitee) give notice to the party from which indemnification is sought
("INDEMNITOR") after the Indemnitee has knowledge of any claim against the
Indemnitor as to which recovery may be sought against the Indemnitee pursuant to
this Section 9, or of the commencement of any legal proceedings against the
Indemnitee as to such claim after the Indemnitee has knowledge of such
proceedings, whichever shall first occur, and shall permit the Indemnitor to
assume the defense of any such claim or any litigation resulting from such
claim. Such notice shall specify in reasonable detail the facts known to the
Indemnitee giving rise to such indemnification rights and, if possible, an
estimate of the amount of liability which could result therefrom. The right of
the Indemnitee to indemnification hereunder shall be deemed agreed to unless,
within ten days after the receipt of such notice, the Indemnitee is notified in
writing by the Indemnitor that it disputes the right to indemnification as set
forth in such notice. Failure by the Indemnitor to notify the Indemnitee of the
Indemnitor's
10
<PAGE>
election to defend such action within ten days after notice thereof shall have
been given to the Indemnitor, or notification to the Indemnitee by the
Indemnitor that the Indemnitee's right to indemnification is being disputed,
shall be deemed a waiver by the Indemnitor of its right to defend such action.
If the Indemnitee shall be so notified of such dispute of such right to
indemnification, the dispute resolution procedures of Section 8 shall apply. The
Indemnitor shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment (except with the consent of the
Indemnitee) or enter into any settlement (except with the consent of the
Indemnitee) which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnitee of a release from all
liability in respect of such claim or litigation.
(d) If the Indemnitor shall not assume the defense of any such claim
or litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem appropriate. The Indemnitee may
settle such claim or litigation on such terms as it may deem appropriate and the
Indemnitor shall promptly reimburse the Indemnitee for the amount of such
settlement, and all expenses, legal or otherwise, incurred by the Indemnitee in
connection with the defense against, or settlement of, such claim or litigation.
If no settlement of such claim or litigation is made, the Indemnitor shall
promptly reimburse the Indemnitee for the amount of any judgment rendered with
respect to such claim or in such litigation, and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense against such claim or
litigation. Notwithstanding the foregoing, if the Indemnitor has disputed the
Indemnitee's right to indemnification in accordance with the provisions of
Section 9(c), the Indemnitor shall not be obligated to pay the Indemnitee the
amount provided for in this Section 9(d) until such dispute has been resolved
and it has been determined that the Indemnitor is required to make such
indemnification.
10. MISCELLANEOUS.
(a) Each of the Transferors hereby covenants and agrees that
subsequent to the Closing Date they will, at any time, and from time to time,
upon the request and at the expense of the Corporation, do, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may reasonably be required to fully effectuate the transfers
contemplated in Section 1. Each of the Transferors hereby constitutes and
appoints the Corporation as its true and lawful attorney-in-fact, with full
power of substitution, to collect for the account of the Corporation any
receivables and other items conveyed to the Corporation pursuant to the
provisions of Section 1, to endorse in the name of the Transferor or the
Corporation, or both, any check received on account of any receivable, claim or
other item, to institute and
11
<PAGE>
prosecute in the name of a Transferor or otherwise, any and all proceedings
which the Corporation may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in and to any of such transferred assets.
(b) All notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and be personally delivered
against a written receipt, delivered to a reputable messenger service (such as
Federal Express, DHL Courier, United Parcel Service, etc.) for overnight
delivery, transmitted by confirmed telephonic facsimile (fax) or transmitted by
mail, registered, express or certified, return receipt requested, postage
prepaid, addressed as follows:
If to Vencor: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Fax: (502) 596-1104
Attention: Chief Financial Officer
If to Atria: 515 West Market Street
Louiville Kentucky 40202
Fax: (502) 596-4160
Attention: Chief Financial Officer
All notices, demands and requests shall be effective upon being properly
personally delivered, upon being delivered to a reputable messenger service,
upon transmission of a confirmed fax, or upon being deposited in the United
States mail in the manner provided in this Section 13. However, the time period
in which a response to any such notice, demand or request must be given shall
commence to run from the date of personal delivery, the date of delivery by a
reputable messenger service, the date on the confirmation of a fax, or the date
on the return receipt, as applicable. If any party refuses delivery, the notice,
demand or request shall be deemed received two days after the notice, demand or
request was delivered to a reputable messenger service or deposited in the
United States mail.
(c) This Agreement may be modified or amended from time to time only
by a written instrument executed by all of the parties hereto.
(d) Captions contained in this Agreement are inserted only as a matter
of convenience and reference, and in no way define, limit, extend or describe
the scope of this Agreement, or the intent of any provision hereof. All
references to Sections herein shall refer to Sections of this Agreement unless
the context clearly requires otherwise .
(e) This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns.
12
<PAGE>
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Kentucky without regard to its conflicts
of laws rule.
(g) This Agreement represents the entire agreement of the parties
hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
CORPORATION:
ATRIA COMMUNITIES, INC.
By:___________________
Title:________________
TRANSFERORS:
VENCOR, INC.
By:____________________
Title:_________________
13
<PAGE>
FIRST HEALTHCARE CORPORATION
By:
---------------------------
Title:
------------------------
NATIONWIDE CARE, INC.
By:
---------------------------
Title:
------------------------
NEW POND VILLAGE ASSOCIATES
By: First Healthcare
Corporation, General Partner
By:
---------------------------
Title:
--------------------------
14
<PAGE>
Exhibit 10.3
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is made and entered
into as of the _____ day of __________, 1996, by and between ATRIA COMMUNITIES,
INC., a Delaware corporation ("Atria"), and VENCOR, INC., a Delaware corporation
("Vencor").
RECITALS:
--------
A. Atria is a newly-formed corporation formed for the purpose of acquiring
substantially all of the assisted and independent living communities of Vencor
(the "Communities").
B. The parties will convey the Communities to Atria in connection with an
initial public offering of shares of Atria's common stock (the "Common Stock").
C. Atria desires to receive certain services from Vencor to smooth the
transition of Atria from being a wholly-owned subsidiary of Vencor to being a
separate company.
D. The parties desire to enter into this Agreement to set forth their
understanding with respect to such services which shall be provided by Vencor to
Atria in exchange for cash.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Services. Vencor shall provide those services set forth in Exhibit 1 to
this Agreement to Atria. Atria and Vencor may agree to increase or decrease the
number of additional services, if necessary; provided, that, such arrangement is
made in writing and executed by both Atria and Vencor. The amount of time that
Atria will receive for each such services from Vencor is set forth in Exhibit 1
as full-time equivalents ("FTEs"). If Atria needs more than the amount of FTE's
set forth in Exhibit 1, Atria and Vencor will negotiate in good faith a
modification to this Agreement. Notwithstanding the provisions of this Section,
Vencor shall not be required to make available any such services to the extent
that doing so would unreasonably interfere with the performance by any employee
of such employee's duties for such employee's employer or otherwise cause
unreasonable burden to such employee's employer.
2. Payments. Atria shall pay $54,577.08 to Vencor for each month of
services to be rendered in the next month by Vencor to Atria on the first of
each month. For any
<PAGE>
period for which such services would be provided to Atria on less than a full-
month basis, Atria shall pay the appropriate pro rata amount to Vencor.
3. Representations and Warranties.
a. Vencor hereby represents to Atria with respect to itself that:
(1) it is a corporation duly organized and validly existing;
(2) it has the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby;
(3) this Agreement constitutes a valid and legally binding
obligation, enforceable with its terms.
b. Atria hereby represents and warrants to Vencor as follows:
(1) Atria is a corporation duly organized and validly existing;
(2) Atria has the full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby;
(3) this Agreement constitutes a valid and legally binding
obligation of Atria, enforceable in accordance with its terms.
4. Term. The Term of this Agreement shall be for one year from the date of
this Agreement; provided, however, that Atria shall have the right to terminate
this Agreement upon thirty (30) days' written notice to Vencor at any time.
Thirty (30) days prior to the expiration of this Agreement, Atria may give
written notice to Vencor that this Agreement shall be extended for an additional
one year period; provided, however, that, Atria or Vencor may give sixty (60)
days' written notice to the other terminating this Agreement at any time during
such second year period of this Agreement.
5. Miscellaneous.
a. This Agreement may be modified or amended from time to time only by
a written instrument executed by the parties hereto.
b. Captions contained in this Agreement are inserted only as a matter
of convenience and reference, and in no way define, limit, extend or describe
the scope of this Agreement, or the intent of any provision hereof. All
references to sections herein shall refer to sections of this Agreement unless
the context clearly requires otherwise.
c. This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns.
<PAGE>
d. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Kentucky, without regard to its conflicts
of law rule.
e. This Agreement embodies the entire understanding between the
parties hereto with respect to subject matters covered hereby and supersedes any
prior agreement or understanding between the parties with respect to such
matters.
f. This Agreement may be executed in multiple counterpart copies, each
of which shall be considered an original and all of which shall constitute one
and the same instrument.
g. This Agreement is not assignable.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ATRIA COMMUNITIES, INC.
A Delaware Corporation
By: __________________________________
Title: _______________________________
VENCOR, INC.
A Delaware Corporation
By: ___________________________________
Title: ________________________________
<PAGE>
EXHIBIT 1
SERVICES TO BE PROVIDED BY VENCOR TO ATRIA
------------------------------------------
<TABLE>
<CAPTION>
Full Time Avg. Comp.
Services Equivalents and Benefits 1996 Estimate
- -------- ----------- ------------- -------------
<S> <C> <C> <C>
Staff Accounting 2.00 $48,000 $ 96,000
Accounts Payable 0.50 30,000 15,000
Payroll 0.25 30,000 7,500
H/R and Benefits 0.50 60,000 30,000
Risk Management/Insurance 0.25 84,000 21,000
Tax 1.00 78,000 78,000
Legal 0.50 96,000 48,000
SEC Reporting 0.25 84,000 21,000
Treasury Support 0.50 84,000 42,000
Market Planning 1.25 60,000 75,000
MIS Personnel 0.50 72,000 36,000
Other:
MIS System 100,000
----- ------- -------
Total before overhead
and Profit 5.00 $ 4,400 $569,500
Overhead and Profit (@15%) 85,425
---- ------- --------
Total Cost 7.50 $62,600 $654,925
==== ======= ========
</TABLE>
<PAGE>
Exhibit 10.4
FORM OF TAX SHARING AGREEMENT
-----------------------------
THIS TAX SHARING AGREEMENT ("AGREEMENT") is made and entered into as of the
____ day of ____________, 1996 by and between (i) VENCOR, INC., a Delaware
corporation ("VENCOR"), and (ii) ATRIA COMMUNITIES, INC., a Delaware corporation
("ATRIA").
RECITALS:
A. On the date hereof, Vencor and its subsidiaries have transferred to
Atria the assisted living division of Vencor ("DIVISION") in connection with an
initial public offering of common stock of Atria.
B. On the date that Atria consummates the sale of its common stock in the
initial public offering ("CLOSING DATE"), Atria and its subsidiaries
(hereinafter referred to as the "ATRIA GROUP") will not continue to be included
in Vencor's consolidated income tax returns.
C. The parties desire to set forth certain agreements they have reached
with respect to certain Federal, state and local tax liabilities.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual agreements
provided for herein, the parties hereto hereby agree as follows:
1. MANNER OF PREPARING RETURNS. All tax returns to be filed after the
Closing Date shall, in the absence of a change in law or other authority, be
prepared on a basis consistent with the elections, accounting methods,
conventions and principals of taxation used for the most recent taxable periods
for which tax returns involving that precise item have been filed; provided,
however, that (i) either party may take an inconsistent position with that
previously taken to the extent that such position does not create an increase in
tax to the other party and (ii) either party may take an inconsistent position
which increases the tax of the other party if at the time of taking such
inconsistent position it pays to the other party the increase in tax (without
interest) which will result to the other party as a result of the inconsistent
position.
2. UNFILED TAX RETURNS.
(a) In filing all income tax returns for the taxable year beginning in
1996, each party will file all such returns in a manner which is consistent with
the position that the last day on which any member of the Atria Group is
included in Vencor's
<PAGE>
affiliated group was the day immediately preceding the Closing Date.
(b) All consolidated Federal income tax returns which are required to
be filed for periods beginning before the Closing Date shall be prepared and
filed by Vencor.
(c) Atria shall supply Vencor on or before December 15, 1996, with
true and correct Federal income tax returns of each member of the Atria Group
for the taxable year ended May 31, 1996, computed as though a consolidated
income tax return was not filed for such period. Such Federal income tax
returns shall be made solely by reference to Atria and each of its subsidiary's
items of income, deduction and credit for the taxable year then ended,
notwithstanding that any such item may require a different treatment or
limitation on a consolidated Federal income tax return. Within 60 days of
receipt of the Federal income tax returns for such taxable year referred to
above, Vencor shall advise Atria, in writing, of any changes, modifications,
additions or deletions which Vencor believes appropriate in order to properly
reflect the separate income tax liability of any member of the Atria Group in
accordance with the provisions of this Section 2(c). In the event that Atria
does not agree with any of the changes, modifications, additions or deletions
made by Vencor, and Vencor and Atria are unable to resolve their differences,
then the issue shall be submitted to the firm of certified public accountants
then regularly serving Vencor whose decision shall be final, binding and
conclusive upon the parties.
(d) Atria shall supply Vencor on or before July 15, 1997 with true and
correct Federal income tax returns of each member of the Atria Group for the
period beginning on June 1, 1996 and ending on the day immediately preceding the
Closing Date ("STUB PERIOD"), computed in the same manner as provided in Section
2(c) with respect to the income tax returns for the taxable year ended May 31,
1996. The balance of the provisions of Section 2(c) shall apply equally to the
tax returns Atria is required to deliver to Vencor with respect to the Stub
Period.
(e) At the time that Atria delivers to Vencor the Federal income tax
returns referred to in Sections 2(c) and 2(d), Atria shall pay to Vencor an
amount equal to the excess, if any, (i) the net Federal income tax which the
Atria Group would have had to pay to the Internal Revenue Service based upon
such Federal income tax returns, over (ii) the amount of all payments or
intercompany charges previously made by, or charged to, the Atria Group with
respect to Federal income tax for the applicable period. If Vencor disagrees
with the Federal income tax returns provided to it by Atria in accordance with
the provisions of Sections 2(c) and 2(d) and (i) the adjustment made by Vencor
increases the Federal income tax liability which should have been reflected on
such Federal income tax returns, then within ten
2
<PAGE>
days after any such adjustment (or portion thereof) is agreed to by the parties
or determined by Vencor's firm of certified public accountants, as applicable,
Atria shall pay such additional tax to Vencor, or (ii) the adjustment made by
Vencor decreases the Federal income tax liability which should have been
reflected on such Federal income tax returns, then within ten days after any
such adjustment (or portion thereof) is agreed to by the parties or determined
by Vencor's firm of certified public accountants, as applicable, Vencor shall
pay to Atria an amount equal to the reduced tax liability. If the amount
referred to in (ii) above exceeds the amount referred to in (i) above, then
within ten days following the date on which the Federal income tax liability of
the Atria Group for the applicable period is agreed to by Vencor and Atria (or
determined by Vencor's certified public accountants, if applicable), Vencor
shall pay to Atria such excess.
(f) With respect to the Stub Period, if any of the income of the Atria
Group is from a partnership in which a member of the Atria Group is a partner
and such income is included in Vencor's income for financial reporting purposes,
but is not properly includible in the consolidated Federal income tax return of
Vencor or a member of Vencor's affiliated group after the Closing Date ("VENCOR
GROUP") for the Stub Period, then on or before July 15, 1997, Vencor shall pay
to Atria an amount equal to the Federal income tax attributable to the
partnership income included by Vencor for financial reporting purposes.
(g) With respect to the Stub Period, if the Atria Group has a loss
from a partnership in which a member of the Atria Group is a partner and such
loss is included in Vencor's income for financial reporting purposes, but is not
properly includible in the consolidated Federal income tax return of the Vencor
Group for the Stub Period, then on or before July 15, 1997, Atria shall pay to
Vencor an amount equal to the Federal income tax benefit to Vencor attributable
to the partnership loss included by Vencor for financial reporting purposes.
(h) If the Federal income tax returns delivered by Atria to Vencor
pursuant to the provisions of Sections 2(c) or 2(d) indicate a net loss, Vencor
shall pay to Atria, within 60 days of the receipt of such tax returns, an amount
equal to the excess, if any, of (i) the refund which Vencor and its affiliated
group will be entitled to receive based upon such Federal income tax returns
over (ii) the amount of all payments or intercompany credits previously made to,
or credited to, the Atria Group with respect to Federal income tax for the
applicable period; plus the amount, if any, of all payments or intercompany
charges previously made by, or charged to, the Atria Group with respect to
Federal income tax for the applicable period. If Vencor disagrees with the
Federal income tax returns provided to it by Atria in accordance with the
provisions of Sections 2(c) or 2(d)
3
<PAGE>
and the adjustment made by Vencor reduces the refund or creates a Federal
income tax liability which should have been reflected on such Federal income tax
returns, then within ten days after such adjustment (or portion thereof) is
agreed to by the parties or determined by Vencor's firm of certified public
accountants, as applicable, the appropriate party shall make payment to the
other. If the amount referred to in (ii) above exceeds the amount referred to
in (i) above, then within ten days following the date on which the Federal
income tax liability of the Atria Group for the applicable period is agreed to
by Vencor and Atria (or determined by Vencor's certified public accountants, if
applicable), Atria shall pay to Vencor such excess.
(i) All state and local income tax returns which include both a member
of the Vencor Group and a member of the Atria Group that are required to be
filed for any period beginning before the Closing Date shall be prepared and
filed by Vencor. The provisions of Sections 2(c) through 2(h), inclusive, shall
apply with respect to all such state and local income tax returns.
(j) All Federal, state and local tax returns with respect to taxes
which are not measured by income which are due after the Closing Date shall be
prepared, filed and paid by the member of the Vencor Group or Atria Group which
would be responsible for the payment of the taxes if such companies were at all
times unrelated to each other.
(k) All Federal income tax returns for periods beginning subsequent to
the Closing Date shall be prepared by Vencor with respect to the Vencor Group
and by Atria with respect to the Atria Group.
3. AUDIT ADJUSTMENTS.
(a) If as a result of an audit of an income tax return of the Vencor
Group or any member thereof an adjustment is made by a tax regulatory authority
which relates to the Division, results in additional tax payable by the Vencor
Group and results in a Temporary Difference (as hereinafter defined) in Vencor's
opinion, Vencor shall give prompt notice thereof to Atria setting forth in
detail the adjustment and whether Vencor intends to challenge the adjustment.
Upon the adjustment becoming final (within the meaning of Section 5(d)), if the
adjustment results in a Temporary Difference, Atria shall be required to pay to
Vencor the additional tax (without interest) which Vencor is required to pay as
a result of the adjustment. Such payment shall be made within ten days of the
later of (i) the date the adjustment becomes final or (ii) a determination that
the adjustment results in a Temporary Difference.
4
<PAGE>
(b) If as a result of an audit of an income tax return of the Vencor
Group or any member thereof an adjustment is made by a tax regulatory authority
or pursuant to an amended return or refund claim which relates to the Division
and results in a decrease in the tax payable by the Vencor Group and might
conceivably result in a Temporary Difference, Vencor shall give prompt notice
thereof to Atria setting forth in detail the adjustment and its opinion as to
whether the adjustment results in a Permanent Difference (as hereinafter
defined) or a Temporary Difference. Upon the adjustment becoming final, or the
amended return or refund claim being accepted, as applicable, (i) if the
adjustment results in a Permanent Difference, no payment shall be made to Atria
and (ii) if the adjustment results in a Temporary Difference, Vencor shall be
required to pay to Atria an amount equal to the decrease in tax (without
interest) resulting from the adjustment. Such payment shall be made within ten
days of the later of (i) the date the adjustment becomes final or the amended
return or refund claim is accepted, as applicable, or (ii) a determination that
the adjustment results in a Temporary Difference.
(c) If as a result of an audit of an income tax return of the Atria
Group or any member thereof an adjustment is made by a tax regulatory authority
which results in additional tax payable by the Atria Group and which results in
a Temporary Difference in Atria's opinion, Atria shall give prompt notice
thereof to Vencor setting forth in detail the adjustment and whether Atria
intends to challenge the adjustment. Upon the adjustment becoming final, Vencor
shall be required to pay to Atria the additional tax (without interest) which
Atria is required to pay as a result of the adjustment. Such payment shall be
made within ten days of the later of (i) the date the adjustment becomes final
or (ii) a determination that the adjustment results in a Temporary Difference.
(d) If as a result of an audit of an income tax return of the Atria
Group or any member thereof an adjustment is made by a tax regulatory authority
or pursuant to an amended return or refund claim which results in a decrease in
the tax payable by the Atria Group and which might conceivably result in a
Temporary Difference, Atria shall give prompt notice thereof to Vencor setting
forth in detail the adjustment and its opinion as to whether the adjustment
results in a Permanent Difference or a Temporary Difference. Upon the
adjustment becoming final, or the amended return or refund claim being accepted,
as applicable, (i) if the adjustment results in a Permanent Difference, no
payment shall be made to Vencor and (ii) if the adjustment results in a
Temporary Difference, Atria shall be required to pay to Vencor an amount equal
to the decrease in tax (without interest) resulting from the adjustment. Such
payment shall be made within ten days of the later of (i) the date the
adjustment becomes final or the amended return or refund claim is accepted, as
applicable, or
5
<PAGE>
(ii) a determination that the adjustment results in a Temporary Difference.
(e) In the case of an adjustment to a tax return or liability not
measured by income which relates to the Division, Atria shall have the sole
right to contest such adjustment (at its own cost and expense) and shall be
responsible for, or receive the benefit of, any change in tax, interest or
penalty that may result therefrom.
(f) For purposes of this Agreement, the following shall apply:
(i) The term "TEMPORARY DIFFERENCE" shall mean a tax detriment
or tax benefit to the Atria Group or Vencor Group relating to a tax item in one
taxable period which creates or results in a corresponding tax benefit or tax
detriment to the Vencor Group or Atria Group, respectively, in a different tax
period for which the statute of limitations has not expired (or for which
mitigation provisions are applicable), and for which no valuation allowance is
required to be established, interpreted in accordance with generally accepted
accounting principles.
(ii) The term "PERMANENT DIFFERENCE" means a tax detriment or tax
benefit to the Atria Group or Vencor Group which does not create or result in a
corresponding tax benefit or tax detriment to the Vencor Group or Atria Group,
respectively, in a different tax period for which the statute of limitations has
not expired (or for which mitigation provisions are applicable), and for which a
valuation allowance is required to be established, interpreted in accordance
with generally accepted accounting principles.
If Vencor and Atria disagree as to whether there is a Temporary Difference or
Permanent Difference, then the party which would be required to make a payment
to the other if there were a Temporary Difference shall refer the issue to the
firm of certified public accountants then regularly serving that party. Each
party shall be entitled to submit oral and written comments to such firm of
certified public accountants setting forth its position. The determination by
such firm of certified public accountants shall be final, binding and conclusive
upon the parties.
4. CARRYBACKS. If the consolidated income taxes of the Vencor Group are
reduced for a taxable period beginning prior to the Closing Date by reason of a
loss or other tax attribute of the Atria Group arising on or after the Closing
Date ("ATRIA CARRYBACK"), Vencor shall pay to Atria an amount equal to such
reduction in taxes (without interest). The Vencor Group shall take all steps
reasonably necessary to receive the maximum reduction in taxes attributable to
an Atria Carryback and Atria shall have the right to review and comment on any
tax return in which any such Atria Carryback may be claimed. Nothing herein
6
<PAGE>
shall require, however, that the Atria Group carryback any loss or other tax
attribute which it generates. The payment required to be made by Vencor to Atria
pursuant to the provisions of this Section 4 shall be made no later than ten
days after the tax benefit is actually received, credited or otherwise utilized
by Vencor.
5. CONTESTING TAX ADJUSTMENTS.
(a) If an adjustment results in an increase in the Vencor Group's or
any member thereof's tax liability affects a taxable year of Vencor beginning
prior to the Closing Date, relates to a partnership involved in the Division and
results in a Temporary Difference, Atria shall have the right, in its sole
discretion, and at its cost, to contest such adjustment.
(b) If an adjustment results in an increase in the Vencor Group's or
any member thereof's liability for a taxable year beginning prior to the Closing
Date, involves the Division and a Temporary Difference, but does not relate to a
partnership involved in the Division, Vencor shall only be required to contest
such adjustment if Vencor's tax counsel determines that it is more likely than
not that Vencor will prevail with respect to the issue, and then only at the
first administrative level provided for by the applicable tax regulatory
authority.
(c) If an adjustment which increases the Atria Group's or any member
thereof's tax liability relates to a partnership and results in a Temporary
Difference, Vencor shall have the right, in its sole discretion, and at its
cost, to contest such adjustment.
(d) If an adjustment results in an increase in the Atria Group's or
member thereof's tax liability and results in a Temporary Difference, but does
not relate to a partnership, Atria shall only be required to contest such
adjustment if Atria's tax counsel determines that it is more likely than not
that Atria will prevail with respect to the issue, and then only at the first
administrative level provided for by the applicable tax regulatory authority.
(e) If Vencor or Atria contests an adjustment pursuant to the
provisions of Sections 5(b) or 5(d), respectively, the cost of contesting such
adjustment through the first administrative level shall be borne by the
contesting party. If the party which would be obligated to make a payment
hereunder as a result of such adjustment is not satisfied with the result
obtained at the first administrative level, and desires that the adjustment be
contested beyond the first administrative level, such party may do so at its own
cost and expense. Such party shall notify the other party of its decision to
further contest the adjustment and the other party shall have the right to
7
<PAGE>
consult with the contesting party if it so desires. No payment shall be required
pursuant to Section 3 until an adjustment has been finally determined. For
purposes of this Agreement, an adjustment is finally determined on the date on
which it may no longer be further contested by administrative or judicial
procedure.
(f) If an adjustment results in a Permanent Difference, only the party
whose income was adjusted shall have the right to contest such adjustment and
shall do so at its own cost and expense.
6. COOPERATION. Each of the parties hereto agrees to cooperate with the
other in connection with the preparation and filing of, and any inquiry, audit,
examination, investigation, dispute or litigation involving, any tax return
filed or required to be filed by or for any member of the Vencor Group or the
Atria Group for any taxable period beginning before the Closing Date or for
which any party may have a liability to the other hereunder. Such cooperation
shall include the execution and delivery of any power of attorney or other
necessary document to allow a party and its counsel to participate on behalf of
any member of the other group and making available, during normal business
hours, all books, records and information and the assistance of all employees
reasonably necessary or useful in connection with contesting any adjustment made
by any tax regulatory authority. If a party desires to copy any books, records
and information in the possession of the other party, the party desiring such
copies shall bear the expense of making such copies. The assistance of employees
shall be without charge.
7. RETENTION OF BOOKS AND RECORDS. Vencor and Atria each agree to retain
all tax returns, related schedules, work papers and all material records and
other documents with respect to all taxable periods ending on or before the
Closing Date until the expiration of the statute of limitations (including
extensions thereof) of the taxable period to which such tax returns and other
documents relate.
8. RESOLUTION OF DISPUTES. If any dispute arises between the parties for
which no specific resolution is provided for herein, then such dispute shall be
settled pursuant to the dispute resolution provisions contained in the
Incorporation Agreement dated June __, 1996 entered into by and among Atria,
Vencor and certain affiliates of Vencor.
9. INDEMNIFICATION BY VENCOR. Vencor hereby agrees to indemnify each member
of the Atria Group for, and hold each member of the Atria Group harmless from,
any taxes, interest or penalties which such member of the Atria Group incurs by
reason of having been included in Vencor's consolidated group for any period
beginning before the Closing Date, other than any
8
<PAGE>
liability which such member of the Atria Group has to Vencor under the terms of
this Agreement.
10. EXPENSES. Unless otherwise expressly provided in this Agreement,
each party shall bear its own expenses which arise as a result of its rights and
obligations under this Agreement.
11. ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENTS. This Agreement
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other agreements, whether or not
written, in respect of any tax between or among any member of the Vencor Group
and the Atria Group. Any and all of such other agreements are hereby canceled
and any rights or obligations existing thereunder are hereby deemed fully and
finally settled.
12. AMENDMENT. This Agreement may be amended from time to time only by a
written agreement executed by each of the parties hereto.
13. NOTICES. All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and be personally
delivered against a written receipt, delivered to a reputable messenger service
(such as Federal Express, DHL Courier, United Parcel Service, etc.) for
overnight delivery, transmitted by confirmed telephonic facsimile (fax) or
transmitted by mail, registered, express or certified, return receipt requested,
postage prepaid, addressed as follows:
If to Vencor: 3300 Capital Holding Center
400 West Market
Louisville, Kentucky 40202
Fax: (502) 596-1104
Attention: Chief Financial Officer
If to Atria: 515 West Market Street
Louisville, Kentucky 40202
Fax: (502) 596-4160
Attention: Chief Financial Office
All notices, demands and requests shall be effective upon being properly
personally delivered, upon being delivered to a reputable messenger service,
upon transmission of a confirmed fax, or upon being deposited in the United
States mail in the manner provided in this Section 13. However, the time
period in which a response to any such notice, demand or request must be given
shall commence to run from the date of personal delivery, the date of delivery
by a reputable messenger service, the date on the confirmation of a fax, or the
date on the return receipt, as applicable. If any party refuses delivery, the
notice, demand or request shall be deemed received two days after the notice,
9
<PAGE>
demand or request was delivered to a reputable messenger service or deposited in
the United States mail.
14. CAPTIONS; SECTION REFERENCES. Section titles or captions contained
in this Agreement are inserted only as a matter of convenience and reference,
and in no way define, limit, extend or describe the scope of this Agreement,
or the intent of any provision hereof. All references herein to Sections
shall refer to Sections of this Agreement unless the context clearly requires
otherwise.
15. BINDING AGREEMENT. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky without regard to its
conflict of laws rules.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VENCOR, INC.
By:____________________________
Title:________________________
ATRIA COMMUNITIES, INC.
By:___________________________
Title:________________________
10
<PAGE>
EXHIBIT 10.7
EXECUTION COPY
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MORTGAGE AND TRUST INDENTURE
by and between
NEW POND VILLAGE ASSOCIATES
and
THE FIRST NATIONAL BANK OF BOSTON
as Trustee
Dated as of November 1, 1990
securing
New Pond Village Associates
Resident Mortgage Bonds
(New Pond Village Project)
Series A
<PAGE>
TRUST INDENTURE
TABLE OF CONTENTS
<TABLE>
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Page
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PARTIES................................................................ 1
RECITALS OF THE PARTNERSHIP............................................ 2
ARTICLE 1 - DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION.................................. 2
Section 1.1. Definitions........................................ 2
Section 1.2. Rules of Construction.............................. 5
Section 1.3. Conflicts with Residency Agreement................. 6
ARTICLE 2 - THE CONVEYANCE AND PROVISIONS REGARDING
SUBORDINATION, RELEASES, GRANTING
OF EASEMENTS AND DEFEASANCE............................... 6
Section 2.1. The Mortgage....................................... 6
Section 2.2. Subordination; Partial Releases;
Granting of Easements.............................. 7
Section 2.3. Defeasance......................................... 8
ARTICLE 3 - THE BONDS.................................................. 9
Section 3.1. Authorized Form of Bonds........................... 9
Section 3.2. Issuance of Series A Bonds......................... 9
Section 3.3. Execution and Authentication....................... 10
Section 3.4. Mutilated, Lost, Stolen or Destroyed
Bonds.............................................. 10
Section 3.5. Registration and Exchange of Bonds;
Persons Treated as Owners.......................... 11
Section 3.6. Notation of Bonds to Reflect Offsets .............. 11
Section 3.7. Cancellation and Issuance of Bonds on
Relocation of Resident............................. 11
ARTICLE 4 - APPLICATION OF BOND PROCEEDS............................... 12
Section 4.1. Application of Proceeds in General................. 12
Section 4.2. Application of Proceeds if Loans are
Outstanding........................................ 12
ARTICLE 5 - PAYMENTS AND FUNDS......................................... 12
Section 5.1. Source of Payment of the Bonds..................... 12
Section 5.2. Bond Fund.......................................... 12
Section 5.3. Project Fund....................................... 12
Section 5.4. Investment of Funds................................ 12
Section 5.5. Trust Funds........................................ 13
</TABLE>
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<TABLE>
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ARTICLE 6 - REDEMPTION OF BONDS........................................ 13
Section 6.1. Optional Redemption................................ 13
Section 6.2. Mandatory Redemption............................... 13
Section 6.3. Notice of Redemption; Partial Redemption........... 13
Section 6.4. Cancellation....................................... 14
ARTICLE 7 - COVENANTS OF THE PARTNERSHIP............................... 14
Section 7.1. Payment of Principal............................... 14
Section 7.2. Performance of Covenants........................... 14
Section 7.3. Validity and Enforcement of This
Indenture.......................................... 15
Section 7.4. Taxes, Charges and Assessments..................... 15
Section 7.5. Permitted Contests................................. 16
Section 7.6. Repairs, Maintenance and Alterations............... 16
Section 7.7. Insurance Required................................. 17
Section 7.8. Filing, Recordation and Release of the
Mortgage and Security Instruments.................. 17
Section 7.9. Accounting Records and Financial
Statements; Access to Real Estate.................. 18
Section 7.10. Damage, Destruction and Condemnation............... 18
Section 7.11. Use of Real Estate and Equipment................... 19
Section 7.12. Partnership Right of Set-off. Disputed
Amounts to Be Held by Trustee...................... 19
ARTICLE 8 - EVENTS OF DEFAULT AND REMEDIES............................. 20
Section 8.1. Events of Default.................................. 20
Section 8.2. Acceleration....................................... 20
Section 8.3. Additional Remedies................................ 21
Section 8.4. Right of Holders to Direct Proceedings............. 22
Section 8.5. Application of Moneys.............................. 22
Section 8.6. Remedies Vested in Trustee......................... 23
Section 8.7. Rights and Remedies of Holders..................... 23
Section 8.8. Termination of Proceedings......................... 24
Section 8.9. Waivers of Events of Default....................... 24
ARTICLE 9 - THE TRUSTEE................................................ 25
Section 9.1. Acceptance of the Trusts........................... 25
Section 9.2. Fees, Charges and Expenses of Trustee.............. 27
Section 9.3. Successor Trustee.................................. 28
Section 9.4. Resignation by the Trustee......................... 28
Section 9.5. Removal of the Trustee............................. 28
Section 9.6. Appointment of Successor Trustee by the
Holders; Temporary Trustee......................... 28
Section 9.7. Concerning Any Successor Trustees.................. 29
Section 9.8. Right of Trustee To Pay Taxes, Other
Charges and Insurance Premiums..................... 29
Section 9.9. Trustee Protected in Relying Upon
Resolution, Etc.................................... 30
</TABLE>
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<TABLE>
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Section 9.10. Trust Estate May Be Vested in Separate or
Co-Trustee......................................... 30
Section 9.11. Indemnification of Trustee......................... 31
ARTICLE 10 - SUPPLEMENTAL INDENTURES................................... 31
Section 10.1. Supplemental Indentures Not Requiring
Consent of Holders................................. 31
Section 10.2. Supplemental Indentures and Amendments
Requiring Consent of Holders....................... 32
ARTICLE 11 - SATISFACTION OF THIS INDENTURE............................ 33
ARTICLE 12 - MANNER OF EVIDENCING OWNERSHIP OF BONDS................... 33
ARTICLE 13 - MISCELLANEOUS............................................. 34
Section 13.1. Limitation of Rights............................... 34
Section 13.2. Unclaimed Moneys................................... 34
Section 13.3. Severability....................................... 35
Section 13.4. Payments on Other than Business Days............... 35
Section 13.5. Notices............................................ 35
Section 13.6. Counterparts....................................... 36
Section 13.7. Applicable Law..................................... 36
</TABLE>
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<PAGE>
MORTGAGE AND TRUST INDENTURE
THIS MORTGAGE AND TRUST INDENTURE dated as of the 1st day of November, 1990
by and between New Pond Village Associates, a Massachusetts general partnership
(the "Partnership"), and The First National Bank of Boston, a corporation duly
organized, existing and authorized to accept and execute trusts of the character
herein set out under the laws of the United States, with its principal office in
the City of Boston, Massachusetts, as Trustee (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Partnership is the developer, owner and operator of New Pond
Village (the "Village"), a residential retirement community in Walpole,
Massachusetts consisting of 167 independent living units (the "Independent
Living Center"), 32 assisted living units (the "Assisted Living Center") and a
90-bed skilled nursing facility (the "Health Center"); and
WHEREAS, the Partnership's development and construction of the Village has
been financed through interim financing which the Partnership now desires to
refinance, in part, through the issuance of its New Pond Village Associates
Resident Mortgage Bonds (New Pond Village Project), Series A (the "Bonds"); and
WHEREAS, each resident (a "Resident") of the Independent Living Center and
the Assisted Living Center of the Village will, upon entering the Village, enter
into a Residency Agreement with the Partnership and purchase a Bond, the amount
of which (the "Bond Amount") will be established by the Partnership according to
the type and size of the Village apartment (the "Apartment Home") occupied; and
WHEREAS, upon subsequent occupancy of an Apartment Home by a new Resident,
the Partnership will issue an additional Bond under this Indenture for purchase
by such Resident; and
WHEREAS, the Partnership, pursuant to the terms of this Mortgage and Trust
Indenture (the "Indenture"), will agree to pay the Trustee amounts which are
sufficient to pay the principal of each Bond when due, whether upon maturity,
redemption or acceleration and such obligations will be secured by a mortgage
lien on the real estate described in Exhibit A hereto on which the Village is
located; and
WHEREAS, the execution and delivery of this Indenture and the issuance of
the Bonds have been in all respects duly authorized and approved by the
Partnership; and
<PAGE>
WHEREAS, the Partnership and the Trustee each agree as follows for the
benefit of the other party and for the equal and ratable benefit of the holders
of the Bonds; and
WHEREAS, the Bonds and the Trustee's certificate of authentication to be
endorsed thereon are all to be in substantially the form of Exhibit B hereto,
with necessary and appropriate variations, omissions and insertions as permitted
or required by this Indenture.
NOW THEREFORE, in consideration of the mutual agreements contained in this
Indenture and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Partnership and the Trustee agree as set forth herein
for their own benefit and for the benefit of the Holders.
RECITALS OF THE PARTNERSHIP
The Partnership has duly authorized the creation, execution and delivery
from time to time of its Bonds of substantially the tenor hereinafter provided,
issuable in one or more series; and, to secure the Bonds and to provide for
their authentication and delivery by the Trustee, the Partnership has duly
authorized the execution and delivery of this Indenture.
All things have been done which are necessary to make the Bonds, when
executed by the Partnership and authenticated and delivered by the Trustee
hereunder and duly issued by the Partnership, the valid obligations of the
Partnership, and to constitute this Indenture a mortgage and security agreement
and contract for the security of the Bonds, in accordance with the terms of the
Bonds and this Indenture.
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 1.1. Definitions. In addition to the words and terms elsewhere
-----------
defined in this Indenture, the following words and terms as used in this
Indenture shall have the following meanings unless the context or use indicates
another or different meaning or intent:
"Apartment Home" means an apartment unit in the Independent Living Center
or Assisted Living Center of the Village.
"Authorized Representative" means any individual designated in writing to
the Trustee from time to time to act on behalf of the Partnership.
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<PAGE>
"Bond" or "Bonds" means one or more of the Partnership's Resident Mortgage
Bonds (New Pond Village Project), Series A issued hereunder.
"Bond Amount" means the principal amount of the Bond to be issued and
purchased as stated in the Residency Agreement.
"Bond Fund" means the fund created by Section 5.2 hereof.
"Business Day" means a day on which banks located in the city in which the
principal corporate trust office of the Trustee is located are not required or
authorized by law to remain closed.
"Counsel" means an attorney or firm of attorneys duly admitted to practice
law before the highest court of any state.
"Equipment" means all machinery, apparatus, equipment, appliances,
fittings, fixtures, building materials and articles of personal property of the
Partnership of every kind and nature whatsoever, now or hereafter located at or
on the Real Estate or used or to be used in the construction, operation,
maintenance or occupation of the buildings or improvements now or hereafter
located thereon, all whether now owned or hereafter acquired, whether affixed or
moveable, and whether relating to the Village or otherwise, and all replacements
of, substitutions for and accessions to any of same and all products and
proceeds (including, without limitation, insurance proceeds) of any of the
foregoing.
"Event of Default" means those defaults specified in and defined by Section
8.1 hereof.
"Fiscal Year" means the period beginning on October 1 of each year and
ending on the next succeeding September 30, or any other twelve-month period
hereafter selected and designated as the official fiscal year period of the
Partnership.
"General Partners" means the general partners of the Partnership, initially
First Healthcare Corporation and NVHS Management Services, Inc. and their
respective successors and assigns.
"Holder" or "owner of the Bonds" or "Bondholder" means the registered owner
of any registered Bond.
"Indenture" means this instrument and any amendments and supplements
thereto.
"Late Payment Rate" means the Trustee's announced "Base Rate" as
established from time to time.
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"Net Proceeds," when used with respect to any insurance or condemnation
award, means the gross proceeds from the insurance or condemnation award for
which that term is used remaining after payment of all expenses (including
attorneys' fees and any expenses of the Trustee) incurred in the collection of
such gross proceeds.
"Outstanding" and "outstanding" when used with reference to the Bonds means
all Bonds which have been duly authenticated and delivered by the Trustee under
this Indenture, except:
1. Bonds canceled because of payment at or redemption prior to
maturity;
2. Bonds deemed paid under Article 11 hereof;
3. Bonds in lieu of which others have been authenticated under
Section 3.4; and
4. Bonds canceled because of transfer in accordance with Section
3.7.
"Partnership" means New Pond Village Associates, a Massachusetts general
partnership, and its successors and assigns.
"Paying Agent" means any person authorized by the Partnership to pay the
principal of or interest, if any, on any Bonds.
"Project Fund" means the fund created by Section 5.3 hereof.
"Qualified Investments" shall mean (i) investments in direct obligations
of, or obligations the principal and interest on which are fully guaranteed or
insured by, the United States of America ("United States Government Securities")
or (ii) direct obligations of, or obligations the principal and interest on
which are fully guaranteed or insured by, any of the following: Bank for
Cooperatives, Federal Financing Bank, Federal Land Banks, Federal Home Loan
Banks, Federal Intermediate Credit Banks, Federal National Mortgage Association,
Export-Import Bank of the United States, Student Home Loan Marketing
Association, Farmers Home Administration, Federal Home Loan Mortgage Corporation
or Government National Mortgage Association or any other agency or corporation
which has been or may hereafter be created by or pursuant to an Act of the
Congress of the United States as an agency or instrumentality thereof, or (iii)
certificates of deposit of banks, which certificates are fully secured by any of
the investments listed in (i) or (ii) above, to the extent such certificates are
not insured by the Federal Deposit Insurance Corporation, or (iv) indirect
investments through mutual funds in the investments listed in (i), (ii) or
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(iii) above, or (v) indirect investments through repurchase agreements with
banks in the investments listed in (i), (ii) or (iii) above, which repurchase
agreements are fully secured by above investments, or (vi) Certificates of
Deposit issued by a bank having greater than $50,000,000 capital and surplus so
long as such Certificate of Deposit does not exceed 5% of such bank's capital
and surplus. Such investments shall be made so as to mature on or prior to the
date or dates that the Trustee anticipates that moneys therefrom will be
required hereunder.
"Real Estate" means those certain lots, pieces or parcels of land with the
buildings and improvements now or hereafter located thereon, situate, lying and
being in the Town of Walpole, County of Norfolk, Commonwealth of Massachusetts,
which lots, pieces or parcels of land are more particularly bounded and
described as set forth in Exhibit A attached hereto and made a part hereof;
together with any additional real property not included in the foregoing
provisions which may be added to the Real Estate by a supplemental agreement.
"Resale Date" means the date the Partnership sells a new Bond for an
Apartment Home for which a Termination Date has occurred.
"Residency Agreement" means a residency agreement between a Resident and
the Partnership for occupancy of an Apartment Home.
"Resident" means the individual(s) executing a Residency Agreement for
occupancy of the Apartment Home; where two (2) individuals execute a Residency
Agreement, both persons shall constitute a "Resident."
"State" means The Commonwealth of Massachusetts.
"Termination Date" means the date a Residency Agreement is terminated with
respect to all individuals constituting a Resident thereunder
"Trust Estate" means the Real Estate and the Equipment, together with any
additional property not included in the Real Estate or the Equipment which may
be added to the Trust Estate by a supplemental agreement.
"Trustee" means The First National Bank of Boston, or any successor at the
time serving as such under this Indenture.
"UCC" means the Massachusetts Uniform Commercial Code.
Section 1.2. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
Section 1.3. Conflicts with Residency Agreement. This Indenture is
----------------------------------
delivered in connection with the execution and delivery by the Partnership and
certain Residents of the Residency Agreements. The current form of the
Residency Agreement is attached hereto as Exhibit C. In the event of any
conflict between this Indenture and the Residency Agreement, this Indenture
shall control. The parties expressly agree that the form of the Residency
Agreement may change over time. The Partnership shall give written notice to
the Trustee promptly after any change in the form of the Residency Agreement.
ARTICLE 2
THE CONVEYANCE AND PROVISIONS REGARDING
SUBORDINATION, RELEASES, GRANTING
OF EASEMENTS AND DEFEASANCE
Section 2.1. The Mortgage. The Partnership hereby grants WITH MORTGAGE
------------
COVENANTS the Trust Estate owned by it to the Trustee in trust upon the terms
hereof and, to the extent the Trust Estate is or may be treated as collateral
under the UCC, grants to the Trustee a security interest therein and in the
proceeds thereof, including without limitation all proceeds of insurance,
eminent domain or sale, to secure the payment of the principal of the Bonds to
be issued by the Partnership under this Indenture according to their tenor,
purport and effect, and to secure the performance and observance of all other
covenants, agreements and obligations made or undertaken by the Partnership
hereunder for the benefit of the Trustee and the Holders.
This grant is upon the STATUTORY CONDITION and upon the further condition
that all covenants, agreements and obligations of the Partnership hereunder will
be observed and performed, and upon any Event or Default, as defined in Section
8.1, the Trustee shall in addition to its other rights and remedies hereunder
have the STATUTORY POWER OF SALE and any other rights granted by law.
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Section 2.2. Subordination; Partial Releases; Granting of Easements. This
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Indenture and the lien created hereby shall be subordinate for all purposes to
any lien, security interest, pledge, lease or other encumbrance on the Trust
Estate, or any part thereof, granted by the Partnership at any time and from
time to time to secure (i) any indebtedness or other liabilities or obligations
of the Partnership incurred in connection with the acquisition or construction
of all or any portion of the Trust Estate, including any improvements or repairs
thereto or equipping thereof, and any refinancing thereof, in whole or in part,
including, without limitation, any lien in favor of BayBank Boston, N.A. in
connection with the construction of the Independent Living Center and the Health
Center; and (ii) any indebtedness or other liabilities or obligations of the
Partnership incurred in connection with obtaining operating funds or working
capital for the operation of the Village. The Trustee agrees and is hereby
directed to execute and deliver any instrument necessary or appropriate to
confirm such subordination upon delivery to the Trustee of a copy of the
subordination agreement, if any.
The Trustee, upon the written request of the Partnership, agrees to
subordinate the lien of this Indenture on, or release from the lien hereof, as
directed by the Partnership (i) that portion of the Real Estate on which the
Health Center is located, together with that portion of the Real Estate
consisting of unimproved land that is located adjacent to the Health Center to
the extent necessary to establish a separate legal lot for the Health Center in
compliance with applicable zoning and land use laws, regulations and ordinances,
in order to facilitate the financing or refinancing of the construction of the
Health Center or any additions, improvements or repairs thereto; (ii) any
portion of the Real Estate constituting unimproved land, in order to facilitate
the financing or refinancing of construction thereon or any additions,
improvements or repairs to any buildings or improvements subsequently
constructed thereon; and (iii) any existing easements, licenses, rights of way
and other rights and privileges, with or without consideration. The Trustee
agrees and is hereby directed to execute and deliver any instrument necessary or
appropriate to effectuate such subordination or release upon delivery to the
Trustee of (1) a copy of the subordination agreement or instrument of release;
(2) a written statement signed by an Authorized Representative of the
Partnership to the effect that the proposed subordination or release will not
have a materially adverse affect on the operation of the Village or the means of
ingress there into or egress therefrom; and (3) an opinion from the
Partnership's legal counsel to the Trustee to the effect that the proposed
subordination or release will not cause the remaining portion of the Real Estate
(which is not subject to the subordination agreement or is not released from the
lien hereof) to not be in compliance with applicable zoning requirements. The
Partnership agrees that it shall provide the Residents with written notice of
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any subordination of the lien hereof or release from the lien hereof with
respect to any of the Real Estate within ninety (90) days after execution of any
instrument of release or subordination agreement, provided, however, that the
failure of the Partnership to give such notice shall not effect the validity of
any such instrument of release or subordination agreement.
The Partnership may at any time grant easements, licenses, rights of way
(including the dedication of public highways) and other rights or privileges in
the nature of easements with respect to any property or rights included in the
Real Estate; and the Trustee agrees and is hereby directed to execute and
deliver any instrument necessary or appropriate to consent to any such grant or
privilege upon delivery to the Trustee of (l) a copy of the instrument of grant;
and (2) a written statement signed by an Authorized Representative of the
Partnership to the effect that the grant proposed to be made will not have a
materially adverse effect on the operation of the Village or the means of
ingress thereinto or egress therefrom.
Section 2.3. Defeasance. When there are in the Bond Fund and the Project
----------
Fund sufficient funds, or United States Government Securities (or equivalent
obligations listed in the definition of Qualified Investments in Section 1.1
hereof) in such principal amounts, bearing interest at such rates and with such
maturities as will provide sufficient funds to pay or redeem all Outstanding
Bonds in full as they become subject to mandatory redemption under Section 6.2
hereof or upon the maturity date thereof, whichever shall occur earlier, and
when all the rights hereunder of the Holders and the Trustee have been provided
for, upon written notice from the Partnership to the Holders and the Trustee,
the Holders shall cease to be entitled to any benefit or security under this
Indenture except the right to receive payment of the funds deposited and held
for payment and other rights which by their nature cannot be satisfied prior to
or simultaneously with termination of the lien hereof, title to the Trust Estate
shall revert to the Partnership, the security interests created by this
Indenture (except in such funds and investments) shall terminate, this Indenture
shall terminate to the extent consistent with the agreements and requirements
herein, and the Trustee shall execute and deliver such instruments as may be
necessary to discharge the lien and security interests created hereunder. In
determining what shall constitute sufficient funds and investments to defease
the Bonds hereunder, the parties shall utilize actuarial and other relevant data
satisfactory to the Trustee derived from the operation of the Village and
similar retirement care communities in New England to forecast the Bonds (and
the Bond Amounts) that will become subject to mandatory redemption or maturity
dates under Section 6.2 during each year, and shall take into account the
deferred fees that will become due and owing to the Partnership on or before
such redemption or maturity dates and subject to
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set-off against the principal amount of the Bonds under Section 7.12 hereof. The
Partnership shall remain obligated to provide the Holders and the Trustee with
any notice of redemption or maturity required under Section 6.3 hereof and, in
addition, shall notify the Holders of all Outstanding Bonds of the defeasance of
same within thirty (30) days after such defeasance occurs; provided, however,
that any failure by the Partnership to so notify the Holders shall not affect
the validity of the defeasance. Upon such defeasance, the funds and investments
required to pay or redeem the Bonds in full shall be irrevocably set aside for
that purpose, and funds held for defeasance shall be invested only in Qualified
Investments. Any funds or property held by the Trustee and not required for
payment or redemption of the Bonds in full shall, after satisfaction of all the
rights of the Holders and the Trustee, be distributed to the Partnership upon
such indemnification, if any, as the Trustee may reasonably require.
ARTICLE 3
THE BONDS
Section 3.1. Authorized Form of Bonds. The Bonds shall be substantially
------------------------
in the form of Exhibit B, which is a part of this Indenture. No Bonds may be
issued under the provisions of this Indenture except in accordance with this
Article. The total principal amount of Bonds that may be issued is not limited;
provided, however, that Bonds may be issued only in accordance with this Article
3.
Section 3.2. Issuance of Series A Bonds. The Bonds shall be designated
--------------------------
"New Pond Village Associates Resident Mortgage Bonds (New Pond Village Project),
Series A." The Bonds shall be non-interest bearing. Each Bond shall be
initially issued in a single denomination corresponding in principal amount to
the Bond Amount designated in the Residency Agreement furnished to the Trustee
pursuant to Section 3.3(c)(l). Bonds shall be issued to and registered in the
name of such persons as are named as Resident in such Residency Agreement.
BONDS ISSUED HEREUNDER ARE NON-TRANSFERABLE BY RESIDENT AND ARE SUBJECT TO
- --------------------------------------------------------------------------
RIGHTS OF OFFSET PURSUANT TO SECTION 7.12.
- -----------------------------------------
The Bonds shall be lettered "R" and numbered from 1 upward. Each Bond shall
be dated as of the date of the Residency Agreement described in Section 3.3(c)
(1). Bonds issued on or prior to January 1, 2000 shall mature on January 1,
2040. Bonds issued after January 1, 2000 shall mature on January 1, 2050, and
shall be designated as a separate series of Bonds.
The principal of the Bonds shall be payable in any coin or currency of the
United States of America which, at the respective
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dates of payment thereof, is legal tender for the payment of public and private
debts, upon presentation of the Bonds at the principal corporate trust office of
the Trustee in Boston, Massachusetts.
Section 3.3. Execution and Authentication. (a) An officer of each General
----------------------------
Partner shall sign the Bonds on behalf of the Partnership by manual or facsimile
signature. If an officer whose signature is on a Bond no longer holds that
office at the time the Bond is authenticated, the Bond shall nevertheless be
valid. A Bond shall not be valid until authenticated by the manual signature of
the Trustee as provided in this Section 3.3. The signature shall be conclusive
evidence that the Bond has been authenticated under this Indenture.
The Partnership shall execute and deliver to the Trustee, and the Trustee
shall authenticate, the Bonds and deliver them in trust to the Partnership for
the benefit of the Holders. The Partnership shall deliver facsimiles of the
Bonds to the Trustee and the Holders.
(b) Prior to the initial delivery by the Partnership to the Residents of
any facsimiles of the Bonds there shall be filed with the Trustee:
(1) A certificate of the Partnership, signed by each General Partner,
authorizing the execution and delivery of this Indenture and approving the
issuance and sale of Bonds hereunder; and
(2) A certified copy of the Partnership Agreement of the Partnership.
(c) Prior to authentication of each Bond, there also shall be filed with
the Trustee:
(1) Notification of the tendering of funds equal to the principal
amount of the Bond being authenticated and delivery of a certificate of an
Authorized Representative of the Partnership to the effect that such amount
has been received by the Partnership from Resident; and
(2) Such other documents as the Trustee shall reasonably request.
Section 3.4. Mutilated, Lost, Stolen or Destroyed Bonds. In the event any
------------------------------------------
Bond is mutilated, lost, stolen or destroyed, the Partnership may execute and
the Trustee may authenticate a new Bond of like date, maturity and denomination
as that mutilated, lost, stolen or destroyed; provided that, in the case of any
mutilated Bond, such mutilated Bond shall first be surrendered to the
Partnership, and in the case of any lost,
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stolen or destroyed Bond, there shall be first furnished to the Partnership and
the Trustee evidence of such loss, theft or destruction satisfactory to the
Partnership and the Trustee, together with indemnity satisfactory to them. In
the event any such lost, stolen or destroyed Bond shall have matured, instead of
issuing a duplicate Bond the Partnership may pay the same without surrender
thereof and such Bond shall be deemed canceled. The Partnership and the Trustee
may charge the Holder of such Bond with their reasonable fees and expenses in
this connection.
Section 3.5. Registration and Exchange of Bonds; Persons Treated as
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Owners. The Trustee shall cause books to be kept for the registration of the
Bonds as provided in this Indenture.
The person in whose name any Bond shall be registered shall be deemed and
regarded as the absolute owner thereof for all purposes, and payment of or on
account of principal of any Bond shall be made only to or upon the order of the
registered owner thereof or his legal representative. All such payments shall
be valid and effectual to satisfy and discharge the liability upon such Bond to
the extent of the sum or sums so paid.
No charge shall be made to any Holder for any registration of any Bond.
Section 3.6. Notation of Bonds to Reflect Offsets. Subject to the
------------------------------------
provisions of Section 7.12, the Partnership shall be entitled to make a notation
on a particular Bond so as to reduce the principal amount outstanding of that
Bond so as to reflect any offset permitted under said Section 7.12. The
Partnership shall notify the Trustee and the Resident of each such annotation
within thirty (30) days of making any such notation and shall include a
facsimile of the annotated bond.
Section 3.7. Cancellation and Issuance of Bonds on Relocation of Resident.
------------------------------------------------------------
With the consent of the Partnership, a Resident may elect to tender for
cancellation a Bond upon moving into a different Apartment Home within the
Village. In the event that the Bond Amount attributable to the new Apartment
Home at the time of such transfer is different from the Bond Amount of the
Resident's original Bond, the Resident shall pay to the Trustee or other lender
as specified in Section 4.2 or be refunded from the Project Fund or similar fund
maintained by said other lender as specified in Section 4.2, as the case may be,
an additional amount equal to the difference between the original Bond Amount
and Bond Amount allocable to the new Apartment Home. The Resident's original
Bond shall thereupon be canceled by the Trustee and a new Bond shall be issued
as provided in this Article 3. If an Apartment Home is occupied by two
Residents and one dies or transfers from the Apartment Home, the Bond issued to
such Residents shall remain outstanding until the maturity date
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thereof or the redemption thereof in accordance with Article 6 hereof.
ARTICLE 4
APPLICATION OF BOND PROCEEDS
Section 4.1. Application of Proceeds in General. The Trustee shall
----------------------------------
deposit all proceeds received by it from the sale of the Bonds in the Project
Fund and shall apply such proceeds as directed by the Partnership.
Section 4.2. Application of Proceeds if Loans are Outstanding. Anything
------------------------------------------------
to the contrary herein notwithstanding, so long as any loan from BayBank Boston,
N.A. or any successor or substitute lender or any other loan permitted under
this Agreement is outstanding, all proceeds from the sale of Bonds shall be
deposited directly with said lender or in such other manner as shall be directed
by the Partnership. The Partnership shall notify the Trustee in advance of any
change in the application of proceeds.
ARTICLE 5
PAYMENTS AND FUNDS
Section 5.1. Source of Payment of the Bonds. The Partnership shall pay
------------------------------
the principal of the Bonds on the maturity date thereof or on a redemption date
established in accordance with Article 6 hereof.
Section 5.2. Bond Fund. The Trustee shall establish and maintain so long
---------
as any of the Bonds are outstanding a separate account to be known as the "Bond
Fund--New Pond Village Project." All principal payments made by the Partnership
as and when received by the Trustee shall be deposited in the Bond Fund and
shall be held therein until disbursed as herein provided.
Moneys in the Bond Fund shall be used to pay principal of the Bonds as the
same mature or are called for redemption and become due.
Section 5.3. Project Fund. The Trustee shall establish and maintain so
------------
long as any of the Bonds are outstanding a separate account to be known as the
"Project Fund - New Pond Village Project." All proceeds from the sale of Bonds
received by the Trustee shall be deposited into the Project Fund and applied in
accordance with Article 4 hereof.
Section 5.4. Investment of Funds. Moneys in the Bond Fund, Project Fund
-------------------
or any other fund established hereunder may be invested only in Qualified
Investments, as defined herein, upon a
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written request of an Authorized Representative of the Partnership filed with
the Trustee. All income derived from the investment of money in the Bond Fund
and the Project Fund shall be paid to the Partnership quarterly unless otherwise
provided in a written request of an Authorized Representative of the
Partnership. The Trustee is hereby authorized to trade with itself in the
purchase and sale of securities for such investments. The Trustee shall not be
liable or responsible for any loss resulting from any investment made pursuant
to this paragraph.
Section 5.5. Trust Funds. All moneys received by the Trustee under the
-----------
provisions of this Indenture shall be trust funds under the terms hereof and
shall not be subject to lien or attachment of any creditor of the Partnership.
Such moneys shall be held in trust and applied in accordance with the provisions
of this Indenture. The Trustee shall hold such moneys for the benefit of the
Holders so long as any Bonds are Outstanding.
ARTICLE 6
REDEMPTION OF BONDS
Section 6.1. Optional Redemption. The Bonds are subject to optional
-------------------
redemption by the Partnership at any time upon prior written notice as provided
in Section 6.3 hereof, in whole or in part, at a redemption price equal to 100%
of the principal amount thereof, with payment of such principal amount to be
made subject to Section 7.1 hereof and the rights of offset set forth in Section
7.12 hereof, including without limitation any rights to offset deferred fees.
Section 6.2. Mandatory Redemption. Each Bond is subject to mandatory
--------------------
redemption by the Partnership upon prior written notice as provided in Section
6.3 hereof, in whole, at any time upon the sooner to occur of (i) 180 days
following the Termination Date or (ii) the Resale Date, at a redemption price
equal to 100% of the principal amount thereof, with payment of such principal
amount to be made subject to Section 7.1 hereof and the rights of offset set
forth in Section 7.12 hereof, including without limitation any rights to offset
deferred fees.
Section 6.3. Notice of Redemption; Partial Redemption.
----------------------------------------
(a) Not less than ten (10) days prior to a redemption (or maturity) date,
the Partnership shall give notice by registered or certified mail or by
acknowledged hand delivery to the Holders of Bonds to be redeemed at the
addresses shown on the registration books maintained by the Trustee, which
notice shall state the Bond number and Apartment Home number to which the Bond
relates, the principal amount of the Bond to be redeemed (or which has matured)
and all amounts to be set-off against such
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principal amount in accordance with Section 7.12 hereof, the section of the
Indenture pursuant to which the redemption (if applicable) is occurring, the
anticipated redemption date (or maturity date, if applicable) and the manner in
which payment will occur. A copy of the notice, together with evidence of proper
notification procedures, shall be furnished concurrently to the Trustee.
(b) In the case of a partial redemption of any Bond the notice of
redemption shall specify the portion of the principal amount thereof to be
redeemed and shall state that payment of the redemption price will be made only
upon presentation of such Bond for a notation thereon of such payment on account
of principal or for surrender in exchange for a Bond of a denomination equal to
the unredeemed portion of the principal amount thereof.
Section 6.4. Cancellation. All Bonds which have been redeemed shall be
------------
cancelled and cremated or otherwise destroyed by the Trustee and shall not be
reissued, and a counterpart of the certificate of cremation or other destruction
evidencing such cremation or other destruction shall be furnished by the Trustee
to the Partnership; provided, however, that one or more new Bonds shall be
issued for the unredeemed portion of any fully registered Bond without charge to
the Holder thereof.
ARTICLE 7
COVENANTS OF THE PARTNERSHIP
Section 7.1. Payment of Principal. The Partnership covenants that it will
--------------------
promptly pay the principal of every Bond issued under this Indenture at the
place, on the dates and in the manner provided herein and in said Bonds
according to the true intent and meaning thereof. The Partnership shall pay
interest on overdue principal at the Late Payment Rate. Each payment of
principal shall be accompanied by a notation of the Bond number to which such
payment relates. Payments shall be subject to the Partnership's right of set-off
in accordance with Section 7.12 hereof.
Section 7.2. Performance of Covenants. The Partnership covenants that it
------------------------
will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture and in any and every
Bond executed, authenticated and delivered hereunder. The Partnership
represents that it is duly authorized under the laws of the State to issue the
Bonds authorized hereby and to execute this Indenture; that all action on its
part for the issuance of the Bonds and the execution and delivery of this
Indenture has been duly and effectively taken and that the Bonds in the hands of
the
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Holders are and will be valid and enforceable obligations of the Partnership
according to the import thereof.
Section 7.3. Validity and Enforcement of This Indenture. The Partnership
------------------------------------------
covenants that this Indenture is at the date of the execution and delivery
hereof a valid and existing contract for the terms herein set forth; that this
Indenture was lawfully made by the Partnership; that the covenants contained in
this Indenture are valid and binding; and that the Partnership has good right,
full power and lawful authority to grant, bargain and assign and to transfer in
trust, convey and pledge the Trust Estate in the manner and form herein
provided. The Partnership covenants that it will in all respects promptly and
faithfully keep, perform and comply with all the terms, provisions, covenants,
conditions and agreements of this Indenture to be kept, performed and complied
with by it. The Partnership further covenants that it will not do or permit
anything to be done, or omit or refrain from doing anything in any case where
any such act done or permitted to be done, or any such omission of or refraining
from action would or might be a ground for declaring a default under this
Indenture.
Section 7.4. Taxes, Charges and Assessments. The Partnership covenants
------------------------------
and agrees, subject to the provisions of Section 7.5 relating to permitted
contests, to pay or cause to be paid (before the same shall become delinquent):
(a) all taxes and charges on account of the use, occupancy or
operation of the Real Estate, or the income therefrom, including, but not
limited to, all sales, use, occupation, real and personal property taxes,
all permit and inspection fees, occupation and license fees and all water,
gas, electric light, power or other utility charges assessed or charged on
or against the Real Estate; and
(b) all taxes, assessments and impositions, general and special,
ordinary and extraordinary, of every name and kind, which shall be taxed,
levied, imposed or assessed during the term of this Indenture upon the Real
Estate.
If under applicable law any such tax, charge, fee, rate, imposition or
assessment may, at the option of the taxpayer, be paid in installments, the
Partnership may exercise such option.
As between the parties hereto, the Partnership shall have the duty of
making and filing all statements or reports which may be required under
applicable law in connection with any such tax, charge, fee, rate, imposition or
assessment, and the Trustee agrees to promptly forward to the Partnership any
and all notices of or bills in connection with any such charge, fee, rate,
imposition or assessment. The Trustee agrees to cooperate with the Partnership
in connection with any contest of the amount or
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validity of any tax, charge, fee, rate, imposition or assessment. If the
provisions of any law, rule or regulation at the time in effect shall require
such statements or reports to be executed and filed by the Trustee or such
proceedings to be brought by the Trustee, the Trustee shall, at the request and
expense of the Partnership, execute and file such statements or reports or, as
the case may be, join in such proceedings, but the Trustee shall not be subject
to any liability for the payment of any costs or expenses in connection
therewith, and the Partnership covenants to indemnify and save the Trustee
harmless from all such costs and expenses.
Nothing contained herein shall be deemed to constitute an admission by the
Partnership to any third party, other than the Trustee, that the Partnership is
liable for any tax, charge, fee, rate, imposition or assessment.
Section 7.5. Permitted Contests. The Partnership shall not be required to
------------------
pay any tax, charge, assessment or imposition referred to in Section 7.4 hereof,
so long as the Partnership shall contest, in good faith and at its cost and
expense, in its own name and behalf or in the name and behalf of the Trustee,
the amount or validity thereof, in an appropriate manner or by appropriate
proceedings which shall operate during the pendency thereof, to prevent the
collection of or other realization upon the tax, assessment, levy, fee, or
charge so contested, and the sale, forfeiture or loss of the Real Estate or any
part thereof, or of the rent or any portion thereof, to satisfy the same,
provided that no such contest shall subject the Trustee to the risk of any
liability. While any such matters are pending, the Trustee shall not pay,
remove or cause to be discharged the tax, assessment, levy, fee, or charge being
contested, unless the Partnership agrees to settle such contest. Each such
contest shall be promptly prosecuted to final conclusion (subject to the right
of the Partnership to settle any such contest), and in any event, the
Partnership shall save the Trustee harmless against all losses, judgments,
decrees and costs (including attorneys' fees and expenses in connection
therewith) and will promptly, after the final determination of such contest or
settlement thereof, pay and discharge the amounts which shall be levied,
assessed or imposed or determined to be payable in connection therewith,
together with all penalties, fines, interests, costs and expenses thereon or in
connection therewith. The Partnership shall give the Trustee prompt written
notice of any such contest, and the Trustee agrees to cooperate with the
Partnership, at the Partnership's cost and expense, in any such contest.
Section 7.6. Repairs Maintenance and Alterations. Subject to Section 7.10
-----------------------------------
of this Indenture, the Partnership will throughout the term of this Indenture at
its own cost and expense keep the Real Estate in good and tenantable repair and
order, reasonable wear and tear excepted, and in as reasonably safe a
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condition as its operation will permit and will make all necessary repairs
thereto, interior and exterior, structural and nonstructural, ordinary as well
as extraordinary, and foreseen as well as unforeseen, and all necessary
replacements or renewals.
The Partnership shall have the right from time to time at its sole cost and
expense to make additions, alterations and changes (hereinafter collectively
referred to as "alterations") in or to the Real Estate, subject, however, in all
cases to the following conditions:
(a) no alteration of any kind shall be made which would result in a
violation of any applicable law, ordinance, order, decree, rule, regulation
or requirement of governmental authorities; and
(b) all alterations to the Real Estate shall be located wholly within
the boundary lines thereof and shall become a part of the Real Estate.
Section 7.7. Insurance Required. The Partnership covenants and agrees
------------------
that it will keep the Real Estate and all of the operations of the Partnership
adequately insured at all times and carry and maintain such insurance in amounts
which are customarily carried and against such risks as are customarily insured
against in connection with the ownership and operation of facilities of similar
character and size in the State.
Each insurance policy required by this Section 7.7 shall be carried by
stock or mutual insurance companies authorized to do business in the State which
are financially responsible and capable of fulfilling the requirements of such
policies. Title, if any, and property damage policies shall name both the
Partnership and the Trustee as insured parties. Each policy shall be in such
form and contain such provisions as are generally considered standard for the
type of insurance involved and shall contain a provision to the effect that the
insurer shall not cancel or substantially modify the policy provisions without
first giving at least thirty (30) days written notice thereof to the Partnership
and the Trustee. The Partnership shall file at least annually (on or before
January 1 in each year) with the Trustee a certificate setting forth the
policies of insurance maintained, the names of the insurers and insured parties,
the amounts of such insurance and applicable deductibles, the risks covered
thereby and the expiration dates thereof.
Section 7.8. Filing. Recordation and Release of the Mortgage and Security
------------------------------------------------------------
Instruments. The Trustee shall cause any and all continuation financing
- -----------
statements to be filed in such manner and in such places as may be required by
law in order to
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fully preserve and protect the security of the owners of the Bonds and the
rights of the Trustee hereunder.
Section 7.9. Accounting Records and Financial Statements; Access to Real
-----------------------------------------------------------
Estate. (a) The Partnership covenants and agrees at all times to keep, or
- ------
cause to be kept, proper books of record and account, prepared in accordance
with generally accepted accounting principles, in which complete and accurate
entries shall be made of all transactions of or in relation to the business,
properties and operations of the Partnership. Such books of record and account
shall be available for inspection by the Trustee at reasonable hours and under
reasonable circumstances.
(b) The Partnership further covenants and agrees to furnish the Trustee
and any requesting Bondholder, within 120 days after the end of each Fiscal
Year, with copies of its audited financial statements, together with (1) the
report and opinion of a certified public accountant stating that the financial
statements have been prepared in accordance with generally accepted accounting
principles and that the examinations made of the Partnership's accounting
records were performed in accordance with generally accepted auditing standards,
and (2) a certificate of an Authorized Officer of the Partnership stating that
no event that constitutes, or which would, with giving of notice or the lapse of
time, or both, constitute an Event of Default has occurred and is continuing as
of the end of such Fiscal Year, or specifying the nature of such event and the
actions taken and proposed to be taken by the Partnership to cure such default.
(c) The Trustee shall have such rights of access to the Real Estate as may
be reasonably necessary to protect the interests of the Holders hereunder.
Section 7.10. Damage, Destruction and Condemnation. In the event the Real
------------------------------------
Estate is destroyed (in whole or in part) or is damaged by fire or other
casualty or title to or any interest in, or the temporary use of, the Real
Estate or any part thereof shall be taken under the exercise of the power of
eminent domain by any governmental body, the Net Proceeds from such event shall
be deposited with the Trustee and held in a separate trust fund. All Net
Proceeds so deposited shall be applied in one or more of the following ways in
accordance with a certificate of an Authorized Representative of the Partnership
furnished to the Trustee:
(a) To the prompt repair, restoration, modification or improvement of
the Real Estate, or portions thereof, affected to a condition similar or
comparable to the condition existing prior to the damage, destruction or
condemnation. Any balance of the Net Proceeds remaining
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after such work has been completed shall be paid to the Partnership.
(b) To the optional redemption of the Bonds in accordance with
Section 5.1 hereof, provided that no part of the Net Proceeds may be
applied for such redemption unless (l) all of the Bonds are to be redeemed
or (2) in the event that less than all of the Bonds are to be redeemed, the
Partnership shall furnish to the Trustee a certificate of an Authorized
Representative of the Partnership stating that (i) the portion of the Real
Estate affected by the damage, destruction or condemnation is not essential
to the continued use of the Real Estate by the Partnership or (ii) a
Termination Date with respect to the affected Apartment Homes has occurred
and the Bonds relating thereto are being redeemed.
The Partnership shall not be required to pay any cost in excess of the Net
Proceeds held by the Trustee.
Section 7.11. Use of Real Estate and Equipment. Notwithstanding the
--------------------------------
Mortgage and Security interest granted to the Trustee pursuant to this Indenture
or anything else herein to the contrary, so long as no Event of Default shall
have occurred and be continuing, the Partnership shall have an absolute right to
possess and control the Real Estate and to collect the revenues and receipts
there from and to expend and dispose of the revenues and receipts as it
determines in its sole discretion. The Partnership may remove and sell or
otherwise use or dispose of the Equipment and fixtures when the same have become
obsolete, worn out or unnecessary for the operation of the Village. The
property so removed shall cease to be subject to the lien of this Indenture.
Upon the written request of the Partnership, the Trustee shall execute any
documents which may be required in connection with any such sale or other
disposition and any documents which may be necessary to confirm that such
property is no longer part of the Trust Estate.
Section 7.12. Partnership Right of Set-off. Disputed Amounts to Be Held
----------------------------------------------------------
by Trustee. In addition to any other right available at law or in equity or by
- ----------
statute, the Partnership shall have the right to set-off against the principal
amount of any Bond to be paid pursuant to Section 7.1 hereof any amounts due and
owing to the Partnership by the Resident or Holder of such Bond, including
without limitation any deferred fees or other amounts payable by the Resident to
the Partnership pursuant to the provisions of the Residency Agreement, provided
that the Partnership shall have advised Resident pursuant to the notice of
redemption (or maturity) required under Section 6.3 hereof of all such amount(s)
due and owing to Partnership and the nature of any fees or charges included
therein. Unless such amounts have been paid prior to maturity or redemption of
the Bonds, as the case
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may be, the Partnership may deduct such amounts from the payment of principal of
the Bond. In the event a Holder disputes any amount(s) set-off by the
Partnership as permitted hereunder, the Partnership shall promptly inform the
Trustee of such dispute and provide the Trustee with copies of all
correspondence relating thereto. The Partnership shall pay over to the Trustee
the disputed amount, which shall remain on deposit with the Trustee until the
Trustee shall receive (i) a written statement signed by both the Holder and an
Authorized Representative of the Partnership, or (ii) an instruction from a
court of competent jurisdiction, directing the payment of such funds.
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default. The following shall be "Events of
-----------------
Default" under this Indenture, and the term "Event of Default" or "Default"
shall mean any one or more of the following events:
(a) failure of the Partnership to pay or cause to be paid any of the
payments required to be paid under this Indenture or the Bonds within ten
(10) days of the date due; or
(b) failure of the Partnership to perform any other covenant,
condition or provision hereof and to remedy such default within ninety (90)
days after written notice thereof from the Trustee to the Partnership; or
(c) if the Partnership admits insolvency or bankruptcy or its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors or applies for or consents to the appointment of a
trustee or receiver; or
(d) if bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any
bankruptcy law or similar law for the relief of debtors, are instituted
against the Partnership and are not dismissed, stayed or otherwise
nullified within ninety (90) days after such institution.
Section 8.2. Acceleration. Upon the occurrence and continuation of an
------------
Event of Default, the Trustee may, and upon the written request of the holders
of not less than twenty-five percent (25%) in aggregate principal amount of the
Bonds outstanding shall, after being indemnified at its option pursuant to
Section 9.1(k) hereof, hereunder declare the entire principal amount of the
Bonds then outstanding hereunder immediately due
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and payable, and the said entire principal shall thereupon become and be
immediately due and payable.
Section 8.3. Additional Remedies. In the case of the happening of an
-------------------
Event of Default, the Trustee may, and upon the written request of the Holders
of not less than twenty-five percent (25%) in aggregate principal amount of the
Bonds then outstanding), and upon being indemnified at its option pursuant to
Section 9.l(k) hereof, shall (a) proceed to protect and enforce its rights and
the rights of the holders of the Bonds under this Indenture by a suit or suits
in equity or at law, either for the specific performance of any covenant or
agreement contained herein or therein or in aid of the execution of any power
herein or therein granted, or for the foreclosure of the mortgage granted
pursuant to this Indenture (as more specifically stated below), or for the
enforcement of any other appropriate legal or equitable remedy, as the Trustee
may deem most effectual to protect and enforce any of the rights or interests of
the Holders of the Bonds under the Bonds or this Indenture; (b) to the extent
permitted by law, exercise the Statutory Power of Sale and sell the Trust
Estate, or any part or parts thereof, to pay the indebtedness secured hereby;
and (c) exercise any remedies available to a secured party under the
Massachusetts Uniform Commercial Code.
While in possession of such property the Trustee shall render annually to
the Partnership, a summarized statement of income and expenditures in connection
therewith.
Upon any sale of the Trust Estate under any of the provisions of this
Article, all Bonds then outstanding, if not previously due, shall forthwith be
and become due and payable.
At any sale of the Trust Estate, any Bondholder or the Trustee may bid for
and lease or purchase, as the case may be, the property offered for such lease
or sale, may make payment on account thereof as herein provided, and, upon
compliance with the terms of such lease or sale, may hold, retain and dispose of
such property without further accountability therefor.
No remedy by the terms of this Indenture conferred upon or reserved to the
Trustee (or to the Holders) is intended to be exclusive of any other remedy, but
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given to the Trustee or to the Holders hereunder or now or
hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any
default or Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such default or Event of Default or acquiescence
therein; and every such right
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and power may be exercised from time to time and as often as may be deemed
expedient.
No waiver of any default or Event of Default hereunder, whether by the
Trustee or by the Holders, shall extend to or shall affect any subsequent
default or Event of Default or shall impair any rights or remedies consequent
thereon.
Section 8.4. Right of Holders to Direct Proceedings. Anything in this
--------------------------------------
Indenture to the contrary notwithstanding, the Holders of a majority in
aggregate principal amount of Bonds then outstanding shall have the right, at
any time, by an instrument or instruments in writing executed and delivered to
the Trustee, to direct the time, the method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other
proceedings hereunder; provided, that such direction shall not be otherwise than
in accordance with the provisions of law and of this Indenture.
Section 8.5. Application of Moneys. All moneys received by the Trustee
---------------------
pursuant to any right given or action taken under the provisions of this Article
shall be applied as follows:
(a) Unless the principal of all the Bonds shall have become or shall
have been declared due and payable, all such moneys shall be applied to the
payment to the persons entitled thereto of the unpaid principal of the
Bonds which shall have become due (other than Bonds called for redemption
for the payment of which moneys are held pursuant to the provisions of this
Indenture), in the order of their due dates, with interest at the Late
Payment Rate on such Bonds from the respective dates upon which they become
due, and, if the amount available shall not be sufficient to pay in full
Bonds due on any particular date, together with such interest, then to the
payment ratably, according to the amount of principal due on such date, to
the persons entitled thereto without any discrimination or privilege.
(b) If the principal of all the Bonds shall have become due or shall
have been declared due and payable, all such moneys shall be applied to the
payment of the principal then due and unpaid upon the Bonds, with interest
at the Late Payment Rate from the date they become due without preference
or priority of principal over interest or of interest over principal, or of
any Bond over any other Bond, ratably, according to the amounts due, to the
persons entitled thereto without any discrimination or privilege.
(c) If the principal of all the Bonds shall have been declared due
and payable, and if such declaration shall thereafter have been rescinded
and annulled under the
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provisions of Section 8.9 hereof then, subject to the provisions of
Subsection (b) of this Section in the event that the principal of all the
Bonds shall later become due or be declared due and payable, the moneys
shall be applied in accordance with the provisions of subsection (a) of
this Section.
Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times, and from time to time, as
the Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the date upon which such application is to be made.
The Trustee shall give such notice as it may deem appropriate on the deposit
with it of any such moneys and of the fixing of any such date, and shall not be
required to make payment to the Holder of any Bond until such Bond shall be
presented to the Trustee for appropriate endorsement or for cancellation or
destruction if fully paid.
Whenever all principal of and interest on all Bonds have been paid under
the provisions of this Section 8.5 and all expenses and charges of the Trustee
have been paid, any balance remaining in any of the Funds established hereunder
shall be paid to the Partnership.
Section 8.6. Remedies Vested in Trustee. All rights of action (including
--------------------------
the right to file proof of claims) under this Indenture or under any of the
Bonds may be enforced by the Trustee without the possession of any of the Bonds
or the production thereof in any trial or other proceedings relating thereto and
any such suit or proceeding instituted by the Trustee shall be brought in its
name as Trustee without the necessity of joining as plaintiffs or defendants any
Holders of the Bonds, and any recovery of judgment shall be for the equal
benefit of the Holders of the Outstanding Bonds.
Section 8.7. Rights and Remedies of Holders. No owner of any Bond shall
------------------------------
have any right to institute any suit, action or proceeding in equity or at law
for the enforcement of this Indenture or for the execution of any trust thereof
or for the appointment of a receiver or any other remedy hereunder, unless a
default has occurred of which the Trustee has been notified as provided in
subsection (f) of Section 9.1, or of which by said subsection it is deemed to
have notice, nor unless also such default shall have become an Event of Default
and the Holders of twenty-five percent (25%) in aggregate principal amount of
Bonds then outstanding shall have made written request to the Trustee and shall
have offered reasonable opportunity either to proceed to exercise the powers
hereinbefore granted or to institute such action, suit or proceeding in its own
name, nor unless also they
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have offered to the Trustee indemnity as provided in Section 8.1 nor unless the
Trustee shall thereafter fail or refuse to exercise the powers hereinbefore
granted or to institute such action, suit or proceeding in its, his or their own
name or names; and such notification, request and offer of indemnity are hereby
declared in every case at the option of the Trustee to be conditions precedent
to the execution of the powers and trusts of this Indenture, and to any action
or cause of action for the enforcement of this Indenture, or for the appointment
of a receiver or for any other remedy hereunder; it being understood and
intended that no one or more Holders of the Bonds shall have any right in any
manner whatsoever to affect, disturb or prejudice the lien of this Indenture by
its, his or their action or to enforce any right hereunder except in the manner
herein provided, and that all proceedings at law or in equity shall be
instituted, had and maintained in the manner herein provided and for the equal
benefit of the Holders of all Bonds then outstanding. Nothing in this Indenture
contained shall, however, affect or impair the right of any Holder to enforce
the payment of the principal of and interest on any Bond at or after maturity
thereof, or the obligation of the Partnership to pay the principal of and
interest of each of the Bonds issued hereunder to the respective Holders thereof
at the time, place, from the source and in the manner in the Bonds expressed.
Section 8.8. Termination of Proceedings. In case the Trustee shall have
--------------------------
proceeded to enforce any right under this Indenture by the appointment of a
receiver, or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely, then and in
every such case the Partnership and the Trustee shall be restored to their
former positions and rights hereunder with respect to the Trust Estate, and all
rights, remedies and powers of the Trustee shall continue as if no such
proceedings had been taken.
Section 8.9. Waivers of Events of Default. The Trustee may at its
----------------------------
discretion waive any Event of Default hereunder and its consequences and rescind
any declaration of acceleration of principal, and shall do so upon the written
request of the owners of (l) at least fifty one percent (51%) in aggregate
principal amount of all Outstanding Bonds in respect of which Event of Default
in the payment of principal exists or (2) at least twenty five percent (25%) in
aggregate principal amount of all Outstanding Bonds in the case of any other
Event of Default; provided, however, that there shall not be waived any Event of
Default in the payment of the principal of any Outstanding Bonds unless prior to
such waiver or rescission, all arrears of principal (other than principal on the
Bonds which became due and payable by declaration of acceleration) and all
expenses of the Trustee and in connection with such Event of Default shall have
been paid or provided for. In case of any such waiver or rescission, or in case
any proceeding taken by the
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Trustee on account of any such Event of Default shall have been discontinued or
abandoned or determined adversely, then and in every such case the Partnership,
the Trustee and the Bondholders shall be restored to their former positions and
rights hereunder, respectively, but no such waiver or rescission shall extend to
any subsequent or other Event of Default, or impair any right consequent
thereon.
ARTICLE 9
THE TRUSTEE
Section 9.1. Acceptance of the Trusts. The Trustee hereby accepts the
------------------------
trusts imposed upon it by this Indenture, and agrees to perform such duties as
are specifically set forth herein, but no implied covenants or obligations shall
be read into this Indenture against the Trustee.
(a) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers or
employees but shall be answerable for the conduct of the same in accordance
with the standard specified above, and shall be entitled to advice of
counsel concerning all matters of trusts hereof and the duties hereunder,
and may in all cases pay such reasonable compensation to all such
attorneys, agents, receivers and employees as may reasonably be employed in
connection with the trusts hereof. The Trustee may act upon the opinion or
advice of any attorney (who may be the attorney or attorneys for the
Partnership). The Trustee shall not be responsible for any loss or damage
resulting from any action or nonaction in good faith in reliance upon such
opinion or advice.
(b) The Trustee shall not be responsible for any recital herein, or
in the Bonds (except in respect to the certificate of the Trustee endorsed
on the Bonds), or for insuring the property herein conveyed or collecting
any insurance moneys, or for the validity of the execution by the
Partnership of this Indenture or of any supplements thereto or instruments
of further assurance, or for the sufficiency of the security for the Bonds
issued hereunder or intended to be secured hereby, or for the value or
title of the Real Estate or otherwise as to the maintenance of the security
hereof; and the Trustee shall not be bound to ascertain or inquire as to
the performance or observance of any covenants, conditions or agreements on
the part of the Partnership; but the Trustee may require of the Partnership
full information and advice as to the performance of the covenants,
conditions and agreements aforesaid as to the condition of the Real Estate.
The Trustee shall not be
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<PAGE>
responsible or liable for any loss suffered in connection with any
investment of funds made by it in accordance with the provisions of this
Indenture.
(c) The Trustee shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram or other
paper or documents believed to be genuine and correct and to have been
signed or sent by the proper person or persons. Any action taken by the
Trustee pursuant to this Indenture upon the request or authority or consent
of any person who at the time of making such request or giving such
authority or consent is the owner of any Bond, shall be conclusive and
binding upon all future owners of the same Bond and upon Bonds issued in
exchange therefor or in place thereof.
(d) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the Trustee
shall be entitled to rely upon a written request or a certificate of an
Authorized Representative of the Partnership.
(e) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not
be answerable for other than its negligence or willful default.
(f) The Trustee shall not be required to take notice or be deemed to
have notice of any default hereunder except failure by the Partnership to
make any of the payments or furnish any documents to the Trustee required
pursuant to the provisions of this Indenture unless the Trustee shall be
specifically notified in writing of such default by the Holders of at least
twenty-five percent (25%) in aggregate principal amount of all Bonds then
outstanding and all notices or other instruments required by this Indenture
to be delivered to the Trustee must, in order to be effective, be delivered
at the principal corporate trust office of the Trustee, and in the absence
of such notice so delivered the Trustee may conclusively assume there is no
default except as aforesaid.
(g) The Trustee shall not be personally liable for any debts
contracted or for damages to persons or to personal property injured or
damaged, or for salaries or nonfulfillment of contracts during any period
in which it may be in possession of or managing the Real Estate.
(h) At any and all reasonable times, the Trustee, and its duly
authorized agents, attorneys, experts, engineers, accountants and
representatives, shall have the right to fully inspect any and all of the
Real Estate, including all
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<PAGE>
books, papers and records of the Partnership pertaining to the Real Estate
and the Bonds, and to take copies of Residency Agreements and other
documents in regard thereto.
(i) The Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in
respect of the premises.
(j) Notwithstanding anything elsewhere in this Indenture contained,
the Trustee shall have the right, but shall not be required, to demand, in
respect of the authentication of any Bonds, the withdrawal of any cash, the
release of any property, or any action whatsoever within the purview of
this Indenture, any showings, certificates, opinions, appraisals or other
information, or corporate action or evidence thereof, in addition to that
by the terms hereof required as a condition of such action by the Trustee
deemed desirable for the purpose of establishing the right of the
Partnership to the authentication of any Bonds, the withdrawal of any cash,
or the taking of any other action by the Trustee.
(k) Before taking any action under this Section 9.l, the Trustee may
require that a satisfactory indemnity bond be furnished for the
reimbursement of all expenses to which it may be put and to protect it
against all liability, except liability which is adjudicated to have
resulted from its negligence or willful default in connection with any
action so taken.
(l) All moneys received by the Trustee or any paying agent shall,
until used or applied or invested as herein provided, be held in trust for
the purposes for which they were received but need not be segregated from
other funds except to the extent required by law. Neither the Trustee nor
any paying agent shall be under any liability for interest on any moneys
received hereunder except as such may be agreed upon.
(m) If any event of default under this Indenture shall have occurred
and be continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and shall use the same degree of care as a
prudent man would exercise or use in the circumstances in the conduct of
his own affairs.
Section 9.2. Fees, Charges and Expenses of Trustee. The Trustee shall be
-------------------------------------
entitled to payment and/or reimbursement for reasonable fees for its services
rendered hereunder and all advances, counsel fees and other expenses reasonably
and necessarily made or incurred by the Trustee in connection with such
services, including its expenses incurred under Sections 9.4
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and 9.5. The Trustee shall be entitled to payment and reimbursement for the
reasonable fees and charges of the Trustee as Paying Agent and bond registrar
for the Bonds as hereinabove provided. The Trustee shall have a right of payment
prior to payment on account of principal of any Bond for the foregoing advances,
fees, costs and expenses incurred.
Section 9.3. Successor Trustee. Any corporation or association into which
-----------------
the Trustee may be converted or merged, or with which it may be consolidated, or
to which it may sell or transfer its corporate trust business and assets as a
whole or substantially as a whole, or any corporation or association resulting
from any such conversion, sale, merger, consolidation or transfer to which it is
a party, ipso facto, shall be and become successor Trustee hereunder and vested
with all of the title to the whole property or Trust Estate and all the trusts,
powers, discretions, immunities, privileges and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 9.4. Resignation by the Trustee. The Trustee and any successor
--------------------------
Trustee may at any time resign from the trusts hereby created by giving thirty
(30) days' written notice to the Partnership and by first class mail to each
Holder of Bonds as shown by the list of Holders required by this Indenture to be
kept at the office of the Trustee, and such resignation shall take effect at the
later of the end of such thirty (30) days, or upon the appointment of a
successor Trustee by the Holders or by the Partnership and the acceptance of
such appointment by such successor. Such notice to the Partnership may be
served personally or sent by registered or certified mail. If a successor
Trustee has not accepted appointment within thirty (30) days after the date of
such notice of resignation, the Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
Section 9.5. Removal of the Trustee. The Trustee may be removed at any
----------------------
time, by an instrument or concurrent instruments in writing delivered to the
Trustee and signed by the owners of a majority in aggregate principal amount of
Bonds then outstanding.
Section 9.6. Appointment of Successor Trustee by the Holders; Temporary
----------------------------------------------------------
Trustee. In case the Trustee hereunder shall resign or be removed, or be
- -------
dissolved, or shall be in course of dissolution or liquidation, or otherwise
become incapable of acting hereunder, or in case it shall be taken under the
control of any public officer or officers, or of a receiver appointed by a
court, a successor may be appointed by the owners of a majority in aggregate
principal amount of Bonds then outstanding, by an instrument or concurrent
instruments in writing signed by such
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owners, or by their attorneys in fact, duly authorized; provided, nevertheless,
that in case of such vacancy the Partnership, by an instrument executed and
signed by its General Partners, may appoint a temporary Trustee to fill such
vacancy until a successor Trustee shall be appointed by the Holders in the
manner above provided, and any such temporary Trustee so appointed by the
Partnership shall immediately and without further act be superseded by the
Trustee so appointed by such Holders; provided, however, if no successor Trustee
shall be appointed by the Holders within six (6) months after commencement of
the vacancy, the temporary Trustee appointed by the Partnership shall become the
successor Trustee. Every such Trustee appointed pursuant to the provisions of
this Section shall be a trust company or bank in good standing, within the
State, having a reported capital and surplus of not less than $50,000,000, if
there be such an institution willing, qualified and able to accept the trust
upon reasonable or customary terms.
Section 9.7. Concerning Any Successor Trustees. Every successor Trustee
---------------------------------
appointed hereunder shall be a bank or trust company and shall execute,
acknowledge and deliver to its predecessor and also to the Partnership an
instrument in writing accepting such appointment hereunder, and thereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, trusts, duties and
obligations of its predecessor; but such predecessor shall, nevertheless, on the
written request of the Partnership, or of its successor, execute and deliver an
instrument transferring to such successor Trustee all the estates, properties,
rights, powers and trusts of such predecessor hereunder; and every predecessor
Trustee shall deliver all securities and moneys held by it as Trustee hereunder
to its successor. Should any instrument in writing from the Partnership be
required by any successor Trustee for more fully and certainly vesting in such
successor the estate, rights, powers and duties hereby vested or intended to be
vested in the predecessor, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Partnership. The
resignation of any Trustee and the instrument or instruments removing any
Trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article shall be filed and/or recorded by the
successor Trustee in each recording office, if any, where the Indenture shall
have been filed and/or recorded.
Section 9.8. Right of Trustee To Pay Taxes, Other Charges and Insurance
----------------------------------------------------------
Premiums. In case any tax, assessment or governmental or other charge upon, or
- --------
insurance premium with respect to, any part of the Trust Estate is not paid as
required herein, the Trustee may pay such tax, assessment or governmental or
other charge or insurance premium, without prejudice, however, to any rights of
the Trustee or the Holders hereunder arising in
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<PAGE>
consequence of such failure; and any amount at any time so paid under this
Section, with interest thereon from the date of payment at the Late Payment
Rate, shall be given a preference in payment over any payment of principal of
the Bonds, and shall be paid out of the proceeds of revenues collected
hereunder, if not otherwise caused to be paid; but the Trustee shall be under no
obligation to make any such payment unless it shall have been requested to do so
by the Holders of at least twenty-five percent (25%) in aggregate principal
amount of Bonds then outstanding and shall have been provided with adequate
funds for the purpose of such payment.
Section 9.9. Trustee Protected in Relying Upon Resolution Etc. The
------------------------------------------------
resolutions, opinions, certificates and other instruments provided for in this
Indenture may be accepted by the Trustee as conclusive evidence of the facts and
conclusions stated therein and shall be full warrant, protection and authority
to the Trustee for the release of property and the withdrawal of cash hereunder.
Section 9.10. Trust Estate May Be Vested in Separate or Co-Trustee. It is
----------------------------------------------------
the purpose of this Indenture that there shall be no violation of any law of any
jurisdiction (including particularly the law of the State) denying or
restricting the right of banking corporations or associations to transact
business as Trustee in such jurisdiction. It is recognized that in case of
litigation under this Indenture, and in particular in case of the enforcement of
either on default, or in case the Trustee deems that by reason of any present or
future law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee or hold title to the Trust Estate, as
herein granted, or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that the Trustee appoint an additional
individual or institution as a separate or co-trustee. In the event that the
Trustee appoints an additional individual or institution as a separate or co-
trustee, each and every remedy, power, right, claim, demand, cause of action,
immunity, estate, title, interest and lien expressed or intended by this
Indenture to be exercised by or vested in or conveyed to the Trustee with
respect thereto shall be exercisable by and vest in such separate or co-trustee,
and every covenant and obligation necessary to the exercise thereof by such
separate or co-trustee shall run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Partnership
be required by the separate trustee or co-trustee so appointed by the Trustee
for more fully and certainly vesting in and confirming to him or it such
properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Partnership. In case
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any separate trustee or co-trustee, or a successor to either, shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, trusts, duties and obligations of such separate trustee or co-trustee,
so far as permitted by law, shall vest in and be exercised by the Trustee until
the appointment of a new trustee or successor to such separate trustee or co-
trustee.
Section 9.11. Indemnification of Trustee. Notwithstanding its insurance
--------------------------
agreements, the Partnership shall to the extent legally permissible indemnify
and save harmless the Trustee and its directors, officers, employees and agents
against and from (a) all claims by or on behalf of any person arising out of (i)
any condition of the Trust Estate, or (ii) the construction, reconstruction,
improvement, use, occupancy, conduct or management of or from any work or
anything done or omitted to be done in or about the Trust Estate, or (iii) any
accident, injury or damage to any person occurring in or about the Trust Estate,
or (iv) any breach or default by the Partnership of any of its obligations
hereunder, or (v) any act or omission of the Partnership or any of its agents,
contractors, servants, employees, or licensees, (vi) the offering, issuance,
sale or resale of the Bonds, or (vii) any claim or proceeding involving the
Trustee's administration of the trust hereunder except those arising from the
Trustee's gross negligence or wilful misconduct, and (b) all costs, counsel
fees, expenses or liability reasonably incurred in connection with any such
claim or any action or proceeding brought thereon. If any action or proceeding
is brought against the Trustee or any such director, officer, employee or agent
by reason of any indemnified claim, the Partnership upon notice from the
affected party shall resist or defend such action or proceeding. Subject to the
foregoing, the Trustee shall cooperate and join with the Partnership at the
expense of the Partnership as may be reasonably required in connection with any
action taken or defended by the Partnership.
ARTICLE 10
SUPPLEMENTAL INDENTURES AND AMENDMENTS
Section 10.1. Supplemental Indentures Not Requiring Consent of Holders.
--------------------------------------------------------
The Partnership and the Trustee may without the consent of, or notice to, any of
the Holders enter into an indenture or indentures supplemental to this
Indenture, as shall not be inconsistent with the terms and provisions hereof,
for any one or more of the following purposes:
(a) to cure any ambiguity or formal defect or omission in this
Indenture;
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(b) to grant to or confer upon the Trustee for the benefit of the
Holders any additional rights, remedies, powers or authority;
(c) to subject to the lien and pledge of this Indenture additional
revenues, properties or collateral;
(d) to effectuate the transfer by the Partnership to a purchaser or
successor entity of ownership of the Trust Estate upon receipt by the
Trustee of an opinion of Counsel to the effect that upon the sale,
assignment or other transfer, the obligations of the Partnership will
constitute the valid, legal and binding obligations of the assignee or
transferee entity subject to customary qualifications; and
(e) to release from the lien of this Indenture any vacant land or air
rights or to release easements in or over the Real Estate; provided,
however, that such release shall not adversely affect the compliance of the
Real Estate remaining after such release with all applicable laws,
ordinances, orders, decrees, rules, regulations and requirements of
governmental authorities.
Section 10.2. Supplemental Indentures and Amendments Requiring Consent of
-----------------------------------------------------------
Holders. Exclusive of supplemental indentures covered by Section 10.1 hereof
- -------
and subject to the terms and provisions contained in this Section, and not
otherwise, the Holders of not less than 51% in aggregate principal amount of the
Bonds then outstanding shall have the right, from time to time, anything
contained in this Indenture to the contrary notwithstanding, to consent to and
approve the execution by the Partnership and the Trustee of such other indenture
or indentures supplemental hereto as shall be deemed necessary and desirable by
the Partnership for the purpose of modifying, altering, amending, adding to or
rescinding, in any particular, any of the terms or provisions contained in this
indenture or in any supplemental indenture or amendment; provided, however, that
nothing in this Section contained shall permit, or be construed as permitting
(a) an extension of the stated maturity or mandatory redemption date or a
reduction in the principal amount of any Bond, without the consent of the Holder
of such Bond, or (b) a reduction in the aforesaid aggregate principal amount of
Bonds the Holders of which are required to consent to any such supplemental
indenture or amendment, without the consent of the Holders of all the Bonds at
the time outstanding which would be affected by the action to be taken, or (c) a
modification of the rights, duties or immunities of the Trustee, without the
written consent of the Trustee.
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<PAGE>
ARTICLE 11
SATISFACTION OF THIS INDENTURE
Satisfaction of This Indenture. If the Partnership shall pay and discharge
------------------------------
the entire indebtedness on all Bonds outstanding in any one or more of the
following ways:
(a) by paying or causing to be paid in lawful moneys of the United
States the principal of all Bonds outstanding, as and when the same become
due upon maturity or redemption; or
(b) by delivering to the Trustee, for cancellation by it, all Bonds
outstanding;
and if the Partnership shall also pay or cause to be paid all other sums payable
hereunder by the Partnership, then and in that case, this Indenture shall cease,
determine and become null and void, and thereupon the Trustee shall, upon the
written request of an Authorized Representative of the Partnership, and upon
receipt by the Trustee of a certificate of an Authorized Representative of the
Partnership and an opinion of counsel, each stating that in the opinion of the
signers all conditions precedent to the satisfaction and discharge of this
Indenture have been complied with, forthwith execute proper instruments
acknowledging satisfaction of and discharging this Indenture. The satisfaction
and discharge of this Indenture shall be without prejudice to the rights of the
Trustee to charge and be reimbursed by the Partnership for any expenditures
which it may thereafter incur in connection herewith.
Any moneys, funds, securities or other property remaining on deposit in any
Fund or investment under this Indenture shall, upon the full satisfaction of
this Indenture, forthwith be transferred, paid over and distributed to the
Partnership.
ARTICLE 12
MANNER OF EVIDENCING OWNERSHIP OF BONDS
Any request, direction, consent or other instrument provided by this
Indenture to be signed and executed by the Holders may be in any number of
concurrent writings of similar tenor and may be signed or executed by such
Holders in person or by agent appointed in writing. Proof of the execution of
any such request, direction or other instrument or of the writing appointing any
such agent and of the ownership of Bonds, if made in the following manner, shall
be sufficient for any of the purposes of this Indenture and shall be conclusive
in favor of
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<PAGE>
the Trustee with regard to any action taken by them, or either of them, under
such request or other instrument, namely:
(a) The fact and date of the execution by any person of any such
writing may be proved by the certificate of any officer in any jurisdiction
who by law has power to take acknowledgments in such jurisdiction, that the
person signing such writing acknowledged before him the execution thereof,
or by the affidavit of a witness of such execution; and
(b) The ownership of Bonds registered as to principal shall be proved
by the register of such Bonds.
Any action taken or suffered by the Trustee pursuant to any provision of
this Indenture, upon the request or with the assent of any person who at the
time is the Holder of any Bond or Bonds, shall be conclusive and binding upon
all future Holders of the same Bond or Bonds.
ARTICLE 13
MISCELLANEOUS
Section 13.1. Limitation of Rights. With the exception of rights herein
--------------------
expressly conferred, nothing expressed or mentioned in or to be implied from
this Indenture or the Bonds is intended or shall be construed to give to any
person or company other than the parties hereto, and the Holders of the Bonds,
any legal or equitable right, remedy or claim under or in respect to this
Indenture or any covenants, conditions and provisions hereof being intended to
be and being for the sole and exclusive benefit of the parties hereto and the
Holders of the Bonds as herein provided.
Section 13.2. Unclaimed Moneys. Any moneys deposited with the Trustee by
----------------
the Partnership in accordance with the terms and covenants of this Indenture, in
order to redeem or pay the Bonds in accordance with the provisions of this
Indenture, and remaining unclaimed by the registered owners of the Bonds for six
(6) years after the date fixed for redemption or of maturity, as the case may
be, shall, if the Partnership is not at the time to the knowledge of the Trustee
in default with respect to any of the terms and conditions of this Indenture, or
in the Bonds contained, be repaid by the Trustee to the Partnership upon its
written request therefor; and thereafter registered owners of the Bonds shall be
entitled to look only to the Partnership for payment thereof; provided, however,
that the Trustee, before being required to make any such repayment, shall, at
the expense of the Partnership, effect publication in a newspaper of general
circulation in the area in which the Village is located of a
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<PAGE>
notice to the effect that said moneys have not been so applied and that after
the date named in said notice any unclaimed balance of said moneys then
remaining shall be returned to the Partnership. Prior to delivery of such funds,
the Partnership will be required to covenant and agree to indemnify and save the
Trustee harmless from any and all loss, costs, liability and expense suffered or
incurred by the Trustee by reason of having returned any such moneys to the
Partnership as herein provided.
Section 13.3. Severability. If any provision of this Indenture shall be
------------
held or deemed to be or shall, in fact, be inoperative or unenforceable as
applied in any particular case in any jurisdiction or jurisdictions or in all
jurisdictions, or in all cases because it conflicts with any other provision or
provisions or any constitution or statute or rule of public policy, or for any
other reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative or unenforceable to any extent whatever.
The validity of any one or more phrases, sentences, clauses or Sections in
this Indenture contained shall not affect the remaining portions of this
Indenture or any part thereof.
Section 13.4. Payments on Other than Business Days. In any case in which
------------------------------------
a payment under this Indenture is due on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day with the same force and
effect as if made on the date due.
Section 13.5. Notices. It shall be sufficient service of any notice to
-------
the Partnership or the Trustee or if the same shall be duly mailed by registered
or certified mail and addressed, if to the Partnership, to
New Pond Village Associates
c/o NVHS Management Services, general partner
45 Walpole Street
Norwood, Massachusetts 02032
Attn: President
New Pond Village Associates
c/o First Healthcare Corporation, general partner
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Attn: General Counsel
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<PAGE>
with a copy to:
Ronald B. Schram, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
and if to the Trustee, to The First National Bank of Boston, Mail Stop 45-02-15,
150 Royal Street, Canton, Massachusetts 02021, Attention: Corporate Trust
Division. The Partnership and the Trustee may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates or other communications shall be sent.
Section 13.6. Counterparts. This Indenture may be simultaneously executed
------------
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
Section 13.7. Applicable Law. This Indenture shall be governed
--------------
exclusively by the applicable laws of The Commonwealth of Massachusetts.
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<PAGE>
IN WITNESS WHEREOF, NEW POND VILLAGE ASSOCIATES has caused these presents
to be signed in its name and behalf by its General Partners, and to evidence its
acceptance of the trusts hereby created The First National Bank of Boston has
caused these presents to be signed in its name and behalf by its Authorized
Signatory, all as of the day and year first above written.
NEW POND VILLAGE ASSOCIATES
By NVHS Management Services, Inc.
By /s/ Frank S Crane
----------------------------------
Title: President
By FIRST HEALTHCARE CORPORATION
By /s/ Joan E Thompson
---------------------------------
Title: Authorized Signatory
THE FIRST NATIONAL BANK
OF BOSTON
By /s/ Kathryn L Gannon
----------------------------------
Authorized Signatory
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF Norfolk )
On this 26th day of November, 1990, before me, the undersigned, a notary
public duly qualified for said County and State, came Frank S Crane III
, who is personally known to me to be such officer and the same person who
executed the foregoing Trust Indenture on behalf of said General Partner of New
Pond Village Associates, and he acknowledges the execution of the same to be the
voluntary act and deed of said General Partner and its voluntary act and deed as
such officers.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
___________________________________
Notary Public
MARIE C. UDAS, NOTARY PUBLIC
MY COMMISSION EXPIRES
MAY 21, 1993
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF )
On this 26th day of November, 1990, before me, the undersigned, a notary
public duly qualified for said County and State, came Kathyrn L. Gannon of
___________ and _______________, Authorized Signatory of this Corporation who is
personally known to me to be such officers and the same persons who executed the
foregoing Trust Indenture on behalf of said General Partner of New Pond Village
Associates, and he acknowledges the execution of the same to be the voluntary
act and deed of said General Partner and its voluntary act and deed as such
officers.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
___________________________________
Notary Public
My Exp: March 15, 1996
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF )
On this 26th day of NOVEMBER, 1990, before me, the undersigned, a notary
public duly qualified for said County and State, came KATHRYN L. GANNON, of
, and , Authorized Signatory of this
corporation, who are personally known to me to be such officers and the same
persons who executed the foregoing Trust Indenture on behalf of this
corporation, and they acknowledge the execution of the same to be the voluntary
act and deed of the corporation and their voluntary act and deed as such
officers.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
___________________________________
Notary Public
My Exp: March 15, 1996
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<PAGE>
EXHIBIT "A"
Two parcels of land located in Walpole, Massachusetts as described as
follows:
PARCEL ONE
- ----------
That certain parcel of land being the aggregate of the three parcels of
land ("Lot 1, Area 844,838 S.F., 19.40 Ac.", "Lot 2, Area 425,606 S.F., 9.77
Ac." and "Proposed Way 'A' (46' wide)") shown on a plan entitled "Plan of Land
in Walpole, Mass." dated March 20, 1986 by Norwood Engineering Co., Inc., as
recorded with the Norfolk Registry of Deeds in Plan Book 372 as Plan No. 1024 of
1988, bounded and described as follows:
SOUTHERLY by land shown on said plan as now or formerly of
Margaret H. Jelinek in four courses measuring
together one thousand five hundred sixty-eight and
82/100 (1568.82) feet;
NORTHWESTERLY by land now or formerly of Neponset Reservoir
Corporation, Charles C. and Phyllis A. McDonough
and Martin and Mary A. Conroy in four courses
measuring together, one thousand one hundred
twelve and 24/100 (1112.24) feet;
NORTHEASTERLY by land now or formerly of William R. and Caroline
E. Ralli, William H. and lao En Den Ying, Marilly
M. Vison and Steven P. Giampo, Gregory and Shirley
A. Yengation and Peter M. and Dorothy A. Scott,
five hundred eighty-one and 25/100 (581.24) feet;
NORTHERLY by land of Peter M. and Dorothy A. Scott one
hundred seventy-five and 00/100 (175.00) feet;
NORTHEASTERLY by the southwesterly sideline of Bullard Street,
in two courses measuring together five hundred
fifty-nine and 99/100 (559 99) feet;
<PAGE>
SOUTHEASTERLY AND by land now or formerly of George A. and
EASTERLY Julia R. Mather, Jr., in two courses measuring
together two hundred fifty-nine and 40/100
(259.40) feet;
EASTERLY by land now or formerly of Richard a. and Linda A.
Healy, Calvin and Mary Anne Conrad and Andrew A.
and Helen A. Janauicius, in three courses
measuring together three hundred ninety-nine and
24/100 (399.24) feet;
NORTHEASTERLY by land now or formerly of Andrew M. and Helen M.
Janauicius one hundred sixty and 00/100 (160.00)
feet; and
EASTERLY by the westerly sideline of Main Street in two
courses measuring together one hundred twenty-six
and 63/100 (126.63) feet.
PARCEL TWO
- ----------
That certain parcel of land shown as Lot A on a plan entitled "Plan of Land
in Walpole, Mass." dated May 15, 1986, by Norwood Engineering Company, Inc.,
recorded with the Norfolk Registry of Deeds in Plan Book 338 as Plan No. 803 of
1986, bounded and described as follows:
SOUTHEASTERLY by land shown on said plan as the northwesterly
sideline of Main Street seventy-five and 00/100
(75.00) feet;
SOUTHWESTERLY by land now or formerly of Neponsent Valley Health
System one hundred sixty and 00/100 (160.00) feet;
NORTHEASTERLY by the same, seventy-five and 00/100 (75.00) feet;
and
NORTHWESTERLY by Lot B, one hundred sixty and 00/100 (160.00)
feet;
6429R
-2-
<PAGE>
EXHIBIT B
No.
NEW POND VILLAGE ASSOCIATES
RESIDENT MORTGAGE BONDS
(NEW POND VILLAGE PROJECT)
SERIES A
Original Issue Date:
Maturity Date:
Registered Owner:
Principal Amount:
New Pond Village Associates, a Massachusetts general partnership, for
value received, hereby promises to pay, but solely from the sources as
hereinafter provided and not otherwise, to the registered owner named above, or
registered assigns, on the maturity date stated above upon surrender hereof, the
principal amount stated above or, if this Bond or a portion thereof shall be
duly called for redemption, until the date fixed for redemption. THIS BOND IS
NON-INTEREST BEARING AND IS NON-TRANSFERABLE.
Any capitalized term used in this Bond as a defined term but not defined
herein shall be defined as in the Indenture (as hereinafter defined).
This Bond shall not be entitled to any right or benefit under the
Indenture, or be valid or become obligatory for any purpose, until this Bond
shall have been authenticated by the execution by the Trustee (as hereinafter
defined), or its successor as Trustee, or by an authenticating agent, of the
certificate of authentication inscribed hereon.
1. Indenture and Security. This Bond is one of the Series A Bonds
----------------------
issued by New Pond Village Associates, a Massachusetts general partnership (the
"Partnership"), under a Mortgage and Trust Indenture dated as of November l,
1990 (the "Indenture") between the Partnership and The First National Bank of
Boston, as trustee (the "Trustee") (hereinafter referred to as the "Bonds") for
the purpose of providing funds to refinance certain indebtedness relating to New
Pond Village, a residential retirement facility in Walpole, Massachusetts (the
"Village"). The terms of the Bonds include those stated in the Indenture and
Holders are referred to the Indenture for a statement of such terms. The Bonds
are general obligations of the Partnership. To secure the obligations of the
Partnership to make payments of the principal of the Bonds and the performance
of its other
<PAGE>
obligations under the Indenture, the Partnership has pursuant to the Indenture
granted to the Trustee a mortgage lien on the Real Estate. This Indenture and
the lien created hereby shall be subordinate for all purposes to any lien,
security interest, pledge, lease or other encumbrance on the Trust Estate, or
any part thereof, granted by the Partnership at any time and from time to time
to secure (i) any indebtedness or other liabilities or obligations of the
Partnership incurred in connection with the acquisition or construction of all
or any portion of the Trust Estate, including any improvements or repairs
thereto or equipping thereof, and any refinancing thereof, in whole or in part,
including, without limitation, any lien in favor of BayBank Boston, N.A. in
connection with the construction of the Independent Living Center and the Health
Center; and (ii) any indebtedness or other liabilities or obligations of the
Partnership incurred in connection with obtaining operating funds or working
capital for the operation of the Village. The Trustee agrees and is hereby
directed to execute and deliver any instrument necessary or appropriate to
confirm such subordination upon delivery to the Trustee of a copy of the
subordination agreement, if any.
The Trustee, upon the written request of the Partnership, agrees to
subordinate the lien of the Indenture on, or release from the lien hereof, as
directed by the Partnership (i) that portion of the Real Estate on which the
Health Center is located, together with that portion of the Real Estate
consisting of unimproved land that is located adjacent to the Health Center to
the extent necessary to establish a separate legal lot for the Health Center in
compliance with applicable zoning and land use laws, regulations and ordinances,
in order to facilitate the financing or refinancing of the construction of the
Health Center or any additions, improvements or repairs thereto; (ii) any
portion of the Real Estate constituting unimproved land, in order to facilitate
the financing or refinancing of construction thereon or any additions,
improvements or repairs to any buildings or improvements subsequently
constructed thereon; and (iii) any existing easements, licenses, rights of way
and other rights and privileges, with or without consideration.
2. Optional Redemption. The Bonds are subject to optional redemption
-------------------
by the Partnership at any time upon not less than ten (10) days prior written
notice as provided in Paragraph 4 hereof, in whole or in part, at a redemption
price equal to 100% of the principal amount thereof, subject to the
Partnership's right of set-off as provided in Paragraph 6, including without
limitation any rights to offset deferred fees.
3. Mandatory Redemption. Each Bond is subject to mandatory redemption by
--------------------
the Partnership upon not less than ten (10) days prior written notice as
provided in Paragraph 4 hereof, in whole, at any time upon the sooner to occur
of (i) 180 days
B-2
<PAGE>
following the date a Residency Agreement is terminated with respect to all
individuals constituting a Resident thereunder (the "Termination Date") or (ii)
the date the Partnership sells a new Bond for an Apartment Home for which a
Termination Date has occurred (the "Resale Date"), subject to the Partnership's
right of set-off as provided in Paragraph 6, including without limitation any
rights to offset deferred fees.
4. Notice of Redemption; Partial Redemption. Not less than ten (10) days
----------------------------------------
prior to a redemption (or maturity) date, the Partnership shall give notice by
registered or certified mail or by acknowledged hand delivery to the Holders of
Bonds to be redeemed at the addresses shown on the registration books maintained
by the Trustee stating the Bond number and Apartment Home number to which the
Bond relates, the principal amount of the Bond to be redeemed (or which has
matured) and all amounts to be set-off against such principal amount under
Paragraph 6 hereof, the section of the Indenture pursuant to which the
redemption (if applicable) is occurring, the anticipated redemption date, and
the manner in which payment will occur. A copy of the notice, together with
evidence of proper notification procedures, shall be furnished to the Trustee.
5. Persons Deemed Owners. The registered Holder of a Bond may be treated
---------------------
as its owner for all purposes.
6. Partnership's Right of Set-off. As more specifically provided in the
------------------------------
Indenture, the Partnership shall have the right to set-off against payment of
the principal of each Bond any unpaid amounts due and owing to the Partnership
under the Residency Agreement, including certain deferred fees, provided that
prior to such set-off the Partnership has notified the Holder in accordance with
such provisions.
7. Amendments and Waivers. Subject to certain exceptions provided for in
----------------------
the Indenture, the Indenture and the Series A Bonds may be amended with the
consent of the Holders of at least 51% in principal amount of the Series A Bonds
then outstanding, and, with respect to any default declared at the written
request of the Holders, may be waived with the consent of the Holders of at
least 25% in principal amount of the Series A Bonds then outstanding. Without
the consent of the Holder, the Indenture or the Series A Bonds may be amended to
cure any ambiguity, formal defect or omission or to confer upon the Trustee
additional rights, remedies, powers and authority or to subject to the lien of
the Indenture additional revenues, properties or collateral or to release vacant
land or easements.
8. Defaults and Remedies. Upon the occurrence and continuation of an
---------------------
Event of Default, the Trustee may, and upon the written request of the holders
of not less than twenty-five percent (25%) in aggregate principal amount of the
Bonds
B-3
<PAGE>
outstanding shall, after being indemnified at its option pursuant to Section
9.1(k) hereof, hereunder declare the entire principal amount of the Bonds then
outstanding hereunder immediately due and payable, and the said entire principal
shall thereupon become and be immediately due and payable.
If an Event of Default shall have occurred, the Trustee may and if
requested so to do by the Holders of twenty-five percent (25%) in aggregate
principal amount of Bonds then outstanding and indemnified as provided in the
Indenture, the Trustee shall exercise such one or more of the rights and powers
conferred by the Indenture as the Trustee shall deem necessary and appropriate
to protect and enforce its rights and the rights of the Holders under the
Indenture.
No remedy by the terms of the Indenture conferred upon or reserved to the
Trustee (or to the Holders) is intended to be exclusive of any other remedy, but
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given to the Trustee or to the Holders thereunder or now or
hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any Event
of Default shall impair any such right or power or shall be construed to be a
waiver of such Event of Default or acquiescence therein; and every such right
and power may be exercised from time to time and as often as may be deemed
expedient.
No waiver of any Event of Default hereunder, whether by the Trustee or by
the Holders, shall extend to or shall affect any subsequent default or Event of
Default or shall impair any rights or remedies consequent thereon.
The Holders of a majority in aggregate principal amount of Bonds then
outstanding shall have the right, at any time, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the time, method and
place of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of the Indenture or for the appointment
of a receiver or any other proceedings under the Indenture, provided that such
direction shall not be otherwise than in accordance with the provisions of law
and of the Indenture.
9. Authentication. This Bond shall not be valid until authenticated by
--------------
the manual signature of the Trustee or Authenticating Agent.
10. General. Reference is hereby made to the Indenture, a copy of
-------
which is on file with the Trustee, for the provisions, among others, with
respect to the nature and extent of the rights, duties and obligations of the
Partnership, the Trustee
B-4
<PAGE>
and the Holders of the Bonds and the security for the Bonds. The Holder of this
Bond, by the acceptance hereof, is deemed to have agreed and consented to and be
bound by the terms and provisions of the Indenture.
B-5
<PAGE>
IN WITNESS WHEREOF, New Pond Village Associates has caused this Bond to be
signed by the facsimile signature of each of its general partners.
NEW POND VILLAGE ASSOCIATES,
a Massachusetts general
partnership
By NVHS Management Services,
Inc., general partner
By_____________________________________
Title:
By First Healthcare Corporation,
general partner
By_____________________________________
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the within-
mentioned Indenture.
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By: ____________________
Authorized Signatory
Date:
B-6
<PAGE>
APPENDIX B
----------
RESIDENCY AGREEMENT
(Third Printing, November, 1990)
RESIDENT(S): ___________________________________________________________________
APARTMENT HOME NUMBER: _________________________________________________________
BOND AMOUNT: $
-------------------------------------------------------------------
CONTINUING CARE ELIGIBLE RESIDENT(S): __________________________________________
CONTINUING CARE INITIAL PREMIUM AMOUNT: $
----------------------------------------
INITIAL MONTHLY FEE: $
-----------------------------------------------------------
This Residency Agreement is entered into by
______________ and ________________________________________ (individually and/or
collectively "Resident") and New Pond Village Associates ("New Pond") a
Massachusetts general partnership which owns and operates New Pond Village in
Walpole, Massachusetts (the "Village").
1. GENERAL SERVICES AND FACILITIES
1.1. Basic Agreement. In exchange for purchase by Resident of a New
---------------
Pond Village Resident Mortgage Bond in the Bond Amount stated above and payment
of the ongoing Monthly Fee, initially in the amount stated above, Resident will
be entitled to occupy the Apartment Home indicated above and receive the
services and use the facilities described in this Agreement according to the
provisions of this Agreement. Occupancy of the Apartment Home will begin on the
date shown in the Occupancy Date Endorsement on the signature page of this
Agreement (the "Occupancy Date").
1.2. Apartment Furnishings. The Apartment Home will be furnished with
---------------------
carpeting, sheer curtains, self-defrosting refrigerator and freezer, range,
continuous cleaning oven, dishwasher, garbage disposal and emergency call alerts
in the bedrooms and bathrooms; provided, however, that Apartment Homes in the
Assisted Living Center will not have ranges, ovens, or dishwashers. One surface
parking area per Apartment Home will be provided for Resident's use free of
<PAGE>
charge which will be unassigned. A Resident having more than one motor vehicle
may be asked by New Pond to park one of the vehicles at a remote parking area,
and a charge may be imposed. Recreational and other oversized vehicles will be
allowed on a limited basis with the prior written approval of New Pond, and a
charge may be imposed. Each Apartment Home will have a designated storage area
(approximately 4' by 4' in size) for Resident's personal use.
1.3. Community Areas. Residents will have use of the Village's community
---------------
areas, which will initially include:
. Central Dining Room (for Independent Living Residents and guests only)
. Assisted Living Dining Room
. Multi-Purpose Activity Room
. Private Family Dining Room
. Grille/Cafe
. Library
. Convenience Store
. Exercise Room
. Greenhouse
. Crafts Room
. Billiards Room
. Woodworking Room
. Beauty Parlor
. Barber Shop
. Bank
. Laundry Rooms
New Pond reserves the right to change the community areas, if appropriate,
after notice to the Residents' Council. New Pond also reserves the right to
exclude any resident from these and all common areas for inappropriate or
disruptive behavior.
1.4. Included General Services. During Resident's occupancy of the
-------------------------
Apartment Home, New Pond will provide Resident with the services described in
this Section 1.4 as part of the Monthly Fee. New Pond reserves the right to
make changes to these services after notice to the Residents' Council (except
that such notice need not be given in advance in cases of emergency).
Food Service. Breakfast, lunch and formal evening dining will be
------------
served daily. As part of the Monthly Fee, Resident will be entitled to one
meal credit for each day of the month (for example, 30 meal credits for
June and 31 meal credits for July). Meal credits may be used at any time
during the month for Resident's meals or for guest dining. If Resident
resides in the Assisted Living Center, three meal credits per day are
included in the
-2-
<PAGE>
Monthly Fee. Any unused meal credits for any month will be forfeited and
may not be applied as a credit against meal charges for any other period. A
Resident absent from the Village for more than 30 days will receive a meal
credit allowance prorated on a daily basis if Resident gives New Pond
written notice at least 10 days in advance. For health-related absences, no
prior notice is required.
Housekeeping. Housekeeping of the Apartment Home, Including
------------
vacuuming, dusting, bathroom and kitchen cleaning and changing of bed
linen, will occur on a scheduled basis every other week. If Resident
resides in the Assisted Living Center, housekeeping will occur every week.
Utilities. Sewer, water, electricity, heat and air-conditioning for
---------
the Apartment Home will be provided. The Apartment Home will be centrally
wired for cable television and telephone hook-up. Installation and monthly
cable and telephone charges will be paid by Resident if service is desired.
Emergency System. Village personnel will monitor all the emergency
----------------
alert systems and coordinate emergency responses as appropriate.
Security. Each exterior building door will have a security access
--------
system, and security personnel will be on duty during late night and early
morning hours.
Laundry. Self-service laundry facilities for Resident's personal
-------
laundry will be provided at designated locations.
Maintenance. New Pond will maintain all community areas and will be
-----------
responsible for making necessary repairs, maintenance, and replacement of
the Apartment Home furnishings provided by New Pond.
Transportation. Local transportation to designated shopping, social
--------------
events, medical facilities, places of worship and other local destinations
will be provided on a regularly scheduled basis.
Social and Recreational Programs. New Pond will coordinate a variety
--------------------------------
of social, recreational, educational, and cultural programs.
Wellness Program. Educational and screening programs promoting
----------------
wellness and preventative health maintenance
-3-
<PAGE>
will be conducted, including regularly scheduled exercise programs.
1.5. Additional Services. The following additIonal services will be
-------------------
available at the Village on a fee-for-service basis:
. Additional housekeeping.
. Laundry services for personal items.
. On-site guest rooms for Resident's guests, which will
be available on a reservation basis.
. Catering for special occasions.
. Tray service when medically advisable.
. Additional and guest meals.
Charges for Additional Services will be made in accordance with the Village's
Additional Services Fee Schedule and will be billed to Resident monthly. New
Pond reserves the right to make changes to the Additional Services after notice
to the Residents' Council.
1.6. Alteration to Apartment Home. Resident may make non-structural
----------------------------
alterations to the Apartment Home (including painting, wallpapering, building of
bookshelves, etc.) with the prior written approval of New Pond. Any approved
alteration will be performed at Resident's expense by the Village's maintenance
staff or by a contractor approved by New Pond. For Resident's safety, Resident
agrees not to replace or add any locking devices to the Apartment Home.
1.7. Maintenance of Apartment Home. New Pond will maintain, repair, and
-----------------------------
replace the appliances furnished by New Pond and the Apartment Homes' mechanical
systems, but Resident will be liable for cost of any work necessitated by
Resident's negligence. Resident agrees to report to New Pond promptly any
conditions in need of repair.
Other than those items described in the preceding paragraph which New Pond
will maintain, Resident will be responsible for keeping the Apartment Home in
good repair, and for keeping the Apartment Home clean and not wasting energy.
New Pond personnel will be available for an additional charge to assist Resident
in performing maintenance or repairs for which Resident is responsible.
2. HEALTH CARE SERVICES AND FACILITIES
2.1. Continuing Care Program. A long term care insurance program (the
-----------------------
"Continuing Care Program") will provide certain skilled and custodial nursing
care and personal care benefits to Eligible Residents through a group insurance
policy (the
-4-
<PAGE>
"Policy") for the benefit of the Village's Eligible Residents. An "Eligible
Resident" is a Resident who has been determined by New Pond and the insurance
carrier issuing the Policy (the "Insurer") on the Occupancy Date to meet the
health standards for coverage under the terms of the Policy. Enrollment in the
Continuing Care Program is mandatory for all Eligible Residents. A description
of the benefits and coverages of the Continuing Care Program is contained in the
group insurance program booklet prepared by the Insurer. A copy of this booklet
and other insurance documents is available to Resident upon request. Resident
hereby assigns the benefits payable under the Policy to New Pond, which will
bill Resident only for services rendered in excess of benefit payments received
by New Pond on behalf of Resident pursuant to this assignment. Each Eligible
Resident becomes covered under the Policy on the Occupancy Date, subject to the
following conditions.
On the Occupancy Date, each Eligible Resident will pay the Continuing Care
Program Initial Premium Amount stated above and, each month thereafter, the
amount of the ongoing monthly premium. New Pond will collect all Policy
payments on behalf of the Insurer and, for Resident's convenience, the monthly
premium will be included in the Monthly Fee (or the Daily Rate if Resident has
transferred to the Health Center). The amount of the monthly premium is subject
to adjustment annually by the Insurer. New Pond reserves the right upon 60 days
written notice to Resident to modify, limit or terminate the coverages and
benefits provided under the Policy and to substitute insurers and different
plans of group or other insurance. In such event, Resident may terminate this
Agreement pursuant to the provisions of Section 4 as Resident's sole remedy
against New Pond.
2.2. Assisted Living Center. The Village will include an Assisted Living
----------------------
Center for persons in need of sustained personal care services but not nursing
care. A Resident desiring to transfer to the Assisted Living Center and meeting
the Standards for Admission to the Assisted Living Center then in effect will be
given priority admission. Residents will pay the base Assisted Living Monthly
Fee and charges for personal care services while living in the Assisted Living
Center. The personal care expense benefits payable under the Continuing Care
Program are designed to cover a portion of these fees for Eligible Residents.
Personal care services will be provided through a contractual arrangement with a
local home health agency and will be billed to Resident on the basis of the type
and amount of services received.
2.3. Health Center. The Village will include a Health Center providing
-------------
custodial and skilled nursing care.
-5-
<PAGE>
Although the Health Center will be open to nonresidents, Village Residents
desiring to transfer and meeting the Standards for Transfer to the Health Center
then in effect will be given priority admission to the extent allowable by law.
2.4. Agreement to Make a Temporary or Permanent Transfer. Resident agrees
---------------------------------------------------
to transfer to the Assisted Living Center and to make a Temporary or Permanent
Transfer to the Health Center or other appropriate nursing facility in the event
that New Pond determines that Resident is unable to live independently in the
Apartment Home and that such a transfer is appropriate. All determination
concerning Temporary or Permanent Transfers will be made by New Pond
consultation with, to the extent feasible, Resident, Resident's family members
or representatives and Resident's attending physician. Skilled and custodial
nursing care expense benefits under the Continuing Care Program will be payable
to Eligible Residents admitted to nursing facilities other than the Health
Center if no appropriate bed is available in the Health Center or if New Pond
determines that the Resident's circumstances make admission to another nursing
facility necessary.
Transfers will be Temporary or Permanent as follows:
---------------------------------------------------
(a) Temporary Transfer - A Resident will be considered to have made
------------------
a Temporary Transfer if New Pond determines, based on Resident's health
status, that Resident is likely to return to the Apartment Home in the near
future. During a Temporary Transfer, Resident will continue to pay the
Monthly Fee for the Apartment Home and will pay the Health Center Daily
Rate then in effect. In the case of an Eligible Resident, the skilled and
custodial nursing care benefits payable under the Continuing Care Program
are designed to cover a portion of the Health Center Daily Rate, which
includes room and board in a semi-private room and regular nursing
services. Resident also will be responsible for paying all applicable
charges for physician visits, private duty nurses, prescription
medications, durable medical equipment, and additional services not
included in the Daily Rate. (Resident's Medicare supplemental health
insurance may provide some benefit payment for these services, but Resident
remains responsible for paying all applicable charges.)
(b) Permanent Transfer - A Resident will be considered to have made
------------------
a Permanent Transfer if New Pond determines, based on Resident's health
status, that Resident is likely to be in need of nursing care for the
foreseeable future. In a single occupancy, a Permanent
-6-
<PAGE>
Transfer will be effective on the date Resident vacates the Apartment Home
(after which date New Pond may make the Apartment Home available to other
prospective residents). Thereafter Resident will no longer be required to
pay the Monthly Fee but will pay the Health Center Daily Rate then in
effect (which includes a service component and a charge for the Continuing
Care Program premium). In a double occupancy, a Permanent Transfer will be
effective on the date the Monthly Fee is reduced for the Resident remaining
in the Apartment Home to the single occupancy Monthly Fee, and the Resident
transferring to the Health Center will pay the Health Center Daily Rate
then in effect. In the case of an Eligible Resident, the skilled and
custodial nursing care benefits payable under the Continuing Care Program
are designed to cover a portion of the Health Center Daily Rate. Resident
will also be responsible for paying applicable charges for physician
visits, private duty nurses, prescription medications, durable medical
equipment, and additional services not included in the Daily Rate.
(Resident's Medicare Supplemental health insurance may provide some benefit
payment for these services, but Resident remains responsible for paying all
applicable charges).
2.5. Agreement to Transfer to Other Facilities if Required. The Health
-----------------------------------------------------
Center will be licensed to provide only limited nursing and health related
services. Should New Pond determine (after consultation to the extent feasible
with Resident, Resident's family members or representatives, and Resident's
attending physician) that Resident's health requires health care
services for which transfer to the Health Center, Assisted Living Center or
other nursing facility would not be appropriate or if Resident requires nursing
services but the Health Center has no available bed, Resident agrees to leave
the Village for such care. If Resident's condition requires short-term care,
Resident will continue to pay the Monthly Fee during the absence (or, if the
Resident has made a transfer to another nursing facility pending availability of
an appropriate bed in the Health Center, Resident will continue to pay the
monthly Continuing Care Program premium). If Resident's condition requires
extended health care services, this Agreement will be subject to termination in
accordance with Section 4 (unless the transfer is to another nursing facility
pending availability of an appropriate bed in the Health Center, in which case
Resident will be transferred to the Health Center as soon as an appropriate bed
is available). In either event, Resident will be responsible for all of his/her
health care costs. Benefits payable under the Continuing Care Program are not
available in connection with transfers under this Section 2.6 unless the
transfer is a temporary one to another nursing facility.
-7-
<PAGE>
2.6. Readmission to Independent Living. If after a transfer to the
---------------------------------
Assisted Living Centers or a Permanent Transfer to the Health Center, Resident
again meets the Standards for Admission to Residency of the Independent Living
Center and wishes to return to independent living, Resident will be given
priority admission for a unit.
2.7. Medicare. During the term of this Agreement, each person who is a
--------
Resident will be required to enroll in the Medicare Parts A and B programs, any
future program that may be offered by Medicare or any similar or successor
governmental program, and to maintain in effect supplemental Medicare insurance
coverage satisfactory to New Pond. A Resident who is not qualified for Medicare
coverage due to age will maintain comprehensIve health coverage satisfactory to
New Pond. Evidence of such insurance will be provided to New Pond upon request.
In no event will New Pond assume responsibility for services that are not
rendered in the Health Center, such as services rendered in an acute care
hospital, a rehabilitation hospital, a substance abuse clinic, or a psychiatric
facility.
3. PURCHASE OF BOND AND FEES
3.1. Purchase of Bond. Resident agrees, upon the Occupancy Date, to
----------------
purchase a non-transferable, non-interest bearing New Pond Village Resident
Mortgage Bond (the "Bond"), issued by New Pond under an Indenture of Trust
between New Pond and the Bond Trustee, in the Bond Amount stated above. All
Bonds will be held by the Bond Trustee, and Resident will be furnished with a
photocopy of the Bond. Resident will receive as a credit against the Bond
Amount the amount of the Reservation Deposit, if any, previously paid by
Resident. New Pond's obligations with respect to repayment of Bonds will be
secured by a mortgage granted to the Bond Trustee for the benefit of all
Bondholders, which mortgage will be subordinate to the construction mortgages
and certain other liens as described in Section 5.15 hereof.
3.2. Continuing Care Program Initial Premium. Upon the Occupancy Date,
---------------------------------------
each Eligible Resident will pay the Continuing Care Program Initial Premium
Amount stated above. A limited refund of the Continuing Care Program Initial
Premium Amount will be made as provided in the Policy should this Agreement
terminate within the time period specified in the Policy.
3.3. Monthly and Additional Service Fees. The Monthly Fee initially will
-----------------------------------
be in the amount stated above. Upon not less than 30 days prior written notice
to Resident, the Monthly Fee may be adjusted as of June 1st of each year. The
Monthly
-8-
<PAGE>
Fee will be prorated on a daily basis for the first month of occupancy as
appropriate. The Monthly Fee includes the Continuing Care Program monthly
premium for Eligible Residents, which is subject to annual adjustment by the
insurance carrier. The Daily Rate for the Health Center includes a service
charge and a charge for the Continuing Care Program premium.
Fees for additional services will be charged in accordance with the
Additional Services Fee Schedule established by New Pond. The Additional
Services Fee Schedule is subject to change at any time upon not less than 30
days written notice to Resident.
3.4. Billing. Resident may charge items which will be posted to monthly
-------
statements, including guest meals, guest rooms, additional housekeeping
services, etc. Statements dated the 1st of the month will be placed in
mailboxes by the 5th of the month. Additional service fees incurred the
previous month and the monthly fee for the current month will be included.
Payment is due on the tenth day of each month.
3.5. Late Charge. New Pond will assess Resident a late charge of 5% per
-----------
month (or the maximum amount allowed by applicable law, if less) of the amount
due if the Monthly Fee or Additional Service Fees are not paid in full on or
before the 10th day of the calendar month in which they are due.
3.6. Changes in Occupancy. If the Apartment Home is occupied by two
--------------------
persons and one surrenders possession of the Apartment Home to the other,
Resident's obligations under this Agreement will continue in full legal force
and effect as to the remaining Resident, and the Monthly Fee will be adjusted to
reflect the single occupancy rate then in effect for the Apartment Home.
If a Resident and a nonresident (including a new spouse) desire to share
the Apartment Home, the nonresident may become a Resident and live in the
Apartment only if he/she meets the Standards for Admission to Residency of the
Village and both persons execute a new Residency Agreement. In such event, the
Monthly Fee will be adjusted to reflect the rate for double occupancy then in
effect for the Apartment Home.
3.7. Liability for Charges. Each person who is designated as Resident in
---------------------
this Agreement is jointly and severally liable for the payment of the Monthly
Fee, Additional Service Fees, and all other amounts required to be paid to New
Pond pursuant to the provisions of this Agreement. In the event it is necessary
for New Pond to institute legal action or
-9-
<PAGE>
other proceedings to recover amounts payable to New Pond under this Agreement,
New Pond also will be entitled to recover legal fees and costs incurred in
connection with all such proceedings. This provision will survive any
termination of this Agreement.
3.8. Scholarship Fund. A scholarship fund under the control and
----------------
administration of the Residents' Council will be established to provide
assistance for Residents experiencing unexpected financial hardship in meeting
his/her financial obligations. The fund initially will be capitalized with
$25,000 from New Pond. All Monthly Fees, Additional Service Fees and other
amounts payable under this Agreement will, however, remain the responsibility of
Resident as a condition for continued occupancy at the Village.
3.9. Refund Reserve Fund. A Refund Reserve Fund in the amount of
-------------------
$2,500,000 will be established and administered by New Pond to facilitate the
prompt refund of Resident Mortgage Bonds. This Reserve Fund will be funded from
the proceeds of sales of Resident Mortgage Bonds, if sufficient proceeds remain
after paying other obligations. If such proceeds are insufficient, New Pond
will attempt to obtain letters of credit from one or more banks to establish
this reserve fund, but is not required to do so. Any cash in the Refund Reserve
Fund will be held and invested by New Pond, which will consult with financial
advisors with such experience as it deems appropriate.
4. TERMINATION AND DEFERRED FEE; CHANGES IN OCCUPANCY
4.1. Termination of Residency. This Agreement is subject to termination
------------------------
as follows:
(a) By Resident at any time upon 60 days prior written notice to New
Pond.
(b) Upon a determination by New Pond in accordance with Section 2.4
or 2.5 of this Agreement that (i) a Temporary or Permanent Transfer of
Resident is appropriate and Resident refuses to transfer, (ii) Resident is
in need of short-term health care services for which the Health Center, the
Assisted Living Center or other nursing facility is not appropriate and
Resident refuses to leave the Village for treatment or (iii) Resident is in
need of extended health care services for which the Health Center, the
Assisted Living Center or other nursing facility is not appropriate.
(c) Upon 30 days written notice to Resident by New Pond (or such
shorter period as may be appropriate under the circumstances) if New Pond
determines that Resident's
-10-
<PAGE>
continued residence in the Apartment Home presents a danger to the safety
or well-being of Resident or others.
(d) Resident fails to pay the Monthly Fee, Additional Service Fees
or any other amounts payable under this Residency Agreement when due
(subject, however, to the provisions of Section 4.4 hereof) ; Resident
violates any other provision of this Agreement or repeatedly violates the
Village's rules and regulations and such violation is not cured within 30
days after written notice to Resident; or New Pond discovers a material
misstatement or omission in the Confidential Data Application or other
information submitted by or on behalf of Resident.
(e) In the event all or a portion of the Apartment Home, the
building in which it is situated, or the Village is destroyed or made
untenantable by fire, flood, storm or other casualty or cause and New Pond
determines not to rebuild the Apartment Home.
(f) In the event all or any portion of the Apartment Home, the
building in which it is situated, or the Village is taken by the exercise
of eminent domain.
(g) Upon the death of Resident.
4.2. Effect of Double Occupancy. If the Apartment Home is occupied by two
--------------------------
persons and one dies or transfers from the Apartment Home, this Agreement will
continue in full legal force and effect as to the remaining Resident, except the
Monthly Fee will be adjusted to reflect the then applicable single occupancy
rate payable for the type of Apartment Home occupied by Resident.
4.3. Agreement to Remain in Effect Upon Transfer to Assisted Living or
-----------------------------------------------------------------
Health Center. In the event that Resident makes a Permanent Transfer to the
- -------------
Assisted Living Center or the Health Center, this Agreement will remain in full
force and effect, except that the facilities and services provided by New Pond
and the Monthly Fee or Daily Rate payable by Resident will be in accordance with
those then in effect for the Assisted Living Center or the Health Center, as
applicable. New Pond may make an Apartment Home available to other prospective
residents upon (a) the permanent transfer of the last person designated as
Resident to another Apartment Home, the Health Center or another nursing
facility or (b) termination of the Residency Agreement for any reason.
-11-
<PAGE>
4.4. Repayment of Bond Amount; Offset of Bond Amount in Event of Financial
---------------------------------------------------------------------
Need
----
(a) New Pond will repay the Bond Amount (less any amounts offset
against the Bond Amount pursuant to Sections 4.4(b) and 4.4(c)), to
Resident upon the earlier of (i) the date a new Bond is sold to a new
resident of the Apartment Home or (ii) 180 days after the termination of
this Agreement with respect to the last person designated as Resident.
(b) In the event Resident transfers to the Health Center and is
unable to pay the Daily Rate due to circumstances not reasonably within
Resident's control, New Pond may, in its sole discretion, allow Resident to
continue to receive services in the Health Center, in which case New Pond
shall make a notation on the Bond so as to reduce the principal amount of
the Resident's Resident Mortgage Bond then outstanding each month by an
amount equal to the lesser of (i) the cumulative Daily Rate charges (or
portion thereof) that Resident has failed to pay and that have not been so
offset by prior annotations to the Bond Amount or (ii) the amount permitted
by law. At such time as the remaining principal balance of the Resident
Mortgage Bond equals the sum of (i) the unpaid balance of any applicable
Additional Service Fees and other charges owed by Resident to New Pond,
plus (ii) an amount equal to five percent (5%) of the Original Bond Amount,
New Pond may offset the entire remaining principal amount of the Resident's
Resident Mortgage Bond then outstanding in satisfaction of Resident's
obligations under Sections 4.5 and 4.6 hereof. By execution of this
Residency Agreement, Resident authorizes New Pond to make notations on
Resident's Resident Mortgage Bond in accordance with the provisions of this
Section 4.4(b).
(c) In the event that the principal amount of the Resident Mortgage
Bond of any Resident is exhausted pursuant to Section 4.4(b) hereof and a
second Resident resides in the Apartment Home, such Resident may continue
to reside in the Apartment Home for so long as he or she continues to pay
the applicable Monthly Fee. In the event of a transfer of said second
Resident to the Health Center, said Resident will be required to pay the
Daily Rate and, if unable to do so, will be entitled to continue to receive
services in the Health Center subject to the conditions of Section 4.4(d)
hereof.
(d) Without in any way limiting New Pond's right to terminate this
Agreement as set forth in Section 4.1,
-12-
<PAGE>
Resident will be entitled to continue to receive treatment the Health
Center despite his or her inability to pay the Daily Rate if and only if
New Pond determines that all of the following conditions have been
satisfied:
(i) the Health Center continues to be a medically appropriate
setting for such Resident;
(ii) New Pond has received such information concerning
Resident's financial status as it deems necessary, including
without limitation tax returns, personal financial statements,
bank statements, and other investment or securities information,
and has determined in its sole discretion that Resident is unable
to pay such Daily Rate due to circumstances not reasonably within
Resident's control;
(iii) Resident has applied for and is eligible to receive
benefits under the Medicaid Program or any similar or successor
governmentally assisted program; and
(iv) the provision of care to Resident would not impair New
Pond's ability to operate on a sound financial basis and in
accordance with its mission statement.
Resident or Resident's estate shall be liable for the Monthly Fees, Daily Rate
Charges, Additional Service Fees, and any other expenses incurred by New Pond on
behalf of Resident pursuant to this Agreement.
4.5. Deferred Fee. Upon termination of this Agreement for whatever reason
------------
as to all persons designated as Resident, Resident will pay to New Pond a
deferred fee (the "Deferred Fee") equal to the lesser of 5% of the Bond Amount
or, if termination occurs within the first 5 months of occupancy, 1% of the Bond
Amount for each month of occupancy of the Apartment Home. The Deferred Fee will
be due and payable on the date that Resident's Bond is repaid by New Pond, or
termination of this Agreement occurs, whichever is later.
4.6. Right of Set-Off; Other Rights. New Pond will have the right to set-
------------------------------
off against repayment of the Bond, the Deferred Fee and any other fees or
amounts payable to New Pond under this Agreement, including any modification to
incorporate provisions of the Standard Nursing Facility Services Agreement.
Termination of this Agreement for whatever reason will not affect or impair the
exercise of any right or remedy granted to New Pond or Resident under this
-13-
<PAGE>
Agreement for any claim or cause of action occurring the date of such
termination.
4.7. Relocation. A Resident may elect to move to another apartment in the
----------
Independent Living Center, subject to availability. In such event, this
Agreement will be terminated and a new Residency Agreement executed. Resident
will receive a refund of the Bond Amount in accordance with Section 4.4 and will
be required to purchase a new Bond for the new apartment. No Deferred Fee,
however, will be charged to Resident for a termination in connection with
relocation to another Independent Living Center Apartment Home. All moving costs
will be at Resident's expense.
4.8. Resident's Responsibility. Resident agrees that he or she shall make
-------------------------
no gift of real or personal property or make any speculative investment which
could impair Resident's ability to satisfy the financial obligations under this
Agreement. If Resident's income is insufficient to meet his or her financial
responsibilities to New Pond, Resident shall make all reasonable efforts to
obtain assistance elsewhere, including taking necessary steps to obtain
applicable local, county, state or federal aid or assistance. As a condition of
continuing to receive care under the provisions of Section 4.4 hereof, Resident
must represent that he or she has not made any gift of real or personal property
or speculative investments in contemplation of the execution of this Agreement.
5. MISCELLANEOUS
5.1. Resident's Interest. Resident does not have any proprietary interest
-------------------
in New Pond, its assets or properties, or the assets and properties of New Pond
by virtue of this Agreement.
5.2. Responsibility for Resident's Property. New Pond will not be
--------------------------------------
responsible for damage or loss to any personal property belonging to Resident
caused by fire, flooding, or other casualty, or by leaking of water, bursting of
pipes, theft or any other cause. Resident will be solely responsible for
insuring against property damage or loss and personal liability. In the event of
Resident's death, transfer from the Village, or permanent transfer to the Health
Center, New Pond will exercise ordinary care in temporarily safekeeping
Resident's personal property at the Village. If such property is not removed
from the Village premises within 30 days after termination of this Agreement,
New Pond reserves the right to have such property placed in a commercial bonded
warehouse at the expense and risk of Resident or his/her estate. In the event
that Resident fails to claim any personal property from the Apartment Home or
-14-
<PAGE>
warehouse within 180 days after termination of this Agreement, New Pond retains
the right to sell such personal property and to retain from the proceeds thereof
an amount equal to its expenses in moving and storing such personal property and
any other fees, charges, or costs owed to New Pond hereunder or relating to such
moving and storage.
5.3. Right of Entry. Resident hereby authorizes employees and agents of
--------------
New Pond to enter Resident's Apartment Home for the purpose of providing
services, repairs, maintenance, alterations, pest control and Inspection, and in
the event of perceived medical or other emergency.
5.4. Indemnification for Negligence. Resident will indemnify, protect and
------------------------------
hold harmless New Pond for any loss, damage, injury or expense incurred by it as
a result of the careless, negligent or willful acts of Resident or Resident's
invitees or guests.
5.5. Guests. Occupancy of the Apartment Home and use of the community
------
facilities is limited to Resident and guests. Guests may occupy the Apartment
Home for more than 14 days during any calendar quarter with the prior written
approval of New Pond. Resident will be responsible for the conduct of Resident's
guests and for payment of any charges incurred by Resident's guests.
5.6. House Rules; Standards for Admission to Residency of the Village.
----------------------------------------------------------------
New Pond will establish rules and regulations for the orderly operation and
management of New Pond's affairs, and the health, safety, welfare, peace and
comfort of the residents of the Village (including the establishment of waiting
lists for those desiring to become residents of the Village), and Resident
agrees to abide by such rules and regulations.
5.7. Absence from Village. Resident agrees to notify the Village's
--------------------
management in advance of any contemplated overnight or longer absence from the
Village.
5.8. Damage to Apartment. If the Apartment Home is damaged by fire,
-------------------
flood, storm or other casualty or cause and New Pond elects not to terminate
this Agreement, New Pond will, at its expense, proceed diligently to repair and
restore the Apartment Home. If the Apartment Home is untenantable during the
repair, New Pond will relocate Resident to a comparable type Apartment Home at
the Village, if available, or, if not, New Pond will endeavor to relocate
Resident temporarily to any other available Apartment Home and the Monthly Fee
will be adjusted for the type of Apartment Home temporarily occupied by
Resident. If more than 75% of the Village buildings are damaged or subject to
-15-
<PAGE>
taking by eminent domain, New Pond has the optIon of rebuilding the Village or
terminating this Agreement.
5.9. Pets. A small pet may be kept in the Apartment Home. Resident will
----
be responsible for the pet's litter and for any damage caused by the pet.
Resident will comply with the Village's Pet Policies, including limitations on
the type or size of pet that may be maintained. Resident agrees to relinquish
the pet in the event of repeated violations of the Pet Policies or complaints
from neighbors.
5.10. Entire Agreement. This Agreement, including Exhibit A, Resident's
----------------
Confidential Data Application, and Exhibit B, the Reservation Agreement,
constitute the entire agreement between New Pond and Resident. New Pond will not
be liable for, or bound by, any statements, representations or promises made to
Resident by any person representing or purporting to represent New Pond or the
Village unless such statements, representations or promises are expressly set
forth in these documents.
5.11. Binding Effect. This Agreement is binding upon the successors and
--------------
assigns of New Pond and the Village and the heirs and personal representative of
Resident. The provisions of this Agreement are not assignable or transferable in
whole or in part by Resident, and Resident will have no right to sublet or
assign the Apartment Home.
5.12. Right to Cure Defaults. New Pond, upon such written notice to
----------------------
Resident as is reasonable under the circumstances, may, but shall not be under
any obligation to, cure any failure by Resident to perform any of Resident's
covenants, agreements or obligations under this Agreement. If New Pond chooses
to do so, all costs and expenses, including reasonable attorney fees and
interest on the amount of any advances at the Bank of Boston prime rate plus 2%,
will be deemed a charge against Resident. Resident also will pay New Pond all
expenses incurred by New Pond in enforcing Resident's obligations under this
Agreement.
5.13. Survival. The provisions contained in Sections 3.7, 4.4, 4.5, 4.6,
--------
and 5.4 shall survive any termination of this Agreement.
5.14. Severability. Each provision of this Agreement will be deemed
------------
separate from each other provision and the invalidity or unenforceability of any
provision will not affect the validity or enforceability of the balance of this
Agreement.
5.15. Subordination. Resident agrees that Resident's rights under this
-------------
Agreement and the Resident Mortgage Bond
-16-
<PAGE>
will be subordinate to any mortgage or other lien that now encumbers all or any
part of real estate upon which the Village is situated, and shall be further
subordinate to the lien of any mortgage hereafter placed on all or any part of
the real estate upon which New Pond is situated, and Resident agrees to execute,
acknowledge and deliver such documents as any lender, future lender or other
party shall reasonably require in order to establish the priority of any such
lien.
5.16. Non-Discrimination. The Village will be operated on a non-
------------------
discriminatory basis, and will provide the facilities and services described in
this Agreement to individuals regardless of race, color, sex, religion, creed or
national origin.
5.17. Notices. Any notice to New Pond by Resident should be given in
-------
writing and mailed or delivered to New Pond Village Associates at the
administrative office of the Village or at such other address as New Pond may
designate in writing. Any notice to Resident by New Pond will be given in
writing and mailed or delivered to Resident's Apartment Home or at such other
address as Resident may designate to New Pond in writing.
-17-
<PAGE>
5.18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, New Pond and Resident have signed this Agreement on
this ________ day of _____________________________, _____.
NEW POND VILLAGE ASSOCIATES,
a Massachusetts general partnership
By: _______________________________________
Title: Authorized Representative
of New Pond Village Associates
WITNESS:
______________________________
RESIDENT
(Signed):_____________________
Print Name:___________________
(Signed):_____________________
Print Name: _________________
WITNESS:
_______________________________
Exhibit A: Resident's Confidential Data Application
Exhibit B: Reservation Agreement
-18-
<PAGE>
<TABLE>
<S> <C> <C>
4. [_] Filed for record in the real estate records. 5. [_] Debtor is a Transmitting Utility 6. No. of additional Sheets Presented
- -----------------------------------------------------------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and address(es) 2. Secured Party(ies) and address(es) 3. For Filing Officer Date, Time,
Number and Filing Office)
New Pond Village Associates The First National Bank of November 26, 1990 13:20PM
45 Walpole Street Boston, as Trustee 191 Book 54
Norwood, Massachusetts 02062 100 Federal Street Town Clerk
Boston, Massachusetts 02110 Walpole MA 02081
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financing statement covers the following types (or items) of property:
See Exhibit A
[_] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
Whichever is NEW POND VILLAGE ASSOCIATES THE FIRST NATIONAL BANK OF BOSTON,
Applicable ..................................... .............................................
(See Instruction as Trustee
Number 9) ..................................... ............................................
Signature(s) of Debtor (Or Assignor) Signature(s) at Secured Party (Or Assignee)
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Copy
STANDARD FORM - UNIFORM COMMERCIAL CODE - FORM UCC.I Rev Jan. 1980 Forms may be purchased from Hobbs & Warren. Inc.,
Boston, Mass. ????
4. [_] Filed for record in the real estate records. 5. [_] Debtor is a Transmitting Utility. 6. No. of Additional Sheets
Presented:
- ------------------------------------------------------------------------------------------------------------------------------------
1. Debtor(s) Last Name First) and address(es) 2. Secured Party(ies) and addresses) 3. For Filing Officer (Date, Time,
Number, and Filing Officer)
New Pond Village Associates The First National Bank of November 26, 1990 13:20PM
45 Walpole Street Boston, as Trustee #191 Book 54
Norwood, Massachusetts 02062 100 Federal Street Town Clerk
Boston, Massachusetts 02110 Walpole MA 02081
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financiang statement covers the following types (or items) of property:
See Exhibit A
[X] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMINATION STATEMENT
This statement of termination of financing is presented to a filing officer for
filing pursuant to the Uniform Commercial Code. The Secured Party certifies that
the Secured Party no longer claims a security interest under the financing
statement bearing the file number shown above.
................................
Dated:........................ 19..... By:.............................
Signature(s) of Secured
Party (Or Assignee)
Filing Officer Copy - Acknowledgment - Filing officer make sure filing
information is in Box 3 before returning this copy to filer.
<PAGE>
<TABLE>
<S> <C> <C>
4. [_] Filed for record in the real estate record 5. - Debtor is a Transmitting utility 6. No. or additional Sheets Presented
- ----------------------------------------------------------------------------------------------------------------------------------
(1. Debtor(s) (Last Name First) and address(es) 2. Secured Party(ies) and address(es) 3. For Filing Officer Date, Time,
Number and Filing Clerical
New Pond Village Associates The First National Bank of
45 Walpole Street Boston, as Trustee Date: Nov. 26, 1990
Norwood, Massachusetts 02062 100 Federal Street Time: 12:03 PM
Boston, Massachusetts 02110 Norwood
File No: 45463
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financing statement covers the following (types or items) of property.
See Exhibit A
[X] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
Whichever is NEW POND VILLAGE ASSOCIATES THE FIRST NATIONAL BANK OF BOSTON,
Applicable ............................................ ....................................................
(See instruction as Trustee
Number 9) ............................................ ....................................................
Signature(s) of Debtor (Or Assignor) Signature(s) at Secured Party (Or Assignee)
- ---------------------------------------------------------------------- ----------------------------------------------------
Debtor Copy
STANDARD FORM - UNIFORM COMMERCIAL CODE - FORM UCC.I Rev Jan. 1980 Forms may be purchased from Hubbs & Warren. Inc.,
Boston, Mass. 02.
4. [_] Filed for record in the real estate records. 5. [_] Debtor is a Transmitting Utility. 6. No. of Additional Sheets
Presented:
- ------------------------------------------------------------------------------------------------------------------------------------
1. Debtor(s) Last Name First) and address(es) 2. Secured Party(ies) and address(es) 3. For Filing Officer (Date, Time,
Number, and Filing Officer)
New Pond Village Associates The First National Bank of Date: Nov, 26, 1990
45 Walpole Street Boston, as Trustee Time: 12:03 PM
Norwood, Massachusetts 02062 100 Federal Street Norwood
Boston, Massachusetts 02110 File No: 45463
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financiang statement covers the following types (or items) at property:
See Exhibit A
[X] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMINATION STATEMENT
This statement of termination of financing is presented to a filing officer for
filing pursuant to the Uniform Commercial Code. The Secured Party certifies that
the Secured Party no longer claims a security interest under the financing
statement bearing the file number shown above.
.................................................
Dated:............. 19.... By:..............................................
Signature(s) if Secured Party (Or Assignee)
Filing Officer Copy - Acknowledgment - Filing officer make sure filing
information is Box 3 before returning this copy to filer.
<PAGE>
<TABLE>
<S> <C> <C>
4. [_] Filed for record in the real estate record 5. - Debtor is a Transmitting utility 6. No. or additional Sheets Presented
- ----------------------------------------------------------------------------------------------------------------------------------
1. Debtors) (Last Name First) and address(es) 2. Secured Party(ies) and address(es) 3. For Filing Officer Date, Time,
Number and Filing Clerical
New Pond Village Associates The First National Bank of
45 Walpole Street Boston, as Trustee Date: Nov. 26, 1990
Norwood, Massachusetts 02062 100 Federal Street Time: 12:03 PM
Boston, Massachusetts 02110 Norwood
File No: 45463
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financing statement covers the following types or items of property.
See Exhibit A
[X] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
Whichever is NEW POND VILLAGE ASSOCIATES THE FIRST NATIONAL BANK OF BOSTON,
Applicable ............................................ ....................................................
(See instruction as Trustee
Number 9) ............................................ ....................................................
Signature(s) of Debtor (Or Assignor) Signature(s) at Secured Party (Or Assignee)
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Copy
STANDARD FORM - UNIFORM COMMERCIAL CODE - FORM UCC.I Rev Jan. 1980 Forms may be purchased from Hobbs & Warren. Inc.,
Boston, Mass. 02.
4. [_] Filed for record in the real estate records. 5. [_] Debtor is a Transmitting Utility. 6. No. of Additional Sheets
Presented:
- ------------------------------------------------------------------------------------------------------------------------------------
1. Debtor(s) Last Name First) and address(es) 2. Secured Party(ies) and address(es) 3. For Filing Officer
(Date, Time, Number, and
Filing Officer)
New Pond Village Associates The First National Bank of Date: Nov. 26, 1990
45 Walpole Street Boston, as Trustee Time: 12:03 PM
Norwood, Massachusetts 02062 100 Federal Street Norwood
Boston, Massachusetts 02110 File No: 45463
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financiang statement covers the following types (or items) of property:
See Exhibit A
[X] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMINATION STATEMENT
This statement of termination of financing is presented to a filing officer for
filing pursuant to the Uniform Commercial Code. The Secured Party certifies that
the Secured Party no longer claims a security interest under the financing
statement bearing the file number shown above.
.................................................
Dated:............. 19.... By:..............................................
Signature(s) if Secured Party (Or Assignee)
Filing Officer Copy - Acknowledgment - Filing officer make sure filing
information is Box 3 in before returning this copy to filer.
<PAGE>
UNIFORM COMMERCIAL CODE -- FINANCING STATEMENT -- FORM UCC.1
IMPORTANT -- READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM
This FINANCING STATEMENT is presented to a filing officer for filing pursuant to
the Uniform Commercial Code.
<TABLE>
<S> <C> <C>
4. [_] Filed for record in the real estate records. 5. [_] Debtor is a Transmitting Utility 6. No. of Additional Sheets Presented:
- ------------------------------------------------------------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and address(ee) 2. Secured Party(ies) and address(ee) 3. For Filing Officer (Date, Time,
Number, and Filing Office
New Pond Village Associates The First National Bank of
45 Walpole Street Boston, as Trustee
Norwood, Massachusetts 02062 100 Federal Street
Boston, Massachusetts 02110
Mail Stop 45-02-15
- ------------------------------------------------------------------------------------------------------------------------------------
7. This financing statement covers the following types (or items) of property:
See Exhibit A
[x] Products of Collateral are also covered
- ------------------------------------------------------------------------------------------------------------------------------------
Whichever is
Applicable NEW POND VILLAGE ASSOCIATES THE FIRST NATIONAL BANK OF BOSTON,
(See Instruction .................................... ..................................
Number 9) as Trustee
.................................... ..................................
Signature(s) of Debtor (Or Assignor) Signature(s) of Secured Party
(Or Assignee)
- ----------------------------------------------------------------------- ---------------------------------
</TABLE>
Filing Officer Copy -- Alphabetical
STANDARD FORM -- UNIFORM COMMERICAL CODE-- FORM UCC-1
Rev. Jan. 1980 Forms may be purchased from Hubbs & Warrens, Inc., Boston,
Mass. 02101
<PAGE>
EXHIBIT A
---------
All machinery, apparatus, equipment, appliances, fittings, fixtures, building
materials and articles of personal property of the Debtor of every kind and
nature whatsoever, now or hereafter located at or on the Debtor's premises at
1600 Boston-Providence Highway, Walpole, Massachusetts or used or to be used in
the construction, operation, maintenance or occupation of the buildings or
improvements now or hereafter located thereon, all whether now owned or
hereafter acquired, whether affixed or moveable, and whether relating to the
project erected at said premises, and all replacements of, substitutions for
and access ions to any of same and all products and proceeds (including, without
limitation, insurance proceeds) of any of the foregoing.
<PAGE>
UNANIMOUS CONSENT OF THE GENERAL PARTNERS
OF NEW POND VILLAGE ASSOCIATES
November 21, 1990
We, the undersigned, being all of the general partners of New Pond Village
Associates, a Massachusetts general partnership (the "Partnership"), hereby
approve and agree to the following:
1. That the Partnership enter into, and the general partners are and each
of them singly is hereby authorized and empowered in the name of and behalf of
the Partnership, to execute, acknowledge, and deliver each of:
(i) A Mortgage and Trust Indenture between the Partnership and The
First National Bank of Boston, as Trustee (the "Trustee")
providing for the issuance of the New Pond Village Associates
Resident Mortgage Bonds (New Pond Village Project) Series A (the
"Bonds"), and for certain obligations to be performed by the
Partnership as a condition thereof; and
(ii) Such additional documents, including without limitation the Bonds
and UCC financing statements, as are necessary or appropriate,
each such document to be in such form as the general partner or general partners
executing the same shall determine, its or their execution and delivery of each
such document to be conclusive evidence that the same is authorized by the
undersigned as general partners.
2. That the undersigned general partners are, and each of them singly is,
hereby authorized in the name of and on behalf of the Partnership to execute,
acknowledge, deliver, file, and record such agreements, documents, orders,
directions, certificates, financing statements, and other instruments and papers
as may be necessary to secure fully the Trustee and to take or cause to be taken
such further action for or on behalf of the Partnership, as such general partner
may in its general discretion determine to be necessary, convenient or
appropriate to carry out and give effect to the transactions contemplated in
this unanimous consent.
<PAGE>
3. That the actions heretofore taken by each of the undersigned general
partners in relation to the foregoing be, and each of such actions is, hereby in
all respects approved, ratified, and confirmed.
NEW POND VILLAGE ASSOCIATES
BY ITS GENERAL PARTNERS
-----------------------
NVHS MANAGEMENT SERVICES, INC.
/s/ Frank S Crane
------------------------------------
Frank S. Crane, III
President
FIRST HEALTHCARE CORPORATION
/s/ Joan Thompson
------------------------------------
Joan Thompson
Authorized Signatory
Suffolk, SS. November 26, 1990
Then personally appeared before me the above said Joan Thompson of First
Healthcare Corporation and stated that the foregoing is the free act and deed of
said First Healthcare Corporation.
_____________________________________
Notary Public
My Commission expires: March 15, 1996
__________________, SS. November 26, 1990
Then personally appeared before me the above said Frank s. Crane, III of
NVHS Management Services, Inc. and stated that the foregoing is the free act and
deed of said NVHS Management Services, Inc.
_____________________________________
Notary Public
My Commission expires:
-2-
<PAGE>
Certificate of New Pond Village Associates
------------------------------------------
I the undersigned authorized signatory for New Pond Village Associates, hereby
certify that I have received this day the sum of $156,600 from LOIS C.
BUFFINGTON constituting the 90% of the principal amount of the resident mortgage
bond for said resident.
We requested the 10% deposit in the amount of $17,400, be transferred to the New
Pond Village Entrance Account. The total principal amount of the resident
mortgage bond amount is $174,000.
Date : New Pond Village Associates
December 4, 1990 By: Marjorie R. Rowden
-----------------------------------
Print Name:
<PAGE>
No. R-
NEW POND VILLAGE ASSOCIATES
RESIDENT MORTGAGE BONDS
(NEW POND VILLAGE PROJECT)
SERIES A
Original Issue Date: November 26, 1990 Maturity Date: January 1, 2040
Registered Owner:
Principal Amount:
New Pond Village Associates, a Massachusetts general partnership, for value
received, hereby promises to pay, but solely from the sources as hereinafter
provided and not otherwise, to the registered owner named above, or registered
assigns, on the maturity date stated above upon surrender hereof, the principal
amount stated above or, if this Bond or a portion thereof shall be duly called
for redemption, until the date fixed for redemption. THIS BOND IS NON-INTEREST
BEARING AND IS NON-TRANSFERABLE.
Any capitalized term used in this Bond as a defined term but not defined
herein shall be defined as in the Indenture (as hereinafter defined).
This Bond shall not be entitled to any right or benefit under the
Indenture, or be valid or become obligatory for any purpose, until this Bond
shall have been authenticated by the execution by the Trustee (as hereinafter
defined), or its successor as Trustee, or by an authenticating agent, of the
certificate of authentication inscribed hereon.
1. Indenture and Security. This Bond is one of the Series A Bonds issued
----------------------
by New Pond Village Associates, a Massachusetts general partnership (the
"Partnership"), under a Mortgage and Trust Indenture dated as of November 1,
1990 (the "Indenture") between the
<PAGE>
Partnership and The First National Bank of Boston, as trustee (the "Trustee")
(hereinafter referred to as the "Bonds") for the purpose of providing funds to
refinance certain indebtedness relating to New Pond Village, a residential
retirement facility in Walpole, Massachusetts (the "Village"). The terms of the
Bonds include those stated in the indenture and Holders are referred to the
indenture for a statement of such terms. The Bonds are general obligations of
the Partnership. To secure the obligations of the Partnership to make payments
of the principal of the Bonds and the performance of its other obligations under
the Indenture, the Partnership has pursuant to the indenture granted to the
Trustee a mortgage lien on the Real Estate. This indenture and the lien created
hereby shall be subordinate for all purposes to any lien, security interest,
pledge, lease or other encumbrance on the Trust Estate, or any part thereof,
granted by the Partnership at any time and from time to time to secure (i) any
indebtedness or other liabilities or obligations of the Partnership incurred in
connection with the acquisition or construction of all or any portion of the
Trust Estate, including any improvements or repairs thereto or equipping
thereof, and any refinancing thereof, in whole or in part, including,
without limitation, any lien in favor of BayBank Boston, N.A. in connection with
the construction of the Independent Living Center and the Health Center; and
(ii) any indebtedness or other liabilities or obligations of the Partnership
incurred in connection with obtaining operating funds or working capital for the
operation of the Village. The Trustee agrees and is hereby directed to execute
and deliver any instrument necessary or appropriate to confirm such
subordination upon delivery to the Trustee of a copy of the subordination
agreement, if any.
The Trustee, upon the written request of the Partnership, agrees to
subordinate the lien of the Indenture on, or release from the lien hereof, as
directed by the Partnership (i) that portion of the Real Estate on which the
Health Center is located, together with that portion of the Real Estate
consisting of unimproved land that is located adjacent to the Health Center to
the extent necessary to establish a separate
-2-
<PAGE>
legal lot for the Health Center in compliance with applicable zoning and land
use laws, regulations and ordinances, in order to facilitate the financing or
refinancing of the construction of the Health Center or any additions,
improvements or repairs thereto; (ii) any portion of the Real Estate
constituting unimproved land, in order to facilitate the financing or
refinancing of construction thereon or any additions, improvements or repairs to
any buildings or improvements subsequently constructed thereon; and (iii) any
existing easements, licenses, rights of way and other rights and privileges,
with or without consideration.
2. Optional Redemption. The Bonds are subject to optional redemption by
-------------------
the Partnership at any time upon not less than ten (10) days prior written
notice as provided in Paragraph 4 hereof, in whole or in part, at a redemption
price equal to 100% of the principal amount thereof, subject to the
Partnership's right of set-off as provided in Paragraph 6, including without
limitation any rights to offset deferred fees.
3. Mandatory Redemption. Each Bond is subject to mandatory redemption by
--------------------
the Partnership upon not less than ten (10) days prior written notice as
provided in Paragraph 4 hereof, in whole, at any time upon the sooner to occur
of (i) 180 days following the date a Residency Agreement is terminated with
respect to all individuals constituting a Resident thereunder (the "Termination
Date") or (ii) the date the Partnership sells a new Bond for an Apartment Home
for which a Termination Date has occurred (the "Resale Date"), subject to the
Partnership's right of set-off as provided in Paragraph 6, including without
limitation any rights to offset deferred fees.
4. Notice of Redemption; Partial Redemption. Not less than ten (10) days
----------------------------------------
prior to a redemption (or maturity) date, the Partnership shall give notice by
registered or certified mail or by acknowledged hand delivery to the Holders of
Bonds to be redeemed at the addresses shown on the registration books maintained
by the Trustee stating the Bond number and Apartment Home number to which the
Bond relates, the principal amount of
-3-
<PAGE>
the Bond to be redeemed (or which has matured) and all amounts to be set-off
against such principal amount under Paragraph 6 hereof, the section of the
Indenture pursuant to which the redemption (if applicable) is occurring, the
anticipated redemption date, and the manner in which payment will occur. A copy
of the notice, together with evidence of proper notification procedures, shall
be furnished to the Trustee.
5. Persons Deemed Owners. The registered Holder of a Bond may be treated
---------------------
as its owner for all purposes.
6. Partnership's Right of Set-off. As more specifically provided in the
------------------------------
Indenture, the Partnership shall have the right to set-off against payment of
the principal of each Bond any unpaid amounts due and owing to the Partnership
under the Residency Agreement, including certain deferred fees, provided that
prior to such set-off the Partnership has notified the Holder in accordance
with such provisions.
7. Amendments and Waivers. Subject to certain exceptions provided for in
----------------------
the Indenture, the Indenture and the Series A Bonds may be amended with the
consent of the Holders of at least 51% in principal amount of the Series A Bonds
then outstanding, and, with respect to any default declared at the written
request of the Holders, may be waived with the consent of the Holders of at
least 25% in principal amount of the Series A Bonds then outstanding. Without
the consent of the Holder, the Indenture or the Series A Bonds may be amended to
cure any ambiguity, formal defect or omission or to confer upon the Trustee
additional rights, remedies, powers and authority or to subject to the lien of
the Indenture additional revenues, properties or collateral or to release vacant
land or easements.
8. Defaults and Remedies. Upon the occurrence and continuation of an
---------------------
Event of Default, the Trustee may, and upon the written request of the holders
of not less than twenty-five percent (25%) in aggregate principal amount of the
Bonds outstanding shall, after being indemnified at its option pursuant to
Section 9.1(k) hereof, hereunder declare the entire principal amount of the
-4-
<PAGE>
Bonds then outstanding hereunder immediately due and payable, and the said
entire principal shall thereupon become and be immediately due and payable.
If an Event of Default shall have occurred, the Trustee may and if
requested so to do by the Holders of twenty-five percent (25%) in aggregate
principal amount of Bonds then outstanding and indemnified as provided in the
Indenture, the Trustee shall exercise such one or more of the rights and powers
conferred by the Indenture as the Trustee shall deem necessary and appropriate
to protect and enforce its rights and the rights of the Holders under the
Indenture.
No remedy by the terms of the Indenture conferred upon or reserved to the
Trustee (or to the Holders) is intended to be exclusive of any other remedy, but
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given to the Trustee or to the Holders thereunder or now or
hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any Event
of Default shall impair any such right or power or shall be construed to be a
waiver of such Event of Default or acquiescence therein; and every such right
and power may be exercised from time to time and as often as may be deemed
expedient.
No waiver of any Event of Default hereunder, whether by the Trustee or by
the Holders, shall extend to or shall affect any subsequent default or Event of
Default or shall impair any rights or remedies consequent thereon.
The Holders of a majority in aggregate principal amount of Bonds then
outstanding shall have the right, at any time, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the time, method and
place of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of the Indenture or for the appointment
of a receiver or any other proceedings under the Indenture, provided that such
direction shall not be otherwise than
-5-
<PAGE>
in accordance with the provisions of law and of the Indenture.
9. Authentication. This Bond shall not be valid until authenticated by
--------------
the manual signature of the Trustee or Authenticating Agent.
10. General. Reference is hereby made to the Indenture, a copy of which
-------
is on file with the Trustee, for the provisions, among others, with respect to
the nature and extent of the rights, duties and obligations of the Partnership,
the Trustee and the Holders of the Bonds and the security for the Bonds. The
Holder of this Bond, by the acceptance hereof, is deemed to have agreed and
consented to and be bound by the terms and provisions of the Indenture.
-6-
<PAGE>
IN WITNESS WHEREOF, New Pond Village Associates has caused this Bond to be
signed by the facsimile signature of each of its general partners.
NEW POND VILLAGE ASSOCIATES,
a Massachusetts general
Partnership
By NVHS Management Services,
Inc., general partner
By ____________________________________________________
Title:
By First Healthcare Corporation,
general partner
By ____________________________________________________
Title: ROBERT F. PACQUER
SR. VICE PRESIDENT
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the within-
mentioned Indenture.
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By: ____________________
Authorized Signatory
Date:
-7-
<PAGE>
No. R-
NEW POND VILLAGE ASSOCIATES
RESIDENT MORTGAGE BONDS
(NEW POND VILLAGE PROJECT)
SERIES A
Original Issue Date: January 1, 1993
Maturity Date: January 1, 2040
Registered Owner:
Principal Amount:
New Pond Village Associates, a Massachusetts general partnership, for value
received, hereby promises to pay, but solely from the sources as hereinafter
provided and not otherwise, to the registered owner named above, or registered
assigns, on the maturity date stated above upon surrender hereof, the principal
amount stated above or, if this Bond or a portion thereof shall be duly called
for redemption, until the date fixed for redemption. THIS BOND IS NON-INTEREST
BEARING AND IS NON-TRANSFERABLE.
Any capitalized term used in this Bond as a defined term but not defined
herein shall be defined as in the Indenture (as hereinafter defined)
This Bond shall not be entitled to any right or benefit under the
Indenture, or be valid or become obligatory for any purpose, until this Bond
shall have been authenticated by the execution by the Trustee (as hereinafter
defined), or its successor as Trustee, or by an authenticating agent, of the
certificate of authentication inscribed hereon.
1. Indenture and Security. This Bond is one of the Series A Bonds issued
----------------------
by New Pond Village Associates, a Massachusetts general partnership (the
"Partnership"), under a Mortgage and Trust Indenture dated as of November 1,
1990 (the "Indenture") between the Partnership and The First National Bank of
Boston, as
<PAGE>
trustee (the "Trustee") (hereinafter referred to as the "Bonds") for the purpose
of providing funds to refinance certain indebtedness relating to New Pond
Village, a residential retirement facility in Walpole, Massachusetts (the
"Village"). The terms of the Bonds include those stated in the Indenture and
Holders are referred to the Indenture for a statement of such terms. The Bonds
are general obligations of the Partnership. To secure the obligations of the
Partnership to make payments of the principal of the Bonds and the performance
of its other obligatIons under the Indenture, the Partnership has pursuant to
the Indenture granted to the Trustee a mortgage lien on the Real Estate. This
Indenture and the lien creaked hereby shall be subordinate for all purposes to
any lien, security Interest, pledge, lease or owner encumbrance on the Trust
Estate, or any part thereof, granted by the Partnership at any time and from
time to time to secure (i) any indebtedness or other liabilities or obligations
of the Partnership incurred in connection with the acquisition or construction
of all or any portion of the Trust Estate, including any improvements or repairs
thereto or equipping thereof, and any refinancing thereof, in whole or in part,
including, without limitation, any lien in favor of BayBank Boston, N.A. in
connection with the construction of the Independent Living Center and the Health
Center; and (ii) any indebtedness or other liabilities or obligations of the
Partnership incurred in connection with obtaining operating funds or working
capital for the operation of the Village. The Trustee agrees and is hereby
directed to execute and deliver any instrument necessary or appropriate to
confirm such subordination upon delivery to the Trustee of a copy of the
subordination agreement, if any.
The Trustee, upon the written request of the Partnership, agrees to
subordinate the lien of the Indenture on, or release from the lien hereof, as
directed by the Partnership (i) that portion of the Real Estate on which the
Health Center is located, together with that portion of the Real Estate
consisting of unimproved land that is located adjacent to the Health Center to
the extent necessary to establish a separate legal lot for the Health Center in
compliance with
-2-
<PAGE>
applicable zoning and land use laws, regulations and ordinances, in order to
facilitate the financing or refinancing of the construction of the Health Center
or any additions, improvements or repairs thereto; (ii) any portion of the Real
Estate constituting unimproved land, in order to facilitate the financing or
refinancing of construction thereon or any additions, improvements or repairs to
any buildings or improvements subsequently constructed thereon; and (iii) any
existing easements, licenses, rights of way and other rights and privileges,
with or without consideration.
2. Optional Redemption. The Bonds are subject to optional redemption by
-------------------
the Partnership at any time upon not less than ten (10) days prior written
notice as provided in Paragraph 4 hereof, in whole or in part, at a redemption
price equal to 100% of the principal amount thereof, subject to the
Partnership's right of set-off as provided in Paragraph 6, including without
limitation any rights to offset deferred fees.
3. Mandatory Redemption. Each Bond is subject to mandatory redemption by
--------------------
the Partnership upon not less than ten (10) days prior written notice as
provided in Paragraph 4 hereof, in whole, at any time upon the sooner to occur
of (i) 180 days following the date a Residency Agreement is terminated with
respect to all individuals constituting a Resident thereunder (the "Termination
Date") or (ii) the date the Partnership sells a new Bond for an Apartment Home
for which a Termination Date has occurred (the "Resale Date"), subject to the
Partnership's right of set-off as provided in Paragraph 6, including without
limitation any rights to offset deferred fees.
4. Notice of Redemption; Partial Redemption. Not less than ten (10) days
----------------------------------------
prior to a redemption (or maturity) date, the Partnership shall give notice by
registered or certified mail or by acknowledged hand delivery to the Holders of
Bonds to be redeemed at the addresses shown on the registration books maintained
by the Trustee stating the Bond number and Apartment Home number to which the
Bond relates, the principal amount of the Bond to be redeemed (or which has
matured) and all
-3-
<PAGE>
amounts to be set-off against such principal amount under Paragraph 6 hereof,
the section of the Indenture pursuant to which the redemption (if applicable) is
occurring, the anticipated redemption date, and the manner in which payment will
occur. A copy of the notice, together with evidence of proper notification
procedures, shall be furnished to the Trustee.
5. Persons Deemed Owners. The registered Holder of a Bond may be treated
---------------------
as its owner for all purposes.
6. Partnership's Right of Set-off. As more specifIcally provided in the
------------------------------
indenture, the Partnership shall have the right to set-off against payment of
the principal of each Bond any unpaid amounts due and owing to the Partnership
under the Residency Agreement, includIng certain deferred fees, provided that
prior to such set-off the Partnership has notified the Holder in accordance with
such provisions.
7. Amendments and Waivers. Subject to certain exceptions provided for in
----------------------
the Indenture, the Indenture and the Series A Bonds may be amended with the
consent of the Holders of at least 51% in principal amount of the Series A Bonds
then outstanding, and, with respect to any default declared at the written
request of the Holders, may be waived with the consent of the Holders of at
least 25% in principal amount of the Series A Bonds then outstanding. Without
the consent of the Holder, the Indenture or the Series A Bonds may be amended to
cure any ambiguity, formal defect or omission or to confer upon the Trustee
additional rights, remedies, powers and authority or to subject to the lien of
the Indenture additional revenues, properties or collateral or to release vacant
land or easements.
8. Defaults and Remedies. Upon the occurrence and continuation of an
---------------------
Event of Default, the Trustee may, and upon the written request of the holders
of not less than twenty-five percent (25%) in aggregate principal amount of the
Bonds outstanding shall, after being indemnified at its option pursuant to
Section 9.1(k) hereof, hereunder declare the entire principal amount of the
Bonds then outstanding hereunder immediately due and
-4-
<PAGE>
payable, and the said entire principal shall thereupon become and be
immediately due and payable.
If an Event of Default shall have occurred, the Trustee may and if
requested so to do by the Holders of twenty-five percent (25%) in aggregate
principal amount of Bonds then outstanding and indemnified as provided in the
Indenture, the Trustee shall exercise such one or more of the rights and powers
conferred by the Indenture as the Trustee shall deem necessary and appropriate
to protect and enforce its rights and the rights of the Holders under the
Indenture.
No remedy by the terms of the Indenture conferred upon or reserved to the
Trustee (or to the Holders) is intended to be exclusive of any other remedy, but
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given to the Trustee or to the Holders thereunder or now or
hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any Event
of Default shall impair any such right or power or shall be construed to be a
waiver of such Event of Default or acquiescence therein; and every such right
and power may be exercised from time to time and as often as may be deemed
expedient.
No waiver of any Event of Default hereunder, whether by the Trustee or by
the Holders, shall extend to or shall affect any subsequent default or Event of
Default or shall impair any rights or remedies consequent thereon.
The Holders of a majority in aggregate principal amount of Bonds then
outstanding shall have the right, at any time, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the time, method and
place of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of the Indenture or for the appointment
of a receiver or any other proceedings under the Indenture, provided that such
direction shall not be otherwise than
-5-
<PAGE>
in accordance with the provisions of law and of the Indenture.
9. Authentication. This Bond shall not be valid until authenticated by
--------------
the manual signature of the Trustee or Authenticating Agent.
10. General. Reference is hereby made to the Indenture, a copy of which
-------
is on file with the Trustee, for the provisions, among others, with respect to
the nature and extent of the rights, duties and obligations of the Partnership,
the Trustee and the Holders of the Bonds and the security for the Bonds. The
Holder of this Bond, by the acceptance hereof, is deemed to have agreed and
consented to and be bound by the terms and provisions of the Indenture.
IN WITNESS WHEREOF, New Pond Village Associates has caused this Bond to be
signed by the facsimile signature of each of its general partners.
NEW POND VILLAGE ASSOCIATES,
a Massachusetts general
partnership
By Hillhaven Properties, Ltd.,
general partner
By ______________________________________
Robert F. Pacquer
Senior Vice President and
Chief Financial Officer
By First Healthcare Corporation,
general partner
By ______________________________________
Robert F. Pacquer
Senior Vice President and
Chief Financial Officer
-6-
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the within-
mentioned Indenture.
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By:____________________
Authorized Signatory
Date:
-7-
<PAGE>
EXHIBIT 10.8
INDENTURE OF TRUST AND AGREEMENT
among
THE REDEVELOPMENT AGENCY OF THE CITY OF SAN MARCOS
and
SAN MARCOS RETIREMENT VILLAGE
and
THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE,
and
SECURITY PACIFIC NATIONAL BANK
________________________________________________________________________________
$13,500,000
The Redevelopment Agency of the City of San Marcos
Adjustable/Fixed Rate Multifamily Housing Bonds
(San Marcos Retirement Village Project)
________________________________________________________________________________
__________________________________
Dated as of December 1, 1985
__________________________________
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
RECITALS.............................................................. 1
PART I: PLEDGE AND ASSIGNMENT; DEFINITIONS
Article 1: Pledge and Assignment by Issuer
Section 101 Pledge and Assignment of Issuer........................ 2
Section 102 Defeasance of Lien; Termination of Borrower's
Obligations on the Loan................................ 2
Article 2: Definitions
PART II: THE BONDS
Article 3: The Bonds
Section 301 Issuance of Bonds...................................... 19
Section 302 Delivery of Bonds...................................... 20
Section 303 Execution; Authentication.............................. 21
Section 304 Interest on Bonds...................................... 21
Section 305 Lost Bonds; Exchange and Transfer of Bonds;
Additional Interest Only Assignable by Separate
Writing................................................ 22
Section 306 Temporary Bonds........................................ 24
Article 4: Redemption or Purchase of Bonds Before Maturity
Section 401 Redemption or Purchase of Bonds........................ 25
Section 402 [Not Used]
Section 403 Selection of Bonds to be Redeemed...................... 30
Section 404 Procedure for Redemption............................... 31
Section 405 No Partial Redemption After Default.................... 31
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 406 Trustee to Notify Bank of Redemption
of Principal........................................... 31
Article 5: Source and Application of Funds
Section 501 Project Fund........................................... 31
Section 502 Bond Fund.............................................. 36
Section 503 Letter of Credit Fund; Draws Under
Letter of Credit....................................... 36
Section 504 Investment of Moneys in Funds.......................... 38
Section 504A Payment of Bonds From Funds............................ 39
Section 505 Avoidance of Arbitrage................................. 39
Section 506 Authorized Application of Funds; Moneys
to be Held in Trust.................................... 40
Section 507 Nonpresentment of Bonds................................ 40
Section 508 Bonds Are Not General Obligations...................... 40
Section 509 Substitute Letter of Credit............................ 41
PART III: THE PROJECT
Article 6: Completion of the Project
Section 601 Borrower's Obligations to Complete
Project, etc........................................... 42
Section 602 Completion Certificate................................. 42
Section 603 Subdivision of Project Site............................ 43
Article 7: Damage and Destruction
Section 701 Damage and Destruction................................. 43
Section 702 Eminent Domain......................................... 43
Section 703 Payment to Borrower.................................... 44
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
PART IV: REPRESENTATIONS AND AGREEMENTS OF ISSUER AND BORROWER
Article 8: Representations and Agreements of Issuer
Section 801 Due Organization, etc.................................. 44
Section 802 Payment of Bonds; Trustee's Rights with Respect to the
Loan; Cooperation with Trustee......................... 45
Article 9: Representations and Covenants of the Borrower
Section 901 Legal Proceedings...................................... 46
Section 902 Compliance with Law; Consents, etc..................... 46
Section 903 Adequacy of Disclosure................................. 46
Section 904 Acquisition, Construction and Completion of
Project................................................ 47
Section 905 Residential Rental Property............................ 49
Section 906 Lower Income Tenants................................... 50
Section 907 Tax-Exempt Status of the Bonds......................... 51
Section 908 Modification and Termination of Special Tax
Covenants.............................................. 51
Section 909 Sale of Project........................................ 52
Article 10: Certain Agreements of Borrower
Section 1001 Borrower to Make Loan Payments Sufficient to Meet
Debt Service on Bonds and Additional Payments.......... 53
Section 1002 Borrower to Maintain Its Legal Existence............... 54
Section 1003 [Not Used]
Section 1004 Borrower to Give Notice of Event Adversely Affecting
Tax-Exempt Status of Interest on Bonds................. 54
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1005 Covenants Related to Mortgaged Property................ 55
Section 1006 Instruments of Further Assurance; Recordings and
Filing................................................. 57
Section 1007 Insurance and Worker's Compensation
Coverage............................................... 57
Section 1008 Indemnification of Issuer, Bank and Trustee............ 58
Section 1009 Inconsistencies Between Indenture and Reimbursement
Agreement.............................................. 60
PART V: EVENTS OF DEFAULT
Article 11: Default Provisions and Remedies of
Trustee, Bank, Bondholders and Issuer
Section 1101 Events of Default; Defaults ........................... 60
Section 1102 Acceleration........................................... 62
Section 1103 [Not Used]
Section 1104 Remedies; Rights of Bank and Bondholders............... 63
Section 1105 Right of Bank and Bondholders to Direct
Proceedings............................................ 63
Section 1106 Appointment of Receiver ............................... 64
Section 1107 Application of Moneys ................................. 64
Section 1108 Remedies Vested in Trustee............................. 64
Section 1109 Rights and Remedies of Bank and Bondholders............ 65
Section 1110 Waivers of Events of Default .......................... 65
Section 1111 Intervention by Trustee ............................... 65
Section 1112 Remedies of Issuer on Event of Default................. 66
Section 1113 Non-Recourse........................................... 66
</TABLE>
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<PAGE>
<TABLE>
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<S> <C>
PART VI: THE TRUSTEE
Article 12: The Trustee
Section 1201 Acceptance of Trusts..................................... 66
Section 1202 Fees and Expenses of Trustee............................. 67
Section 1203 Successor Trustee........................................ 68
Section 1204 Resignation by Trustee; Removal.......................... 68
Section 1205 Appointment of Successor Trustee......................... 68
Section 1206 Dealing in Bonds......................................... 69
Section 1207 Trustee as Bond Registrar; List of
Bondholders.............................................. 69
Section 1208 Successor Trustee as Custodian of Funds,
Bond Registrar and Paying Agent.......................... 69
Section 1209 Adoption of Authentication............................... 69
Section 1210 Designation and Succession of Paying
Agents................................................... 69
Section 1211 Appointment of Co-Trustee................................ 70
PART VII: SUPPLEMENTAL INDENTURE AND WAIVERS;
MISCELLANEOUS
Article 13: Supplemental Indentures and Waivers
Section 1301 Supplemental Indentures Not Requiring
Consent of Bondholders................................... 71
Section 1302 Supplemental Indentures Requiring Consent
of Bondholders........................................... 72
Section 1303 Opinion of Counsel....................................... 73
Section 1304 Consent of Bank; Amendments to Letter of
Credit................................................... 73
Section 1305 Modification by Unanimous Consent........................ 73
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Article 14: Miscellaneous
Section 1401 Consents, etc., of Bondholders......................... 74
Section 1402 Limitation of Rights................................... 74
Section 1403 Severability........................................... 74
Section 1404 Notices................................................ 74
Section 1405 Payments Due on Saturdays, Sundays
and Holidays........................................... 74
Section 1406 Extent of Issuer Covenants; No Personal
Liability.............................................. 74
Section 1407 Bonds Owned by Issuer or Borrower...................... 75
Section 1408 Captions; Index........................................ 75
Section 1409 Counterparts........................................... 75
Section 1410 Governing Law; Sealed Instrument....................... 75
Section 1411 Agreements to Constitute Covenants..................... 75
Signatures
Acknowledgements
EXHIBIT 301 - Form of Bond
EXHIBIT 401 - Form of Bondholder's Election Notice
EXHIBIT 501 - Costs of Issuance
EXHIBIT 601 - Description of Project
EXHIBIT 904A - Form of Borrower's Certificate of Project Costs
EXHIBIT 904B - Form of Monitoring Agreement
EXHIBIT 906A - Form of Income Certification
EXHIBIT 906B - Form of Borrower's Report
</TABLE>
-vi-
<PAGE>
INDENTURE OF TRUST AND AGREEMENT
This Indenture of Trust and Agreement (together with any supplemental
indentures, the "Indenture") is made as of December 1, 1985, among The
Redevelopment Agency of the City of San Marcos (the "Issuer"); San Marcos
Retirement Village, a California general partnership (the "Borrower"); The First
National Bank of Boston, authorized to execute trusts of the character herein
set out, with its principal office in Boston, Massachusetts, as Trustee (the
"Trustee"); and Security Pacific National Bank (the "Bank").
Terms defined in this Indenture are used as defined. Unless otherwise
indicated, references to Articles or Sections refer to those in this Indenture.
RECITALS
The Issuer has duly determined to issue $13,500,000 principal amount of
industrial revenue bonds (the "Bonds", which term includes bonds issued in
replacement or exchange and excludes Bonds for which the Trustee is holding
payment therefor under Section 507 hereof). The proceeds of the Bonds will be
loaned (the "Loan") hereunder by the Issuer to the Borrower. Such proceeds will
be used to finance permitted costs in connection with the construct ion of
residential dwelling units and facilities for the elderly to be owned and used
by the Borrower in San Marcos, California. To secure the Bonds and the Bank
Obligations (as defined in Article 2), and the obligations of the Issuer and the
Borrower hereunder and under the Reimbursement Agreement, the Borrower is
expected to grant a first deed of trust and second deed of trust and/or security
interest in certain of its properties and the Issuer is herein pledging the
Pledged Receipts and assigning certain of its rights hereunder.
All things necessary to make the Bonds, when authenticated, the binding,
limited obligations of the Issuer and to create a valid lien and pledge as
herein provided have been accomplished; and the execution and delivery of this
Indenture and the issuance of the Bonds have been duly authorized.
In consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree, covenant, grant, pledge, assign, represent and warrant as follows (it
being
-1-
<PAGE>
understood and agreed that in the performance of the agreements of the Issuer
herein contained, any obligation it may incur for the payment of money shall not
be a general obligation of the Issuer or a debt or pledge of the faith and
credit of the State of California but shall be payable solely from the Pledged
Receipts):
PART I:
------
PLEDGE AND ASSIGNMENT; DEFINITIONS
ARTICLE 1 - Pledge and Assignment by Issuer
Section 101. Pledge and Assignment of Issuer. In order to secure the due
-------------------------------
payment of principal, premium, if any, and interest of or on the Bonds and
compliance by the Issuer with its agreements contained in this Indenture and to
secure the due payment and performance of the Bank Obligations, the Issuer
hereby grants, pledges and assigns to the Trustee all of its right, title and
interest in and to the following (the "Trust Estate"):
(a) All of the Issuer's right, title and interest in and to the
Pledged Receipts;
(b) All of the Issuer's right, title and interest in and to the First
Deed of Trust; and
(c) All of the Issuer's right, title and interest in this Indenture,
including enforcement rights and remedies (including the grant herein of a
security interest under the Uniform Commercial Code to the maximum extent
possible);
but excepting from such grant, pledge and assignment the right of the Issuer to
any payment or reimbursement pursuant to Section 1001B, Section 1008 or the
third sentence of Section 1112; to have and to hold the Trust Estate, whether
-------------------
now owned or hereafter acquired, unto the Trustee and its respective successors
in trust and assigns forever; in trust nevertheless, upon the terms and trusts
---------------------
herein set forth for the benefit, security and protection of (i) all present and
future holders of all Bonds from time to time issued under and secured by this
Indenture and (ii) the Bank.
Section 102. Defeasance of Lien; Termination of Borrower's Obligations on
------------------------------------------------------------
the Loan. When (i) the Issuer has paid or has caused to be paid out of Priority
- --------
Funds to the holders of all of the Bonds the principal and interest and premium,
if any, due or
-2-
<PAGE>
to become due thereon at the times and in the manner stipulated therein and
herein, (ii) all of the Bank Obligations have been performed or satisfied in
full and (iii) all Additional Payments have been paid or provided for to the
satisfaction of the Issuer and the Trustee, the lien of this Indenture on the
Trust Estate shall terminate and the Borrower's obligations with respect to the
Loan shall terminate, except that the rights given by Section 401(d) of this
Indenture to the registered owners of all Outstanding Bonds shall survive for so
long as such Bonds remain outstanding. Upon the Borrower's request, the Trustee
shall upon the termination of the lien hereof promptly execute and deliver to
the Borrower and the Issuer an appropriate discharge hereof and shall assign and
deliver to the Borrower any property at the time subject to the lien of this
Indenture which may then be in its possession, except amounts held by the
Trustee pursuant to Section 507 for the payment of the principal of, premium, if
any, and interest on the Bonds and Additional Payments and payments pursuant to
Section 1008.
All the outstanding Bonds shall be deemed to have been paid within the
meaning of this Section if:
(a) After 123 days shall have passed and no Bankruptcy shall have
occurred since the Borrower shall have deposited with the Trustee, in trust for
and irrevocably committed thereto:
(i) sufficient moneys, or
(ii) direct obligations of the United States to be of such
maturities and interest payment dates and to bear such interest as will, without
further investment or reinvestment of either the principal amount thereof or the
earnings therefrom (likewise to be held in trust and committed, except as
hereinafter provided), be sufficient together with moneys referred to in (i)
above, for the payment, at their maturities or redemption dates, of all
principal of and interest and premium, if any, on such Bonds to the date of
maturity or redemption, or if default in such payment shall have occurred on
such date then to the date of the tender of such payment; provided, that if any
such Bonds are to be defeased prior to the earlier of the redemption or the
maturity thereof, notice of such redemption shall have been duly given or
irrevocable provision satisfactory to the Trustee shall have been duly made for
the giving of such notice and the Trustee shall have received an unqualified
opinion of Bond Counsel that such payment shall not cause the Bonds to become
"arbitrage bonds" within the meaning of Section 103(c) of the Internal Revenue
Code of 1954, as amended; or
-3-
<PAGE>
(b) the Trustee shall have drawn under the Letter of credit and shall
have paid to the holders of the Bonds, or pursuant to Section 503, 507 or 1107
shall be holding in trust for and irrevocably committed to the payment of the
Bonds, sufficient Priority Funds for the payment, at their maturities or
redemption dates or as provided in Section 503, of all principal of and interest
and premium, if any, on such Bonds to the date of maturity or redemption or as
provided in Section 503, as the case may be, or if default in such payment shall
have occurred on such date, then to the date of tender of such payment;
provided, that if any such Bonds are to be redeemed prior to the maturity
thereof, notice of such redemption shall have been duly given as provided in
this Indenture; and provided, further, that no Bond shall be deemed to have been
paid within the meaning of this clause (b) if any payment of principal thereof
or premium or interest thereon shall have been made out of funds or securities
deposited with the Trustee by the Borrower and if with respect to any such
deposit the conditions of clause (a) of this Section 103 shall not have been
satisfied.
The Bank Obligations shall be deemed to have been performed and satisfied
in full within the meaning of this Section 103 if (A) the Letter of Credit is no
longer outstanding, (B) the Borrower shall have paid sufficient moneys to the
Bank for the payment of all of its obligations under the Reimbursement Agreement
and (C) the Bank shall have so notified the Trustee in writing.
Any moneys held by the Trustee in accordance with the provisions of this
Section shall be invested by the Trustee in accordance with Section 504 (but
only to the extent that such investments are available) only in direct
obligations of the United States the maturities or redemption dates, without
premium, of which shall coincide as nearly as practicable with, but not be later
than, the time or times at which said moneys will be required for the aforesaid
purposes; provided, however, that moneys drawn under the Letter of Credit shall
be invested only in direct obligations of the United States with maturities of
30 or fewer days. The making of any such investments or the sale or other
liquidation thereof shall not be subject to the control of the Issuer or the
Borrower and neither the Trustee nor, without limiting it obligations under the
Basic Agreements, the Borrower shall have any responsibility for any losses
resulting from such investment. Any income or interest earned by, or increment
to, the investments held under this Section, to the extent determined from time
to time by the Trustee, with the consent of the Bank, to be in excess of the
amount required to be held by it for the purposes of this Section 102, shall be
paid to or for the account of the Borrower.
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Any amounts remaining in the Project Fund or the Bond Fund, after all of
the outstanding Bonds shall be deemed to have been paid and all other amounts
required to be paid under this Indenture, including without limitation the Bank
Obligations, shall have been paid and after the Trustee shall have been notified
by the Bank that all Bank Obligations have been satisfied, shall be paid to the
Borrower upon the termination of this Indenture.
ARTICLE 2 - Definitions
The following terms as used in this Indenture, the Bonds and any
certificate or document executed in connection therewith shall have the
following meanings (or are defined elsewhere in this Indenture as indicated
below) unless the context otherwise indicates:
"Act of Bank Bankruptcy" means the Bank shall become insolvent or fail to
pay its debts generally as such debts become due or shall admit in writing its
inability to pay any of its indebtedness or shall consent to or petition for or
apply to any authority for the appointment of a receiver, liquidator, trustee or
similar official for itself or for all or any substantial part of its properties
or assets or any such trustee, receiver, liquidator or similar official is
otherwise appointed or insolvency, reorganization, arrangement or liquidation
proceedings (or similar proceedings) shall be instituted by or against the Bank.
"Additional Payments" means the amounts required to be paid by the Borrower
under Section 1001B.
"Adjustable Period Interest Payment Date" means (i) the first Wednesday in
each calendar month during the Adjustable Rate Period, and (ii) the Conversion
Date.
"Adjustable Rate" means the lesser of (i) 12 1/2% per annum and (ii) a
floating rate established as herein provided. Except as provided in the last
sentence hereof, the floating rate shall be equal to ARBI plus a fixed interest
component ("FIC") equal to (x) one-quarter of one percent (1/4th of 1%) or (y),
(y) from and after the first Wednesday of the Adjustable Rate Interest Period
next succeeding the 15th day after the Remarketing Agent gives notice to the
Registered Owners of the Bonds that the Bonds have been rated AA or better (or
the equivalent thereof) by S&P or Moody's or their successors, one-eighth of one
percent (1/8th of 1%), provided that:
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(i) if the Trustee shall have received a notice tendering any of the
Bonds for purchase as described in Section 401(d) and if the Remarketing Agent
shall remarket all or a portion of such Bonds pursuant to the Remarketing
Agreement, the floating rate of interest for all Bonds shall be equal to the sum
of (A) ARBI, plus (B) the FIC, plus (C), if required to enable the Remarketing
Agent to remarket such tendered Bonds at par plus accrued interest, an
additional interest component ("AIC") determined as hereinafter provided. The
AIC shall be equal to that percentage of interest determined by the Remarketing
Agent in connection with any remarketing effort and expressed in increments of
1/8th of 1% per annum, which when added to the sum of ARBI plus the FIC will
produce the interest rate per annum necessary to enable the Remarketing Agent to
remarket such Bonds at par plus accrued interest. The AIC shall become effective
with respect to all Bonds as of the Purchase Date with respect to the Tendered
Bonds under Section 401(d), unless such date occurs after the last Wednesday of
an Adjustable Rate Interest Period, in which case such AIC shall become
effective as of the first Wednesday of the next Adjustable Rate Interest Period;
and
(ii) if an AIC is added to the floating rate pursuant to the preceding
clause (i), such AIC shall remain in effect until the end of the Adjustable Rate
Interest Period following the Adjustable Rate Interest Period in which the Bonds
were remarketed (except as provided in clause (iii) below), until a further
adjustment to the floating rate is made pursuant to the preceding clause (i) or
until the interest rate on the Bonds is otherwise determined as provided in this
Indenture; and
(iii) if the Remarketing Agent shall have advised the Borrower, the
Issuer, the Trustee and each Bondholder not less than seven days prior to the
first Wednesday of any Adjustable Rate Interest Period that the discontinuance
of the AIC would result in the Bonds bearing interest at a rate different from
the interest rate per annum necessary to enable the Remarketing Agent to
remarket the Bonds at par plus accrued interest, the floating rate shall be
equal to the floating rate as last adjusted pursuant to the preceding clause (i)
until such time as the floating rate may again be adjusted pursuant to such
clause (i) or until the interest rate on the Bonds is otherwise determined as
provided for in this Indenture; and
(iv) in the event that the Remarketing Agent shall have determined
(which determination shall be within the judgment and discretion of the
Remarketing Agent) that the Bonds may be remarketed at par plus accrued interest
at an Adjustable Rate equal to ARBI, then from and after the first Wednesday of
the
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adjustable Rate Interest Period next succeeding the 15th day after the
Remarketing Agent gives notice to the Registered Owners of the Bonds that it has
made such determination and so long as such determination shall remain in
effect, the FIC shall equal zero.
In the event that The First National Bank of Boston discontinues the
announcement of ARBI, the floating rate shall be equal to the average coupon
rate of interest expressed as a percentage of the yield evaluations at par of
United States Treasury obligations having a maturity of 91 days, which is
determined by the Remarketing Agent as necessary to remarket the Bonds at par
plus accrued interest, and which shall be announced by the Remarketing Agent to
the Trustee, the Issuer and the Borrower on Wednesday of each week, beginning on
the first such Wednesday following the discontinuance of ARBI, each change in
such floating rate to take effect on the Wednesday next following its
announcement.
"Adjustable Rate Interest Period" means each period during the Adjustable
Rate Period commencing on (and including) the first Wednesday of each calendar
month (or, in the case of the first such period, the date of delivery of the
Bonds to the initial purchaser or purchasers of the Bonds) and ending on (but
excluding) the first Wednesday of the next succeeding calendar month.
"Adjustable Rate Period" means the period from the date of issuance and
delivery of the Bonds to and including the earlier of (i) the Conversion Date
and (ii) the date the principal of and interest on the Bonds shall have been
paid in full or provision shall have been made for the payment thereof in
accordance with this Indenture
"AIC" -- See definition of Adjustable Rate.
"ARBI" means the rate, calculated as a percentage (the "ARBI Percent") of
the FNBB Base Rate, which, in the sole judgment of The First National Bank of
Boston, will result in the minimum yield attainable on tax-exempt adjustable-
rate bonds priced at par supported by the letter of credit of The First National
Bank of Boston. ARBI shall change as and when the FNBB Base Rate changes,
provided that (a) ARBI shall not be lower on any day during any Adjustable Rate
Interest Period than on the first Wednesday of such Interest Period, and (b)
changes in the FNBB Base Rate of which the Trustee is given notice after the
last Wednesday in any Adjustable Rate Interest Period shall become effective on
the first Wednesday of the next succeeding Adjustable Rate Interest Period.
Changes in ARBI which result
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from a change in the ARBI Percent shall become effective with respect to a
Adjustable Rate Interest period only if the Trustee is given notice of such
change in the ARBI Percent at least seven days prior to the first Wednesday of
such Adjustable Rate Interest Period. Changes in ARBI shall be communicated by
The First National Bank of Boston to the Trustee and the Remarketing Agent
promptly after they are announced.
"Bank" means Security Pacific National Bank so long as its Letter of Credit
is outstanding or, where the context requires, any bank or other financial
institution issuing a Substitute Letter of Credit. If no Letter of Credit or
Substitute Letter of Credit is outstanding, then any reference in this Indenture
to the Bank shall be disregarded.
"Bank Obligations" means any and all obligations of the Borrower to the
Bank under the Reimbursement Agreement (including without limitation the
obligation to reimburse the Bank for amounts drawn under the Letter of Credit
and to pay interest on such amounts until paid).
"Bankruptcy" means the filing of a petition in bankruptcy (or the
commencement of a bankruptcy or similar proceeding) by or against the Borrower
or the Issuer under any applicable bankruptcy, insolvency, reorganization or
similar law now or hereafter in effect.
"Basic Agreements" means this Indenture, the Land Use Restriction
Agreement, the Bonds, the Bond Purchase Agreement, the Depositary Agreement, the
Reimbursement Agreement, the Bond Pledge Agreement, the Intercreditor Agreement,
the Remarketing Agreement and the First Deed of Trust and the Second Deed of
Trust.
"Bond Counsel" means Kutak, Rock & Campbell or any other attorney at law or
a firm of attorneys mutually acceptable to the Trustee and the Borrower of
nationally recognized standing in matters pertaining to the tax-exempt nature of
interest on bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America.
"Bond Fund" -- See Section 502.
"Bondholder" means, as of any time, the registered owner of any Bond as
shown in the register kept by the Trustee as bond registrar.
"Bondholder's Election Notice" -- See Section 401(d).
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"Bond Pledge Agreement" means the Bond Pledge Agreement of even date
herewith among the Borrower, the Bank and the Trustee and entered into pursuant
to the Reimbursement Agreement.
"Bond Purchase Agreement" means the Bond Purchase Agreement of even date
herewith among the Issuer, the Borrower and the initial purchaser or purchasers
of the Bonds.
"Bond Year" means any one-year period ending on the anniversary of the
Closing Date.
"Bonds" -- See Recitals in this Indenture.
"Borrower -- See Recitals in this Indenture.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks are authorized or required to be closed in the City of Boston or the
City of San Diego.
"Certificate as to Arbitrage" means the Certificate as to Arbitrage dated
the Closing Date among the Issuer, the Borrower and the Remarketing Agent.
"Closing Date" means December 31, 1985.
"Code" means the Internal Revenue Code of 1954, as amended.
"Completion Certificate" -- See Section 602.
"Computation Date" -- See Section 304(b).
"Conversion Date" -- See Section 304(b).
"Cost" or "Cost of the Project" or "Project Cost" means and is deemed to
include to the extent permitted by the Enabling Act, whether incurred prior to
or after the date of this Indenture, (a) obligations of the Issuer or of the
Borrower incurred for labor, materials and other expenses and to contractors,
builders and materialmen in connection with the acquisition, construction,
installation and equipping of the Project and improvements thereto; (b) the cost
of contract or performance bonds or of other bonds and of insurance of all kinds
that may be required or necessary during the course of construction of the
Project; (c) all costs of engineering services, including the expenses of the
Issuer and the Borrower for test borings, surveys, test and pilot operations,
estimates, plans and specifications and preliminary investigations therefor, and
for supervising construction, as well as for the performance of all other duties
required by or consequent upon the proper construction of the
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Project; (d) compensation and expenses of the Trustee, legal, accounting,
financial and printing expenses, fees and all other expenses incurred in
connection with the issuance of the Bonds, which are not otherwise provided for
under the terms of this Indenture; (e) interest on the Bonds during the period
of construction of the Project, and for a period not exceeding one year after
completion of construction of the Project; (f) all other costs which the Issuer
or the Borrower shall be required to pay under the terms of any contract or
contracts for the acquisition (by purchase, lease or otherwise), construction or
installation of the Project; and (g) any sums required to reimburse the Issuer
or the Borrower for advances made by either of them for any of the above items,
or for any other costs incurred and for work done by any of them, which are
properly chargeable to the facilities being acquired, constructed or installed.
"Costs of Collection" means all attorneys' reasonable fees and out-of-
pocket expenses incurred by the Trustee and all reasonable costs and expenses
associated with travel on behalf of the Trustee, which costs and expenses are
directly or indirectly related to the Trustee's efforts to collect and/or
enforce the Bonds, this Indenture, the Bond Purchase Agreement, and/or any of
the Trustee's rights, remedies, powers, privileges, or discretions against or in
respect of the Borrower and/or any lessee of the Borrower (whether or not suit
is instituted in connection with any of the foregoing).
"Default" and "event of default" -- See Section 1101.
"Depositary" means The First National Bank of Boston as depositary under
the Depositary Agreement and its permitted successors and assigns.
"Depositary Agreement" means the Depositary Agreement of even date herewith
among the Trustee, the Borrower, the Depositary and the Remarketing Agent.
"Determination of Taxability" means a determination that the interest
income on any of the Bonds does not qualify as exempt interest under Section 103
of the Internal Revenue Code of 1954, as amended ("exempt interest"), for a
reason other than that a Bondholder is a "substantial user" of the Project or a
"related person" of the Borrower within the meaning of Section 103(b)(13) of
said Code, which determination shall be deemed to have been made upon the
occurrence of the first to occur of the following:
(a) the date on which the Trustee receives an opinion of Bond Counsel
that the interest income on any of the Bonds does not qualify as exempt
interest; or
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(b) the date on which the Trustee receives notice that any change in
law or regulation has become effective or that the Internal Revenue Service has
issued any private ruling, technical advice or any other written communication
with or to the effect that the interest income on any of the Bonds does not
qualify as exempt interest; or
(c) the date on which the Borrower receives notice from the Trustee in
writing that the Trustee has been advised by any holder of any Bonds that the
Internal Revenue Service has issued a thirty-day letter or other notice which
asserts that the interest on the Bonds does not qualify as exempt interest.
"Enabling Act" means Chapter 8 (commencing 3375) of Part l of Division 24
of the Health and Safety Code of the State of California, as amended.
"First Deed of Trust" means the First Deed of Trust on The Mortgaged
Property to be entered into among the Borrower, as trustor, Founders Title
Company, as trustee, and the Trustee, as Beneficiary, as provided in Section
603B hereof for the purpose of securing the Borrower's obligations to the Issuer
hereunder.
"Fixed Interest Index" means the interest rate index, determined by the
Remarketing Agent and announced to the Trustee, the Issuer, the Bank and the
Borrower from time to time, based upon yield evaluations at par (on the basis of
a term approximately equal to the time remaining until the maturity of the
Bonds) of not less than ten component issuers of comparable credit quality
selected by the Remarketing Agent which may include, without limitation, issuers
of industrial development revenue bonds and other limited and special obligation
bonds, the interest on which is exempt from federal income taxation. In the
event the Letter of Credit will remain outstanding and available on and after
the Conversion Date or a Substitute Letter of Credit will be issued and
available on and after the Conversion Date, the component issuers shall be of
the same rating category as shall be assigned to the Bonds (or, if the Bonds are
not rated, the long-term obligations of the issuer of the Letter of Credit or
such Substitute Letter of Credit, as the case may be) by Moody's or S&P based on
the availability of either such Letter of Credit. In the event the Letter of
Credit will not remain outstanding and available on and after the Conversion
Date, the component issuers shall be of the same credit quality as the Borrower
in the judgment of the Remarketing Agent. The specific issuers included in the
component issuers may be changed from time to time by the Remarketing Agent in
its discretion. In the event the Fixed Interest Index cannot be determined by
the aforementioned methods, such Index shall be equal to 95% of the
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most recent Bond Buyer Revenue Bond Index, provided that if the Bond Buyer
Revenue Bond Index is no longer published at the time, then the Fixed Interest
Index shall be equal to 90% of the average of the yield evaluations at par of
United States Treasury obligations having a term to maturity within one year of
the remaining term to maturity of the Bonds, as computed by the Remarketing
Agent. In the event that the Fixed Interest Index cannot be determined by any of
the aforementioned methods, the Fixed Interest Index shall be equal to twelve
and one-half percent (12 1/2%) per annum.
"Fixed Period Interest Payment Dates" means the January 1 or July 1 next
succeeding the Conversion Date and each January 1 and July l thereafter until
the principal of, and premium, if any, and interest on, the Bonds shall have
been paid in full or provision shall have been made for the payment thereof in
accordance with this Indenture.
"Fixed Rate" means the rate of interest certified to the Borrower, the
Issuer, the Bank and the Trustee by the Remarketing Agent no fewer than three
Business Days prior to the Conversion Date as the minimum rate of interest
which, in the opinion of the Remarketing Agent, is necessary to sell the Bonds
in a secondary sale (by private placement, so long as the Remarketing Agent
shall be an entity not allowed to sell Bonds publicly) on the Conversion Date at
a price equal to 100% of the outstanding principal amount thereof; provided,
however, that such rate of interest shall not be less than 75% nor more than
125% of the Fixed Interest Index as of the Computation Date.
"Fixed Rate Period" means the period during which interest on the Bonds
shall be payable at the Fixed Rate.
"FNBB Base Rate" means the per annum rate of interest from time to time
announced by The First National Bank of Boston at its principal office in
Boston, Massachusetts as its Base Rate.
"Income Certification" means an income certification substantially in the
form attached hereto as Exhibit 906A, as such form may be revised by the Issuer
from time to time.
"Indenture" -- See first paragraph of this Indenture.
"Intercreditor Agreement" means the Intercreditor Agreement to be entered
into among the Bank, the Trustee and the Borrower at the time provided in
Section 603.
"Interest Payment Dates" means, collectively, the Adjustable Period
Interest Payment Dates and the Fixed Period Interest Payment Dates.
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"Issuer" -- See first paragraph of this Indenture.
"Land Use Restriction Agreement" means that Land Use Restriction Agreement
to be entered into by and among the Issuer, the Trustee and the Borrower.
"Letter of Credit" means the direct draw Letter of Credit originally issued
under the Reimbursement Agreement, in substantially the form of Exhibit A
thereto and having an original Stated Amount (as therein defined) of
$13,712,672, of which an amount not exceeding $13,500,000 may be drawn to pay
unpaid principal on the Bonds, an amount not exceeding $212,672 may be drawn to
pay up to 46 days interest accrued on Bonds, or any Substitute Letter of Credit.
"Letter of Credit Fund" -- See Section 503.
"Loan" -- See Recitals in this Indenture.
"Lower-Income Tenants" means "Individuals of low or moderate income within
the meaning of Section 103(b)(4)(A) of the Code.
"Majority of the Bondholders" means the holders of more than fifty percent
of the aggregate principal amount of Bonds at the time outstanding (other than
Bonds registered in the name of the Borrower).
"Monitoring Agent" means the monitoring agent appointed by the Borrower or
the Trustee under the Monitoring Agreement.
"Monitoring Agreement" means the Monitoring Agency Agreement to be executed
among the Trustee, the Borrower and the Monitoring Agent substantially in the
form of Exhibit 904B hereto or such other agreement as may be in effect from
time to time pursuant to Section 904(i).
"Moody's" means Moody's Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, its successors and
assigns, and, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Issuer, with the approval of the Borrower, by notice to the
Trustee and the Borrower.
"Mortgaged Property" means the real property and improvements comprising
the Project which are subject to the liens of the First Deed of Trust and the
Second Deed of Trust.
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"Notice Address" means:
(a) As to the Borrower: San Marcos Retirement Village
c/o Brim & Associates, Inc.,
Managing Partner
177 N.E. 102nd Avenue
Portland, Oregon 97220
and to
University Financial Corporation
12651 High Bluff Dr., Suite 200
San Diego, California 92130
(b) As to the Issuer: The Redevelopment Agency of the
City of San Marcos
105 West Richmar
San Marcos, California 92069
Attn: Executive Director
(c) As to the Trustee The First National Bank of
or the Depositary Boston
for delivery by 100 Federal Street
hand or overnight Boston, Massachusetts 02110
courier:
Attn: Manager Corporate Trust
Division
(d) As to the Trustee, The First National Bank
for delivery by of Boston
U.S. Mail: P.O. Box 1618
Boston, Massachusetts 02105
Attn: Manager Corporate Trust
Division
(e) As to the Bank: Security Pacific National Bank
1200 Third Avenue, Suite 200
San Diego, California 92101
Attn: Eugene Watson,
Vice President
(f) As to the Depositary The First National Bank
for delivery by U.S. of Boston
Mail P.O. Box 1897
Boston, Massachusetts 02105
Attn: Corporate Trust Division
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or to such other address or addresses as any such party shall designate by
notice to the other parties.
"Option to Convert" means the Borrower's and the Bank's right and option to
convert the rate of interest payable on the Bonds from the Adjustable Rate to
the Fixed Rate as provided in Section 304(b).
"Outstanding Bonds" or "Bonds outstanding" means the amount of principal of
the Bonds which has not at the time been paid, exclusive of (a) Bonds in lieu of
which others have been authenticated under Section 303 and (b) principal of any
Bond which has become due (whether by maturity, call for redemption or
otherwise) and for which provision for payment as required herein has been made.
"Paying Agent" means the Trustee or any other paying agent appointed in
accordance with Section 1210 hereof.
"Payment Date" means each date on which any principal of, premium, if any,
or interest on any Bond is due and payable for any reason.
"Permitted Encumbrances" means liens and encumbrances permitted hereby,
including the lien upon the Mortgaged Property created by this Indenture, the
liens upon the Mortgaged Property created by the First Deed of Trust and Second
Deed of Trust and the liens upon the Mortgaged Property created by the Land Use
Restriction Agreement; liens for ad valorem taxes or betterment assessments not
then delinquent; and any other liens, encumbrances, easements and rights of way
permitted under the Reimbursement Agreement or by the Bank.
"Persons" means natural persons, firms, associations, partnerships, trusts,
corporations, public bodies and other legal entities.
"Plans and Specifications" means the Project as described in Exhibit 601.
"Pledged Receipts" means all of the Issuer's right, title and interest in
the Loan and all payments and other revenues received or receivable by the
Issuer, or the Trustee for the account of the Issuer, in respect of the Loan,
including without limitation moneys, investments and proceeds in the Bond Fund
and the Project Fund, except for amounts in the Rebate Fund and payments to the
Issuer under clauses (a) and (b) of Section 1001B or under Section 1008, and
subject to the provisions of Section 507 regarding moneys for the benefit of the
holders of particular Bonds.
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"Principal Office" when used with respect to the Trustee, means the office
located at 100 Federal Street, Boston, Massachusetts 02110 and, when used with
respect to any other Paying Agent and the Depositary means the office thereof
designated in writing to the Trustee.
"Priority Funds" means (a) with respect to any Payment Date occurring prior
to the termination of the Letter of Credit and the disbursement of proceeds of
any final drawing thereunder (i) moneys deposited in the Bond Fund pursuant to
subsection (a) of Section 502 and any earnings thereon, (ii) moneys deposited in
the Letter of Credit Fund pursuant to Section 503 and (iii) moneys deposited in
the Bond Fund pursuant to subsection (b), (c), (d), (e) or (f) of Section 502,
and any earnings thereon, which have been held by the Trustee, as agent and
bailee, for at least 123 consecutive days, but only if no Bankruptcy has
occurred prior to or during such 123-day period and if the chief executive or
chief financial officer of the managing partner of the Borrower shall have
delivered to the Trustee a certificate stating, as of a date no earlier than the
last day of such period, that no Bankruptcy has occurred and (b) with respect to
any Payment Date occurring after the termination of the Letter of Credit and the
disbursement of proceeds of any final drawing thereunder, monies held by the
Trustee and the proceeds thereof. Notwithstanding the foregoing, when used with
respect to payment of any amount due in respect of any Tendered Bonds, the term
Priority Funds shall mean any monies held by the Trustee and the proceeds from
the investment thereof, except for monies drawn under the Letter of Credit.
"Project" means the residential dwelling units and facilities for the
elderly constructed, acquired and installed with the Loan, including without
limitation the facilities described in Exhibit 601 and any permitted
modification, substitutions and additions.
"Project Fund" -- See Section 501.
"Project Supervisor" means the person and each alternate designated to
supervise the Project hereunder by written certificate furnished to the Issuer,
the Trustee and the Bank, containing the specimen signature of such person and
signed on behalf of the Borrower by the chief executive or chief financial
officer of the managing partner of the Borrower. If the Borrower fails to
designate at least one replacement within ten days after the Unavailability or
inability of all such persons to act, the Bank may, but shall have no obligation
to, appoint a successor who shall be any engineer qualified to practice the
profession of engineering in California.
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"Purchase Draw" means a draw by the Trustee under the Letter of Credit to
finance the purchase at a price equal to principal plus accrued interest to the
date of purchase of the Bonds which the Remarketing Agent has failed or is
unable to remarket on or prior to the applicable date of purchase thereof under
Section 401(d).
"Purchaser" -- See Section 401(e).
"Qualified Investments" means (i) any bonds or obligations which as to
principal and interest constitute direct obligations of or are guaranteed by the
United States of America, (ii) certificates of deposit or banker's acceptances
or interest bearing deposits of the Trustee or the Bank and banks affiliated
with the Trustee or the Bank and banks or trust companies organized under the
laws of the United States of America or any state thereof, which have capital
and surplus of at least $100,000,000, (iii) commercial paper or finance company
paper, including that of any affiliate of the Trustee or the Bank, which is
rated not less than prime-one or A-1 or their equivalents by Moody's or S&P or
their successors, (iv) bonds, obligations or commercial paper the interest on
which is exempt from federal income taxation and which are rated not less than A
by Moody's or S&P or their successors, and (v) any bonds or obligations of the
District of Columbia, any territory of the United States of America or any state
of the United States of America or of any political subdivision or other
instrumentality of the foregoing which are rated in one of the two highest
categories for such securities by Moody's or S&P or their successors; provided
that such investment or deposit is not prohibited by federal or state banking
laws applicable to the Trustee.
"Qualified Project Costs" means Project Costs, but only to the extent that
such costs (i) were paid or incurred after April 9, 1985, (ii) are chargeable to
the Project's capital account or would be so chargeable either with a proper
election or but for a proper election to deduct such costs, within the meaning
of Treasury Regulation l.103-8(a)(1), as the same may be amended from time to
time and (iii) are deemed to be "residential rental property" or "functionally
related and subordinate" under Treasury Regulation 1.103-8(b).
"Qualified Project Period" means that period beginning on the first day on
which at least 10% of the units in the Project are first occupied (or, if later,
the date of initial issuance and delivery of the Bonds) and ending on the latest
of (a) the date which is ten years after the date on which at least 50% of the
units in such Project are occupied (or, if later, the date of initial issuance
and delivery of the Bonds), (b) the date equal
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to 50% of the term of the Bonds with the longest maturity, measured from the
date on which any completed unit in the Project is occupied initially (or, if
later, the date of initial issuance and delivery of the Bonds) or (c) the date
on which any assistance provided with respect to such Project under Section 8 of
the United States Housing Action of 1937, as amended, terminates.
"Record Date" means (a) with respect to any Adjustable Period Interest
Payment Date, the Business Day next preceding such Interest Payment Date, or (b)
with respect to any Fixed Period Interest Payment Date, the fifteenth day of the
month next preceding such Interest Payment Date, or, if such day shall not be a
Business Day, the next preceding Business Day.
"Reimbursement Agreement" means the Reimbursement Agreement of even date
herewith between the Borrower and the Bank, as from time to time amended, and
any agreement to which the Borrower and any Bank are parties and pursuant to
which a Substitute Letter of Credit is issued.
"Remarketing Agent" means The First National Bank of Boston or such other
remarketing agent as may be appointed from time to time pursuant to the
Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement of even date
herewith between the Borrower and the Remarketing Agent, as from time to time
amended, pursuant to which the Borrower has appointed the Remarketing Agent as
the exclusive agent for the remarketing of Bonds tendered by Bondholders for
purchase or redemption pursuant to Sections 401(d) and 401(e) and such other
agreement appointing a Remarketing Agent as may be in effect from time to time.
"Required Property Insurance Coverage" means a policy or policies of
insurance insuring against loss or damage of the kinds usually insured against
by similar businesses in the area, including without limitation insurance with
respect to the Mortgaged Property against loss or damage by fire and other risks
from time to time included under extended coverage policies and federal flood
insurance (if the Mortgaged Property is in a designated flood plain area), and
insuring against such other risks as the Bank may from time to time reasonably
request, all such insurance to be in amounts and with such deductibles as the
Bank may from time to time reasonably request or approve.
"Required Public Liability Insurance" means insurance against death or
bodily injury and property damage in such amounts and with such deductibles as
the Bank from time to time may reasonably request or agree to.
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"S&P" means Standard & Poor's Corporation, a corporation organized and
existing under the laws of the State of New York, its successors and assigns,
and, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "S&P" shall be deemed to
refer to any other nationally recognized securities rating agency designated by
the Issuer, with the approval of the Borrower, by notice to the Trustee and the
Borrower.
"Second Deed of Trust" means the Second Deed of Trust on the Mortgaged
Property to be entered into among the Borrower, as trustor, the Bank, as
beneficiary, and Founders Title Company as trustee, as provided in Section 603
hereof for the purpose of securing the Bank Obligations.
"Substitute Letter of Credit" means any irrevocable transferable letter of
credit, insurance policy, guaranty, surety bond or other agreement substituted
for the Letter of Credit in accordance with Section 509.
"Tendered Bonds" has the meaning provided therefor in the Depositary
Agreement.
"Trust Estate" -- See Section 101.
"Trustee" -- See first paragraph of this Indenture.
"Uniform Commercial Code" means the California Commercial Code.
Any reference in this Indenture to the Borrower, the Issuer, the Trustee,
the Bank, the Remarketing Agent or the Depositary shall include those which
succeed to their functions, duties or responsibilities pursuant to or by
operation of law or who are lawfully performing their functions. Any reference
in this Indenture to any statute or law or chapter or section thereof shall
include all amendments, supplements or successor provisions thereto.
PART II:
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THE BONDS
ARTICLE 3 - The Bonds
Section 301. Issuance of Bonds. The Bonds shall be designated "The
-----------------
Redevelopment Agency of the City of San Marcos Adjustable/Fixed Rate Multifamily
Housing Bonds (San Marcos
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Retirement Village Project)"; shall be issued in the aggregate principal amount
of $13,500,000; shall be numbered consecutively from R-1 upwards; shall be
issued in fully registered form; shall mature on December 1, 2010, except as
provided herein; shall be substantially in the form set forth in Exhibit 301
attached hereto, with such variations, omissions and insertions as are permitted
or required hereby; and shall be dated as of the Closing Date if authenticated
prior to the first Interest Payment Date and otherwise shall be dated as of the
Interest Payment Date next preceding the date of their authentication, except
that if authenticated on an Interest Payment Date they shall be dated as of such
date of authentication; provided that if at the time of authentication interest
thereon is in default, they shall be dated as of the date to which interest has
been paid or if no interest has been paid, they shall be dated as of the Closing
Date. The Bonds shall be issued initially in fully registered form without
coupons numbered from R-1 upwards in such denominations as shall be requested by
the initial purchaser or purchasers of the Bonds.
Interest on each Bond shall accrue from its date; provided, that interest
shall not accrue on Bonds held by the Trustee for the account of the Borrower
pursuant to the Bond Pledge Agreement as a result of a Purchase Draw under the
Letter of Credit as provided in Section 503(c) hereof.
Section 302. Delivery of Bonds. Upon the execution and delivery of this
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Indenture, the Issuer shall execute and deliver the Bonds to the Trustee and the
Trustee shall authenticate the Bonds and deliver them to the initial purchaser
or purchasers as provided in Section 2 of the Bond Purchase Agreement upon the
direction of the Issuer.
Prior to delivery by the Trustee of the Bonds, there shall be filed with
the Trustee:
(a) A copy, duly certified on behalf of the Issuer, of the resolutions
adopted by the Issuer authorizing the execution and delivery of this Indenture
and the issuance and sale of the Bonds.
(b) The Letter of Credit.
(c) An executed counterpart of this Indenture.
(d) The Issuer's due request and authorization to the Trustee to
authenticate and deliver the Bonds to the initial purchaser or purchasers upon
payment of a specified sum to the Trustee for the account of the Issuer.
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Section 303. Execution; Authentication. Bonds shall be executed on behalf
-------------------------
of the Issuer by the manual or facsimile signature of Executive Director and
attested by the Chairman. The official seal (which may be facsimile) of the
Issuer shall be impressed or imprinted on all Bonds. In case any officer whose
signature shall appear on the Bonds shall cease to be such Officer before the
delivery of such Bonds, such signature shall nevertheless be valid and
sufficient.
No Bond shall be valid or obligatory until authenticated as provided in
Exhibit 301 by the Trustee. Such authentication shall be conclusive evidence
that such Bond has been authenticated and delivered hereunder. The certificate
of authentication on any Bond shall be deemed to have been executed by the
Trustee if manually signed by an authorized signatory of the Trustee, but it
shall not be necessary that the same Person sign the certificate of
authentication on all of the Bonds issued hereunder.
Section 304. Interest on Bonds.
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(a) The Bonds shall bear interest from and including the date thereof
(except as herein provided) until payment of the principal thereof shall have
been made or provided for in accordance with the provisions hereof, whether at
maturity, upon redemption or otherwise. Prior to the Conversion Date interest
accrued on the Bonds shall be computed on the basis of a 365 or 366-day year, as
applicable, for the number of days actually elapsed. On and after the Conversion
Date interest accrued on the Bonds shall be computed upon the basis of a 360-day
year, consisting of twelve (12) thirty (30) day months.
During the Adjustable Rate Period the Bonds will bear interest at the
Adjustable Rate. Subsequent to the Conversion Date, the Bonds shall bear
interest at the Fixed Rate. Interest will be payable as provided in Exhibit 301
on each Interest Payment Date, commencing February 5, 1986.
(b) The Bonds will be issued subject to the provision that the
interest rate on the Bonds will cease to be at the Adjustable Rate and will
become fixed until maturity at the Fixed Rate upon the election by the Borrower
(or, under the circumstances set forth in Section 10.3 of the Reimbursement
Agreement, the Bank) to exercise the Option to Convert as herein provided on
such date which is a Business Day as the Borrower (or the Bank) shall select,
subject to the terms and conditions hereof (the "Conversion Date"). The Borrower
(or the Bank) may exercise the Option to Convert at any time subsequent to the
six month anniversary of the Closing Date by giving written notice to
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the Issuer, the Trustee and the Bank (or the Borrower) stating (A) its election
to convert to the Fixed Rate, which notice shall specify the date as of which
the Fixed Interest Index was or shall be computed (the "Computation Date"),
which date shall be not more than five Business Days from the date of such
notice, (B) the Conversion Date, which date shall not be less than 20 nor more
than 60 days from the date of such notice, and (C) whether the Letter of Credit
has been extended and the terms thereof, or whether a Substitute Letter of
Credit has been obtained and the terms thereof. Such notice shall be accompanied
by an opinion of Bond Counsel stating that the establishment of the Fixed Rate
and the purchase and resale of the Bonds in connection therewith are authorized
and permitted by this Indenture and the Enabling Act and will not have an
adverse effect on the income tax exemption of interest on the Bonds. Upon
receipt of such written notice the Trustee in the name of the Issuer shall call
all the Bonds for redemption as provided in Sections 401(e) and 403 hereof.
As and for a sinking fund for the Bonds subsequent to the
Conversion Date, the Issuer shall cause to be deposited into the Bond Fund on
the first anniversary of the Conversion Date and on the same day of each year
thereafter an amount which shall amortize the principal amount of Bonds
outstanding at the Fixed Rate from the first anniversary of the Conversion Date
to and including the Maturity Date so as to produce substantially equal debt
service payments (principal and interest) on the Bonds in each such year (after
taking into account considerations relating to the marketability of the Bonds).
Such amounts shall be set forth in a supplemental indenture executed and
delivered for such purpose.
(c) No interest, principal or premium shall be paid or interest paid
or accrued on Bonds purchased for the account of the Borrower pursuant to a
Purchase Draw under the Letter of Credit as provided in Section 503(c) hereof
for so long as such Bonds are held by the Trustee pursuant to the Bond Pledge
Agreement.
Section 305. Lost Bonds; Exchange and Transfer of Bonds; Additional
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Interest Only Assignable by Separate Writing. If any of the Bonds are lost,
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wrongfully taken, mutilated, destroyed or improperly cancelled, the Issuer shall
authorize the issuance of new Bonds to replace them upon proof satisfactory to
the Issuer and the Trustee and (except in the case of mutilated or improperly
cancelled Bonds which are surrendered to the Trustee) upon giving to the Issuer
and Trustee an indemnity bond in such amount as the Issuer and Trustee may
require (except as to any institutional holder, in which case its own agreement
of indemnity shall be sufficient). Each new Bond shall in all
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respects be identical with the mutilated, lost, stolen, destroyed or improperly
cancelled Bond, except that it shall include a notation of all principal
previously advanced, paid or redeemed.
Each such new Bond shall be signed by the same officers or duly authorized
signatories of the Issuer and the Trustee who signed the original Bond; provided
that if an officer or duly authorized signatory who executed the original Bond
no longer occupies the same office with the Issuer or the Trustee or is
otherwise unavailable, then such new Bond shall be signed by a duly authorized
officer or signatory then in office. The obligation of the Issuer upon the new
Bond shall be identical with its obligation upon the original Bond, and the
rights of the holder shall be the same as those conferred by the original Bond.
The Issuer and the Trustee may charge the owner of the Bond with their
reasonable fees and expenses in connection with the issuance of a new Bond under
this Section 305.
The person in whose name a Bond is registered on the Bond register
maintained by the Trustee shall be deemed the absolute owner for all purposes;
and payment of any principal of or interest on any Bond shall be made only to or
upon the order of the registered owner thereof or the owners attorney or legal
representative. Such payments shall fully discharge the liability on the Bond to
the extent of the sums so paid.
At the option of the Bondholder, any Bond may be presented at the corporate
trust office of the Trustee for endorsement showing the balance of principal due
thereon and the date to which interest has been paid.
Upon surrender of a Bond at the corporate trust office of the Trustee, as
bond registrar, together with an assignment duly executed by the registered
owner or his attorney or legal representative in such form as shall be
satisfactory to the Trustee, the Bond may be exchanged for Bonds of the same
maturity, aggregating in amount the then unpaid principal amount of the Bonds
surrendered, of denominations of not less than $500,000 and integral multiples
of $50,000 during the Adjustable Rate Period and of denominations of not less
than $5,000 and integral multiples thereof during the Fixed Rate period and
bearing interest at the same rate, and in the same form as the Bonds surrendered
for exchange.
Any Bond may be transferred upon the books kept for the registration and
transfer of Bonds only upon surrender thereof to the Trustee, as bond registrar,
together with an assignment duly executed by the registered owner or his
attorney or legal representative in such form as shall be satisfactory to the
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Trustee. Upon the transfer of any such Bond the Trustee shall authenticate and
deliver in the name of the transferee or transferees, a new Bond or Bonds of the
same maturity, of denominations of not less than $500,000 and integral multiples
of $50,000 during the Adjustable Rate Period and of denominations of not less
than $5,000 and integral multiples thereof during the Fixed Rate Period,
aggregating in amount the then unpaid principal of the Bond surrendered, and
bearing interest at the same rate and, in the same form as the Bonds
surrendered.
For the purpose of registration of transfers of Bonds purchased in lieu of
redemption in accordance with Section 401(e), each Bondholder, by its acceptance
of such Bonds appoints the Trustee as its duly authorized representative for
purposes of endorsing such Bond so purchased for transfer to the purchaser
thereof in accordance with said Section 401(e).
In all cases in which Bonds shall be issued in exchange for or in
replacement of other Bonds, the Bonds to be issued shall be signed and sealed on
behalf of the Issuer, and authenticated by the Trustee as provided in Section
303. The obligation of the Issuer and the rights of the holders with respect to
such Bonds shall be the same as with respect to the Bonds being exchanged or
replaced. The Issuer and the Trustee may charge the holder of such exchanged or
replaced Bond their reasonable fees and expenses for effecting such exchange or
replacement, except that where such exchange or replacement occurs in connection
with a transfer of ownership of a Bond such charge shall be borne by the
Borrower.
Whenever any outstanding Bond shall be delivered to the Trustee for
cancellation pursuant to this Indenture, or for exchange and transfer pursuant
to this Section 305, such Bond shall be promptly cancelled and destroyed by the
Trustee and counterparts of a certificate of destruction evidencing such
destruction shall be furnished by the Trustee to the Issuer and the Borrower.
Section 306. Temporary Bonds. Pending the preparation of definitive
---------------
Bonds, the Issuer may execute, and upon its request in writing, the Trustee
shall authenticate and deliver one or more printed, lithographed or typewritten
temporary Bonds. Temporary Bonds shall be issuable as registered Bonds without
coupons, of any authorized denomination, and substantially in the form of
definitive Bonds but with such omissions, insertions and variations as may be
appropriate for temporary Bonds, all as may be determined by the Issuer.
Temporary Bonds may contain such reference to any provisions of this Indenture
as may be appropriate. Every temporary Bond shall be executed by the
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Issuer and be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the definitive Bonds. As
promptly as practicable the Issuer shall execute and shall furnish definitive
registered Bonds without coupons and thereupon temporary Bonds may be
surrendered in exchange therefor without charge at the Principal Office of the
Trustee, and the Trustee shall authenticate and deliver in exchange for such
temporary Bonds a like aggregate principal amount of definitive Bonds of
authorized denominations. Until so exchanged the temporary Bonds shall be
entitled to the same benefits under this Indenture as definitive Bonds. At or
prior to the initial issuance of the Bonds, the Issuer shall deliver to the
Trustee six extra unnumbered temporary Bonds, signed and sealed on behalf of the
Issuer for the Trustee's use in connection with transfers.
ARTICLE 4 - Redemption or Purchase of Bonds Before Maturity
Section 401. Redemption or Purchase of Bonds. The Bonds are subject to
-------------------------------
redemption or purchase prior to maturity as follows:
(a) Optional Redemption. The Bonds shall be subject to redemption by
-------------------
the Issuer, at the written direction of the Borrower, as provided in this
Section 401(a):
(i) During the Adjustable Rate Period, the Bonds shall be subject
to redemption from funds other than those deposited as mandatory sinking fund
requirements under Section 402, on any Adjustable Period Interest Payment Date
in each January, April, July and October by the Issuer, at the written direction
of the Borrower, as a whole or in part in the amount of $500,000 or any integral
multiple of $50,000 above $500,000 from time to time, at a redemption price
equal to the principal amount thereof, plus accrued interest to the Adjustable
Period Interest Payment Date fixed for redemption; provided, however, that the
Bonds shall not be subject to redemption as provided in this subparagraph (i)
prior to July 1, 1986, or (ii) at any time after the Conversion Date; and
provided, further, that the Borrower has deposited money with the Trustee in
sufficient amounts to provide Priority Funds or has obtained the consent of the
Bank to pay the redemption price with a draw on the Letter of Credit.
(ii) Subsequent to the fifth anniversary of the Conversion Date,
the Bonds shall be subject to redemption by the Issuer, at the written direction
of the Borrower, on any Interest Payment Date, as a whole or from time to time
in part in the amount of $500,000, or any integral multiple of $50,000 above
$500,000 at a redemption price equal to the principal of and
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accrued interest on the Bonds to the date fixed for redemption by the Borrower
plus a premium equal to 3% during the first twelve months the Bonds are so
subject to redemption, declining 1% per year thereafter until the premium equals
zero; provided the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of credit.
(b) Extraordinary Optional Redemption. The Bonds may be redeemed in
---------------------------------
whole but not in part by the Issuer at any time, at the written direction of the
Borrower, at a redemption price equal to 100% of the principal amount thereof
plus accrued interest thereon to the redemption date, without premium, under any
of the following conditions:
(i) The Project or any production facility served thereby shall
have been damaged or destroyed to such extent that (a) the Project cannot be
reasonably restored within a period of twelve months from the date of such
damage or destruction, or (b) the Borrower is thereby prevented from carrying on
its normal operation of the Project for a period of twelve months from the date
of such damage or destruction; or
(ii) Title to, or the temporary use of all or substantially all
of the Project or any production facility served thereby shall have been taken
or condemned by a competent authority, which taking or condemnation results or
is likely to result in the Borrower being thereby prevented or likely to be
prevented from carrying on its normal operation of the Project for a period of
twelve months; or
(iii) As a result of changes in the Constitution of the United
States of America or of the State of California or of legislative or executive
action (whether state or federal) or by final decree or judgment of any court or
administrative body (whether state or federal), the Bonds or this Indenture
become void or unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed therein or herein or unreasonable
burdens or excessive liabilities are imposed upon the Borrower by reason of the
operation of the Project; or
(iv) There shall have occurred a change in the economic
availability or utility of raw materials, manufactured products, energy sources,
operating supplies or facilities necessary for the operation of the Project or a
technological or other change, which in the reasonable judgment of the Borrower
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renders the Project uneconomic, impractical or unfeasible for the purposes for
which originally acquired, installed and equipped; provided, however, with
respect to each of the foregoing, the Borrower has deposited with the Trustee
money in sufficient amounts to provide Priority Funds or has obtained the
consent of the Bank to pay the redemption price with a draw on the Letter of
Credit.
(c) Mandatory Redemption. The Bonds shall be subject to mandatory
--------------------
redemption as provided in this Section 401(c):
(i) At any time upon the occurrence of a Determination of
Taxability the Bonds shall be redeemed, by a draw under the Letter of Credit in
the amount specified in Section 503(b) hereof, in whole at a redemption price
equal to 100% of the principal amount thereof plus accrued and unpaid interest
to the redemption date plus, if the Determination of Taxability occurs during
the Fixed Rate Period a premium equal to 3% of the outstanding principal amount
of the Bonds.
(ii) Upon the failure of the Borrower to comply with the provisions
of Section 603 hereof on or before the date specified therein, the Bonds shall
be redeemed pursuant to the terms of paragraph (b) of Section 501B in whole at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid interest to the redemption date; provided, however, that such redemption
shall be made only after such moneys become Priority Funds .
(iii) Mandatory redemptions may also be required pursuant to the
terms of paragraph (e) of this Section 401, and paragraph (a) of Section 501B
and Sections 402 and 502(d).
(d) Tender for Purchase upon Election of Bondholder.
-----------------------------------------------
(i) On or prior to the Conversion Date any Bond (or portion
thereof that is an integral multiple of $50,000 equal to or in excess of
$500,000) shall be redeemed by the Issuer or purchased in accordance with the
terms of the Depositary Agreement on the demand of the registered owner thereof,
on any Business Day at a price equal to the principal amount thereof plus
accrued interest, if any, to the date of redemption or purchase, upon: (A)
delivery to the Trustee at its Principal Office of a written notice in the form
of Exhibit 401 hereto (a
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"Bondholder's Election Notice") which (i) states the principal amount of such
Bond, (ii) states the date (the "Purchase Date") on which such Bond or specified
portion thereof shall be redeemed or purchased pursuant to this Section, which
date shall not be prior to the seventh day next succeeding the date of the
delivery of such notice to the Trustee, (iii) irrevocably requests such
redemption and (iv) contains an undertaking of the registered owner to deliver
the Bond to the Depositary in accordance with this Indenture; and (B) delivery
of such Bond duly endorsed in blank for transfer at the Principal Office of the
Depositary at or prior to 10:00 A.M., Boston time, on the Purchase Date.
(ii) By the acceptance of each Bond, the registered owner thereof
agrees that if there are funds available for such purpose in the Bond Purchase
Fund established with the Depositary under the Depositary Agreement, then any
Bond or specified portion thereof so delivered to the Depositary in accordance
with this Section 401(d) shall be, on the Purchase Date specified in the
Bondholder's Election Notice, purchased and not redeemed at a purchase price
equal to the principal amount thereof plus accrued interest, if any, to the
Purchase Date; provided, however, that, if the Purchase Date for any Bond is an
Interest Payment Date, the purchase price thereof shall be the principal amount
thereof and interest on such Bond shall be paid to the registered owner of such
Bond in the normal course. All Bonds purchased with moneys in the Letter of
Credit Account in the Bond Purchase Fund referred to above and Bonds issued in
replacement therefor shall remain duly authorized, issued and outstanding Bonds;
shall remain the valid and binding limited obligations of the Issuer,
enforceable in accordance with their respective terms; and shall be registered
in the name of the Borrower and held by the Trustee pursuant to the Bond Pledge
Agreement.
(iii) At 1:00 P.M., Boston time (or as soon thereafter as
possible), on each Purchase Date, moneys constituting immediately available
funds in the Bond Purchase Fund (as defined in the Depositary Agreement) shall
be used by the Depositary to purchase Tendered Bonds in the chronological order
delivered to the Depositary at the purchase price thereof established pursuant
to subparagraph (ii) of this Section 401(d), to the extent of such moneys. In
the event that any Tendered Bond shall not have been delivered to the Depositary
as provided by such subparagraph (ii), an amount equal to the purchase price
thereof shall be delivered by the Depositary to the Trustee and held by the
Trustee pursuant to Section 507; if such Tendered Bond subsequently is delivered
to the Depositary, then the Depositary shall deliver such Tendered Bond to the
Trustee for payment.
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(e) Tender for Redemption or Purchase upon Expiration of Letter of
--------------------------------------------------------------
Credit or Occurrence of Conversion Date.
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(i) The Bonds shall be redeemed by the Issuer on the expiration
of the Letter of Credit (but only in circumstances where the same is not being
renewed or replaced as contemplated by Section 509), at a price equal to 100% of
the principal amount thereof plus accrued interest to the redemption date. In
addition, the Bonds shall be subject to mandatory redemption on the Conversion
Date even if the Letter of Credit has not expired or been terminated. (The date
of redemption or purchase being herein referred to in the previous two sentences
is referred to as the "Redemption Date"). In the event that the mandatory
redemption is in connection with the occurrence of the Conversion Date, no
redemption shall take place with respect to Bonds purchased as contemplated by
subparagraph (ii) hereof, and Bonds issued in exchange for or upon the
registration or transfer of such Bonds.
(ii) (A) Bonds called for and subject to redemption pursuant to
this paragraph (e) may be purchased, in lieu of redemption, by the Borrower's
designee, which may be the Remarketing Agent (the "Purchaser"), if notice to
that effect is given to the Trustee by the Borrower no later than 2:00 P.M.,
Boston time, on the second Business Day immediately preceding the Redemption
Date, which notice shall include the identity of the Purchaser, and the
conditions set forth in this subparagraph (ii) are satisfied.
(B) By 4:00 P.M., Boston time, on the second Business Day
next preceding the Redemption Date, the Trustee shall give notice, by telephone,
promptly confirmed in writing, to the Borrower and the Remarketing Agent as to
the number of the account of the Trustee to which the purchase price for Bonds
to be purchased pursuant to this subparagraph (ii) should be sent. To the extent
the Purchaser identified by the Borrower in its notice given pursuant to
subclause (A) above has deposited on or before 11:00 A.M., Boston time, on the
Redemption Date in the account designated by the Trustee for such purpose an
amount equal to or greater than the aggregate principal amount of Bonds called
for redemption pursuant to this paragraph (e) plus interest thereon to the
Redemption Date, the tendered Bonds shall be purchased, and not redeemed, on the
Redemption Date with funds deposited in the aforesaid account at a purchase
price for each bond equal to the principal amount thereof plus interest, if
any, thereon to the Redemption Date.
(C) In the event that any Bond purchased as provided in the
preceding clause (B) shall not have been
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delivered to the Trustee on the Redemption Date, an amount equal to the purchase
price thereof shall be retained by the Trustee pursuant to Section 507 for
payment to the registered owner of such purchased Bond (without interest after
the Redemption Date) upon delivery thereof to the Trustee. Any other moneys
remaining in the aforesaid account at the close of business on the Redemption
Date after making the payments specified in this subparagraph (ii), shall be
wired by the Trustee to such account as may be designated by the depositor
thereof as promptly as practicable. All Bonds purchased as herein provided in
the event of a call for redemption upon the termination of the Letter of Credit
(unless the termination date is the Conversion Date) shall be registered by the
Trustee for transfer (pursuant to the authority contained in Section 305) and
redelivered to such Person or Persons as shall be designated by the Purchaser.
All Bonds purchased as herein provided following the exercise of an Option to
Convert shall be exchanged for Bonds of denominations of $5,000 or any integral
multiple thereof and delivered to such Person or Persons as shall be designated
by the Purchaser.
Section 402. [Not Used.]
Section 403. Selection of Bonds to be Redeemed. A redemption of
---------------------------------
Bonds shall be a redemption of the whole or of any part of the Bonds from any
funds available for that purpose in accordance with the provisions of this
Indenture, provided, that there shall be no partial redemption of less than
$50,000 in principal amount of Bonds during the Adjustable Rate Period and
$5,000 in principal amount of Bonds during the Fixed Rate Period. If less than
all the Bonds shall be called for redemption under any provision of this
Indenture permitting such partial redemption (other than purchase of Bonds under
Section 401(d) hereof) the particular Bonds to be redeemed shall be selected by
the Trustee, in such manner as the Trustee in its discretion may deem fair and
appropriate; provided, however, (a) that the portion of any Bond to be redeemed
shall be in the principal amount of $5,000 or some integral multiple thereof,
(b) that, in selecting Bonds for redemption, the Trustee shall treat each Bond
as representing that number of Bonds which is obtained by dividing the principal
amount of such Bond by $5,000, and (c) that during the Adjustable Rate Period no
partial redemption of a Bond may reduce the principal amount thereof to less
than $100,000. If there shall be called for redemption less than all of a Bond,
the Issuer shall execute and deliver and the Trustee shall authenticate, upon
surrender of such Bond, and at the expense of the Borrower and without charge to
the owner thereof, for the unredeemed balance of the Bond so surrendered, Bonds
of like series.
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Section 404. Procedure for Redemption.
------------------------
(a) Except for redemptions of Bonds pursuant to section 401(d), in
the event any of the Bonds are called for redemption, the Trustee shall give
notice, in the name of the Issuer, of the redemption of such Bonds, which notice
shall (i) specify the Bonds to be redeemed, the redemption date, the redemption
price, and the place or places where amounts due upon such redemption will be
payable (which shall be the principal Office of the Paying Agent) and, if less
than all of the Bonds are to be redeemed, the numbers of the Bonds, and the
portions of Bonds, so to be redeemed, (ii) state any condition to such
redemption provided for in this Article, and (iii) state that on the redemption
date, and upon the satisfaction of any such condition, the Bonds to be redeemed
shall cease to bear interest. Such notice may set forth any additional
information relating to such redemption. Such notice shall be given by mail at
least ten days prior to the date fixed for redemption to the registered owners
of Bonds to be redeemed at the address shown on the registration books kept by
the Trustee; provided, however, that failure to give such notice to any
Bondholder or any defect in such notice shall not affect the validity of the
proceedings for the redemption of any of the other Bonds.
(b) Any Bonds and portions of Bonds which have been duly selected
for redemption and which are deemed to be paid in accordance with Section 507
shall cease to bear interest on the specified redemption date.
Section 405. No Partial Redemption After Default. Anything in this
-----------------------------------
Indenture to the contrary notwithstanding, if there shall have occurred and be
continuing an Event of Default, there shall be no redemption of less than all of
the Bonds at the time outstanding.
Section 406. Trustee to Notify Bank of Redemption of Principal. Promptly
-------------------------------------------------
after any redemption of principal of the Bonds made from Priority Funds other
than amounts drawn under the Letter of Credit, the Trustee shall certify such
redemption to the Bank in writing designating the amount of such redemption, the
date on which such redemption was made and the amount by which the Stated Amount
of the Letter of Credit (as defined therein) shall be reduced by reason of such
redemption.
ARTICLE 5 - Source and Application of Funds
Section 501. Project Fund. A Project Fund is hereby established by the
------------
Issuer with the Trustee. Deposit of Bond proceeds into the Project Fund shall
constitute the Loan.
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<PAGE>
A. Source and Disbursements. Proceeds of the issuance of the Bonds (other
------------------------
than any accrued interest required to be deposited in the Bond Fund) shall be
deposited in the Project Fund.
Disbursements from the Project Fund shall be applied for the payment or
reimbursement of Costs of the Project.
Such disbursements shall be made only in compliance with the Covenants and
Disbursement Procedures set forth in Appendix I to the Reimbursement Agreement
and upon receipt by the Trustee of a written requisition signed by the managing
partner or partners of the Borrower and approved by Bank in substantially the
form provided in such Covenants and Disbursement Procedures and paid as set
forth in the written requisition; provided that, without requisition, the
Trustee shall at the written direction of the Borrower transfer funds to the
Bond Fund to pay construction interest. No requisition shall be submitted to
the Trustee which requests reimbursement for payments or payment for obligations
originally paid or incurred before April 15, 1985, except for amounts not to
exceed $828,700. In addition, no requisition shall be submitted to the Trustee
for payment of any Project Costs (other than cost and expenses incurred in
connection with the issuance of the Bonds set forth on Exhibit 501 not to exceed
$375,670) until (a) the Borrower shall have complied with the first sentence of
Section 603 and (b) the Remarketing Agent shall have notified the Trustee that
the Remarketing Agent has received an opinion of Bond Counsel, in form and
substance acceptable to the Remarketing Agent, addressed to the Trustee, the
Remarketing Agent and the Bondholders and dated as of the Closing Date or such
later date as the Remarketing Agent shall approve, to the effect that payments
of principal and interest on the Bonds to the Bondholders from funds drawn under
the Letter of Credit (or other Priority Funds) will not constitute a preference
or transfer voidable under the United States Bankruptcy Code in the event of a
bankruptcy or insolvency of any Person other than the Bank and as to such
related matters as the Remarketing Agent shall have requested. In addition, in
any event, no requisition shall be submitted to the Trustee for payment of land
acquisition costs without the written approval of Kutak, Rock & Campbell.
B. Transfer of Funds from Project Fund to Bond Fund.
------------------------------------------------
(a) All moneys in the Project Fund (including moneys earned thereon by
investment) remaining after delivery of the Completion Certificate and payment
or provision for payment in full of the Costs which are then due and payable
shall promptly at the written direction of the chief executive officer or chief
financial officer of the managing partner of the Borrower be (i) used for the
purchase of Bonds in the open market for the
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purpose of cancellation at prices not exceeding the current price at which Bonds
may be prepaid plus accrued interest thereon to the date of payment therefor, or
(ii) paid into the Bond Fund and applied in accordance with Section 401(a)
hereof to pay principal of the Bonds on the first optional prepayment date on
which Bonds may be prepaid without premium, without further authorization from
the Borrower or the Issuer, or (iii) paid into the Bond Fund and applied to pay
interest on the Bonds, or (iv) such combination of any or all of the foregoing
as is provided in such direction; provided that (l) before any funds are applied
pursuant to this paragraph the Trustee shall have received an opinion of Bond
Counsel or a ruling of the Internal Revenue Service that such payment will not
adversely affect the exemption from federal income taxation of the interest paid
on the Bonds, (2) the funds applied pursuant to this paragraph shall have become
Priority Funds and (3) the Trustee shall give notice of any prepayment of Bonds
pursuant to this paragraph to the Bondholders at least 15 days prior to the
prepayment date and otherwise in accordance with Section 403 hereof. However,
amounts approved by the Project Supervisor shall be retained in the Project Fund
for payment of Costs not then due and payable. Any such retained funds remaining
after full payment of all such Costs shall be likewise applied as aforesaid. All
moneys in the Bond Fund representing capitalized interest remaining after
delivery of the Completion Certificate shall also be applied as aforesaid.
(b) In the event the Borrower fails to comply with the provisions of
Section 603 hereof on or before the date specified therein, all moneys in the
Project Fund (including moneys earned thereon by investment and moneys held in
the Cash Collateral Account established pursuant to Section 501E) remaining on
such date shall promptly be transferred by the Trustee to the Bond Fund.
(c) Any amounts deposited into the Bond Fund pursuant to subparagraph
(a) or (b) of this Section 501B or any amounts in the Bond Fund representing
capitalized interest remaining after delivery of the Completion Certificate
shall be held in a separate account in escrow invested at the direction of the
Issuer, which shall ensure that such investment proceeds to produce a yield not
"materially higher" (as that term is used in Section 103(c) of the Code), than
the yield on the Bonds unless the Trustee receives an opinion of Bond Counsel or
a ruling of the Internal Revenue Service that investment of such amounts at a
"materially higher" yield will not adversely affect the exemption from federal
income taxation of the interest paid on the Bonds. The Trustee shall not be
responsible if any such investments produce a yield in violation of such Code
section.
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<PAGE>
C. Borrower Required to Pay Costs if Project Fund insufficient. If the
-----------------------------------------------------------
moneys in the Project Fund are not sufficient to pay in full the Costs to be
paid therefrom, the borrower agrees, in order to fulfill the purposes of the
Enabling Act, to complete the acquisition of the Project and to pay all Costs
therefor in excess of the moneys available in the Project Fund. The Issuer
makes no warranty, express or implied, that moneys paid into the Project Fund or
otherwise available to complete the Project will be sufficient to pay all Costs
therefor.
D. Obligation of the Parties to Furnish Documents. The Borrower agrees to
----------------------------------------------
cooperate in furnishing to the Trustee the documents that are required to effect
payments out of the Project Fund. Such obligation is subject to any provisions
of this Indenture requiring additional documentation with respect to payments
and shall not extend beyond the moneys in the Project Fund available for payment
under the terms of the Indenture.
E. Cash Collateral Account. There shall also be established as a separate
-----------------------
account with the Bank a "Cash Collateral Account" into which the Borrower shall
deposit with the Bank on or before the Closing Date certificates of deposit
representing the amount of $803,545, $375,670 of which represents the estimated
costs associated with the issuance of the Bonds as set forth on Exhibit 501 and
$427,875 of which represents up to one hundred twenty (120) days interest on the
Bonds at the maximum rate of 12 1/2%, to secure the performance of the
Borrower's obligations under Section 603 hereof. The Bank shall ensure that
these certificates of deposit are issued in the name of "The First National Bank
of Boston, as Trustee." In the event the Borrower fails to comply with the
provisions of Section 603, the Trustee shall, upon the request of the Bank,
direct that all moneys held in the Cash Collateral Account be applied in
accordance with subparagraph (b) of Section 501B. Upon compliance by the
Borrower of all the terms and conditions of Section 603 hereof, and upon
certification by the Bank to the Trustee of the Borrower's compliance with the
requirements of Paragraph A.4(h) of Appendix I of Reimbursement Agreement, the
Trustee shall direct the Bank to promptly pay all moneys held in the Cash
Collateral Account to the Borrower. Amounts held in the Cash Collateral Account
shall be invested at the direction of the Bank. The Trustee shall not be
responsible if any such investments produce a yield in violation of such Code
section. The Bank agrees to indemnify and hold the Trustee harmless for all
liability or responsibility resulting from the Borrower's failure to deposit the
certificates of deposit and issue them in the name of the Trustee, as required
by this Section. At the closing, or promptly thereafter, the Bank shall provide
evidence satisfactory to the Trustee that the certificates of deposit have been
properly deposited and issued.
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<PAGE>
F. Interest Reserve Account. There is hereby established an "Interest
------------------------
Reserve Account" into which the Trustee shall deposit out of the proceeds of the
issuance of the Bonds the sum of $1,500,000. Such amounts shall be disbursed in
accordance with the provisions of Section 503(e) hereof.
G. Remarketing Reserve Account. There is hereby established a
---------------------------
"Remarketing Reserve Account" into which the Trustee shall deposit out of the
proceeds of the issuance of the Bonds an amount equal to 4% of the original
principal amount of the Bonds. Upon reaching the Break Even Date (as defined in
the Reimbursement Agreement), all of the positive cash flow of the project shall
be deposited by the Borrower quarterly in the Remarketing Reserve Account on the
fifteenth day of each January, April, July and October until the amount held in
such Remarketing Reserve Account equals eight percent (8.0%) of the Stated
Amount; provided, however, that the Borrower shall not be required to make
deposits from positive cash flow in excess of two percent (2.0%) in any one
calendar year. Thereafter on each January 15th, the Borrower shall deposit such
amount, if any, as is necessary to cause the amount on deposit in the
Remarketing Reserve Account to be at least equal to eight percent (8.0%) of the
Stated Amount. Amounts on deposit in the Remarketing Reserve Account shall be
invested in time or demand deposits in the Bank, and such investments shall be
valued at cost. Prior to completion of the Project, investment earnings in the
Reserve Account shall be transferred to the Project Fund. Funds on deposit in
the Remarketing Reserve Account shall be (i) transferred to the Bank to
reimburse it for any draws on the Letter of Credit honored by the Bank when an
Event of Default under the Reimbursement Agreement has been occurred and is
continuing or (ii) used to make payments of principal and interest with respect
to the Bonds in the event the Bank does not honor a draw upon the Letter of
Credit. Amounts on deposit in the Remarketing Reserve Account shall also be
used to reimburse the Bank for any payment under the Letter of Credit in
connection with a redemption, whether by maturity, upon acceleration, or
otherwise, of any of the Bonds. At such times as the Project reaches break even
in cash flow (taking into account operating costs as accrued and payable and
Project debt service at an assumed interest rate of an average of the interest
rate applicable to the Bonds during the relevant period) for a period of six
consecutive months (as certified to the Trustee by the Borrower and the Bank),
the Borrower's obligation to maintain the Remarketing Reserve Account pursuant
to this Section 501G shall be reduced to four percent (4.0%) of the Stated
Amount for the remainder of the term of the Reimbursement Agreement. All
amounts in excess of such requirement shall be transferred by the Trustee to the
Borrower.
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<PAGE>
Section 502. Bond Fund. A Bond Fund is hereby established by the Issuer
---------
with the Trustee, and the Trustee is hereby appointed paying agent for the
Bonds. Except as otherwise provided in this Indenture, the Bond Fund shall be
used solely for the payment of the principal (including redemptions), interest
and any premium on the Bonds and, to the extent permitted hereunder, Additional
Payments, as and when the same shall become due. Moneys shall be deposited in
the Bond Fund from time to time as follows:
(a) Proceeds equal to any accrued interest and premium paid by purchasers
of any Bonds shall be deposited into the Bond Fund.
(b) Upon completion of the Project, funds shall be transferred from the
Project Fund to the Bond Fund and applied as provided in subparagraph (a) of
Section 501B.
(c) Payments of construction interest pursuant to Section 501A and Loan
payments by the Borrower pursuant to Section 1001A shall be deposited into the
Bond Fund.
(d) Proceeds from damage to the Project and condemnation awards shall be
deposited into the Bond Fund when required by Article 7 and Section 1005. The
Trustee shall use such amounts as provided in Section 403 for the redemption,
without penalty, of principal of the Bonds immediately upon the earliest
practicable redemption date on or after which such amounts have become Priority
Funds selected by the Trustee for the redemption without further authorization
from the Borrower or the Issuer so as, to the extent possible, to exhaust such
amount. Any balance remaining after such application shall be deemed part of
the Bond Fund and available for any purposes of the Bond Fund.
(e) Sums received upon exercise of remedies by the Trustee or the Issuer
after an event of default shall be deposited in the Bond Fund, except sums
received by the Issuer pursuant to (i) the third sentence of Section 1112 or
(ii) rights not assigned hereunder.
(f) Sums transferred from the Project Fund as provided in subparagraph (b)
of Section 501B.
Section 503. Letter of Credit Fund; Draws Under Letter of Credit. A
---------------------------------------------------
Letter of Credit Fund is hereby established with the Trustee for the benefit of
the Bondholders and the Bank. The moneys deposited in the Letter of Credit Fund
shall be held in escrow by the Trustee and shall consist solely of sums drawn by
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<PAGE>
the Trustee under the Letter of Credit and any earnings thereon. The Trustee
shall make draws upon the Letter of Credit for deposit into the Letter of Credit
Fund as follows:
(a) At or prior to 4:00 P.M., Boston time, on the second Business Day
immediately preceding each Interest Payment date the Trustee shall draw upon the
Letter of Credit in accordance with the terms thereof in an amount equal to such
interest then becoming due and payable, to the extent that priority Funds are
not then available therefor, in order to pay the interest on the Bonds becoming
due and payable on such Interest Payment Date.
(b) At or prior to 4:00 P.M., Boston time, on the second Business Day
immediately preceding each Payment Date on which a payment of principal, and any
premium on, of the Bonds is due and payable, whether by redemption pursuant to
Section 401 or 402 hereof, by acceleration of the Bonds pursuant to Section 1102
or upon final maturity of the Bonds, the Trustee shall draw upon the Letter of
Credit in accordance with the terms thereof in an amount equal to such
principal, any premium and accrued interest thereon, then becoming due and
payable, to the extent that Priority Funds are not then available therefor, in
order to provide moneys necessary to pay the principal, any premium and accrued
interest thereon, then becoming due and payable.
(c) At or prior to the time specified in the Depository Agreement,
the Trustee shall draw upon the Letter of Credit, in order to make timely
payment of the Purchase Price of the Bonds tendered for purchase on the Purchase
Date. All moneys received by the Trustee pursuant to a Purchase Draw under the
Letter of Credit shall be deposited by the Trustee in the Letter of Credit
account of the Bond Purchase Fund established in accordance with the Depositary
Agreement to be used solely for the payment of the Purchase Price of tendered
Bonds. Any Bonds so purchased with a Purchase Draw shall be registered in the
name of the Borrower and held pursuant to the Bond Pledge Agreement for the
benefit of the Bank as security for the reimbursement of the amount of such
Purchase Draw by the Borrower.
(d) In the event of a drawing upon the Letter of Credit under Section
503(b) to pay principal and interest on the Bonds to be purchased or redeemed
pursuant to Section 401(d) or (e), then immediately following its receipt of the
proceeds of such drawing the Trustee shall on the Conversion Date wire to the
Bank in immediately available funds the amount deposited with the Trustee by the
Purchaser pursuant to clause (B) of subparagraph (ii) of Section 401(e), which
amount shall be applied by the Bank to the payment of the obligations of the
Borrower to the Bank under the Reimbursement Agreement.
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<PAGE>
(e) In the event of a drawing upon the Letter of Credit under Section
503(a) to pay interest in the Bonds, then following its receipt of the proceeds
of such drawing, the Trustee shall, on the Interest Payment Date for which the
drawing was made, wire to the Bank in immediately available funds from monies,
if any, remaining on deposit in the Interest Reserve Account established
pursuant to Section 501F an amount sufficient to reimburse the Bank for the
amount of the drawing on the Letter of Credit. Within five (5) business days of
the Interest Payment Date on which a reimbursement payment is made to the Bank
pursuant to this Section 503(e) which reduces the amount remaining in the
Interest Reserve Account to an amount which is insufficient to reimburse the
Bank for the interest drawing on the next succeeding Interest Payment Date, the
Trustee shall give written notice to the Borrower to the effect that the
Borrower shall be responsible for making the reimbursement payments to the Bank
on the next succeeding Interest Payment Date in accordance with the terms of the
Reimbursement Agreement. Any monies remaining in the Interest Reserve Account
after the giving of such notice shall be transferred to the Project Fund and
applied as provided herein.
Section 504. Investment of Moneys in Funds. The Trustee shall invest
-----------------------------
moneys in the Project Fund in any Qualified Investments and may sell or
liquidate any such investment upon the written direction of the chief executive
officer or chief financial officer of the managing partner of the Borrower, if
the Borrower is not then in default hereunder; provided, however, until the
conditions set forth in Section 603 hereof are satisfied, such direction of the
Borrower is to be made only with the prior written consent of the Bank. Moneys
in the Bond Fund and the Letter of Credit Fund shall be invested by the Trustee
(but only to the extent that such investments are available) only in direct
obligations of the United States, the maturities or redemption dates of which
shall coincide as nearly as practicable with, but not be later than, the time or
times at which said moneys will be required for the purposes of this Indenture;
provided, however, that moneys drawn under the Letter of Credit shall be
invested only in direct obligations of the United States with maturities of 30
or fewer days. The making of any such investments or the sale or other
liquidation thereof shall not be subject to the control of the Borrower and
neither the Trustee nor, without limiting its obligations under the Basic
Agreements, the Borrower shall have any responsibility for any losses resulting
from such investment. Any investments pursuant to this Section may be purchased
from the Trustee or the Bank. Except with respect to the Project Fund the
Trustee is authorized to sell or otherwise convert into cash investments
credited to any Fund at the times and in the amounts necessary to meet payments
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<PAGE>
when due from such Fund. No order of the Borrower shall restrict such
authorization, and the Trustee shall not be liable for any loss occurring from
such sale or conversion to cash. Each Fund shall include all investments made
from moneys credited to such Fund and shall include all proceeds from such
investments. For purposes of this Indenture, such investments shall be valued at
face amount or market value, whichever is less. All proceeds of the Bonds,
including without limitation funds and accounts established under the Indenture
and any monies pledged under the Reimbursement Agreement, may be invested
without regard to yield restriction until February 28, 1986 inclusive, at which
time such proceeds must be invested in obligations described in Section 103(a)
of the Code, unless in the opinion of Kutak, Rock & Campbell provided to the
Trustee, the continued investment of such funds without respect to yield
limitations will not adversely affect the exemption from federal income tax of
interest on the Bonds.
Section 504A. Payment of Bonds From Funds. The Trustee shall apply moneys
---------------------------
on each Payment Date for the purpose of paying principal and premium, if any,
and principal on the Bonds then due and payable from the monies and in the
reference indicated:
(a) Moneys deposited into the Bond Fund pursuant to Section 502(a)
and any investment earnings thereon;
(b) Other Priority Funds held in the Bond Fund;
(c) Moneys drawn by the Trustee under the Letter of Credit and
deposited in the Letter of Credit Fund pursuant to Section 503;
(d) After the acceleration of the maturity of the Bonds under Section
1102, after funds held in the Bond Fund; and
(e) After the acceleration of the maturity of the Bonds under Section
1102, received by the Trustee from any other source.
Section 505. Avoidance of Arbitrage. The Borrower agrees to restrict the
----------------------
use of Bond proceeds in such manner and to such extent as necessary to assure
that the Bonds will not constitute arbitrage bonds under Section 103(c) of the
Internal Revenue Code and the regulations prescribed under that Section. The
Chairman of the Issuer is authorized and directed, alone or in conjunction with
any other officer, employee or consultant of the Issuer or the Borrower, to give
an appropriate certificate on behalf of the Issuer, for inclusion in the
transcript of proceedings for the Bonds, setting forth the facts, estimates and
circumstances and reasonable expectations pertaining to Section 103(c) of the
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<PAGE>
Internal Revenue Code of 1954, as amended and the regulations thereunder.
Section 506. Authorized Application of Funds; Moneys to be Held in Trust.
-----------------------------------------------------------
The Trustee is authorized to apply each Fund as provided in this Indenture. All
moneys deposited with the Trustee hereunder shall be held by the Trustee in
trust but need not be Segregated from other funds except as required by law. The
Trustee will withdraw sufficient funds from the Bond Fund or the Letter of
Credit Fund, as the case may be, to pay principal of and premium, if any, and
interest on the Bonds on behalf of the Issuer as the same become due and
payable. If and to the extent that, following acceleration, by declaration or
otherwise, under Section 1102, sufficient Priority Funds, including moneys drawn
under the Letter of Credit, are not available to pay principal of, premium, if
any, and interest on the Bonds, then other available moneys, including amounts
realized pursuant to Article 11, shall be used to pay principal of and premium,
if any, and interest on the Bonds.
Section 507. Nonpresentment of Bonds. If funds sufficient to pay
-----------------------
principal of and interest on any Bond (including without limitation any Tendered
Bond or other Bond purchased as provided in Section 401(d) or (e) hereof) have
been deposited with the Trustee and irrevocably committed thereto, all liability
of the Issuer and the Borrower for the payment of such amount shall forthwith
cease. The Trustee shall hold such funds, without liability for interest
thereon, for the benefit of the registered owner of such Bond or Tendered Bond,
who shall thereafter be restricted exclusively to such funds for any claim with
respect to such amount. Any such funds which remain unclaimed for four years
after such due date shall upon request in writing by the Borrower be paid to the
Borrower without any interest thereon, and the Trustee shall have no further
responsibility with respect to such moneys.
Section 508. Bonds Are Not General Obligations. The Bonds do not now and
---------------------------------
shall never constitute a general obligation of the Issuer nor a debt or pledge
of the faith and credit of the State of California, and each covenant and
undertaking by the Issuer herein and in the Bonds to make payments is not a
general obligation of the Issuer or of the State of California or a debt or a
pledge of the faith and credit of the State of California, but is a special,
limited obligation payable solely from the Pledged Receipts and is a valid claim
of the holders only against such Pledged Receipts (but in addition is secured by
the First Deed of Trust on and security interest in certain properties of the
Borrower). Nothing herein shall be construed as requiring the Issuer to use any
funds or revenues from any source other than the Pledged Receipts.
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<PAGE>
Section 509. Substitute Letter of Credit. At any time prior to the
---------------------------
expiration of the Letter of Credit, the Borrower may, at its option, provide for
the delivery to the Trustee of a substitute Letter of Credit. The stated
termination date of any substitute Letter of Credit shall not be earlier than
one year subsequent to the date on which such Substitute Letter of Credit is
issued, except that any Substitute Letter of Credit issued during the Adjustable
Rate Period may provide that it will terminate on the Conversion Date. Any
Substitute Letter of credit provided for the Fixed Rate Period or any portion
thereof shall provide for the payment of at least 210 days interest accrued on
the Bonds (calculated on the basis of a year having 360 days) and a redemption
premium in the amount of 3% of the outstanding principal amount of the Bonds.
On or prior to the date of the delivery of such Substitute Letter of Credit to
the Trustee, the Borrower shall furnish to the Trustee and the Issuer (i) an
opinion of Bond Counsel stating that the delivery of such substitute Letter of
Credit to the Trustee is authorized under this Indenture and complies with the
terms hereof, (ii) an opinion of counsel in form and substance reasonably
satisfactory to the Trustee (and substantially similar in content with respect
to the Substitute Letter of Credit as those opinions originally rendered with
respect to the Letter of Credit in connection with the original issuance of the
Bonds) to the effect that the Substitute Letter of Credit is the valid, binding
and enforceable obligation of the bank or other financial institution issuing it
(subject to customary exceptions as to limitations on enforceability by
bankruptcy and other laws affecting creditors' rights generally and by the
application of equitable principles) and that payments on the Bonds out of the
proceeds of a drawing on the Substitute Letter of Credit will not constitute
voidable preferences under the federal Bankruptcy Code or other applicable laws
and regulations, and (iii) either (A) written evidence from Moody's if the Bonds
are rated by Moody's, and S&P, if the Bonds are rated by S&P, to the effect that
such rating agency has reviewed the proposed Substitute Letter of Credit and
that the substitution of the proposed Substitute Letter of Credit for the Letter
of Credit will not, by itself, result in a reduction of its ratings of the Bonds
from those which then prevail, or (B) written evidence satisfactory to the
Trustee that the commercial bank or other financial institution issuing such
Substitute Letter of Credit has a rating on its long-term obligations from
Moody's and/or S&P which is (x) equal to or better than the second highest long-
term debt rating category, or (y) equal to or better than such ratings of long-
term obligations of the issuer of the credit facility being replaced by such
Substitute Letter of Credit.
-41-
<PAGE>
The Letter of Credit may by its terms provide for extensions thereof and
the Borrower may, at its election, and with the consent of the Bank, provide for
one or more additional extensions of the Letter of Credit for any period
commencing after the expiration of such Letter of Credit.
PART III:
--------
THE PROJECT
ARTICLE 6 - Completion of the Project; Subdivision of Project Site
Section 601. Borrower's Obligations to Complete Project, etc. The
-----------------------------------------------
Borrower shall cause the Project to be completed as promptly as feasible but in
no event later than December 1, 1987 unless otherwise approved by the Bank which
approval shall not be unreasonably withheld, and shall at its expense do or
cause to be done all things necessary or proper for such completion in
accordance with applicable law and regulations.
Until completion of the Project, the Borrower shall make no changes in the
Plans and Specifications or take any other action which would affect the
qualification of the Project as a "project", as defined in the Enabling Act, or
would affect in any material respect the description of the Project approved by
the Issuer.
Section 602. Completion Certificate. Completion of the Project shall be
----------------------
evidenced to the Trustee by a Completion Certificate signed by the Project
Supervisor and approved by the Bank, which approval shall not be unreasonably
withheld or delayed, (i) stating that the Project or such additional facilities,
as the case may be, has been substantially completed in accordance with the
Plans and Specifications so as to permit efficient operation thereof, and all
costs then due and payable in connection therewith have been paid, and that
completion has been accomplished in such a manner as to conform with all
applicable zoning, planning, building, environmental and other regulations of
all governmental authorities having jurisdiction; (ii) specifying the date by
which the foregoing events had occurred; (iii) stating that there is no laborer,
supplier, materialman, or other person then entitled to assert a materialman's
or other similar lien upon the Mortgaged Property; (iv) indicating the nature
and estimated cost of any work to be done on the Mortgaged Property which is
ancillary or supplemental to the Project; and (v) stating that it is given
without prejudice to any rights against third parties which then exist or may
subsequently come into being.
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<PAGE>
Section 603. Subdivision of Project Site. The Borrower shall cause the
---------------------------
subdivision map of the Project site to be filed and recorded with the San Diego
County Recorder's Office on or before May 1, 1986, or such later date as may be
approved by the bank. Immediately after the recordation of such map, the
Borrower shall cause to be submitted to the Trustee a certification from the
Bank that the conditions set forth in paragraph A.4(h) of Appendix I to the
Reimbursement Agreement have been satisfied and shall submit a written
requisition as provided in Section 501A for disbursement of moneys sufficient to
pay the purchase price for the Project site and shall enter into and record with
the San Diego County Recorder's Office the First deed of Trust, the Second Deed
of Trust and shall enter into and deliver the Intercreditor Agreement, the Land
Use Restriction Agreement and such other instruments or collateral assignments
as the Bank may reasonably request.
ARTICLE 7 - Damage and Destruction
Section 701. Damage and Destruction. If the Mortgaged Property shall be
----------------------
damaged or destroyed by fire, flood, or other casualty, there shall be no
abatement or reduction in the payments required to be made by the Borrower
hereunder and (i) the Borrower shall repair, replace, restore or reconstruct the
Mortgaged Property so as to restore it to substantially its prior value and to a
state suitable for its continued use as a residential dwelling facility for the
elderly as reasonably determined by the Borrower and (ii) any net proceeds of
insurance shall be held in a separate account by the Trustee and applied for
such purpose in the manner provided for moneys in the Project Fund. If such net
proceeds are insufficient, the Borrower will complete such restoration and will
provide for payment of the costs of such completion from its own moneys. Any
insurance proceeds remaining after the payment of all such costs shall be paid
to the Bank to the extent of any unreimbursed obligations under the
Reimbursement Agreement and then to the Borrower. However, if within 30 days
after the damage or destruction, the Borrower determines in good faith that the
Mortgaged Property cannot be reasonably restored within twelve months to a
condition substantially equivalent to that immediately preceding such damage or
destruction and so notifies the Trustee and the Bank in writing, the Borrower
shall not be obligated to restore the Mortgaged Property and the net insurance
proceeds shall be paid into the Bond Fund.
Section 702. Eminent Domain. If title to or the temporary use of all or
--------------
part of the Mortgaged Property shall be taken under exercise of any power of
eminent domain, there shall be no abatement or reduction in the payments
required to be made by the
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Borrower hereunder and any net proceeds from any award for such taking shall be
paid to the Trustee and held in a special account and invested and disbursed in
the manner provided for moneys in the Project Fund, and applied as follows:
(a) The restoration of the Mortgaged Property to an economic unit
comparable to its previous state.
(b) The acquisition or construction of other land and improvements,
exclusive of movables, deemed by the Borrower to be adequate for the continuance
of its business operations at the project site (which improvements shall be
deemed a part of the project); but only if such land and improvements are
acquired by the Borrower subject only to liens and encumbrances constituting
permitted Encumbrances.
(c) Payment into the Bond Fund.
Within 90 days following entry of a final order in any eminent domain
proceedings granting condemnation, an officer of the managing partner of the
Borrower shall elect in a writing furnished to the Trustee and the Bank one of
the above uses. Absent such notice, the Trustee shall pay such proceeds into the
Bond Fund. Any net proceeds not applied for the purposes set forth in
subsections (a) or (b) above shall be paid into the Bond Fund. The Borrower
agrees that, if it shall elect to apply the proceeds to the purposes set forth
in either subsection (a) or subsection (b) above, the Borrower shall grant the
Trustee and the Bank a deed of trust on and a security interest in any land or
other property acquired with such proceeds, and such property shall be included
in the Mortgaged Property for the purposes of this Indenture.
Section 703. Payment to Borrower. Upon the termination of the lien of
-------------------
this Indenture, unexpended proceeds of any insurance or condemnation award shall
be paid to the Borrower free of any obligation hereunder.
PART IV
-------
REPRESENTATIONS AND AGREEMENTS
OF ISSUER AND BORROWER
ARTICLE 8 - Representations and Agreements of Issuer
Section 801. Due Organization, etc. The Issuer represents and warrants as
---------------------
follows:
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(a) It is a political subdivision of the State of California, with
the power under and pursuant to the Enabling Act, to execute, deliver and
perform its obligations under this Indenture and the Bond Purchase Agreement,
and to issue and sell the Bonds.
(b) It has taken all necessary action and has complied with all
provisions of the Constitution of the State of California and the Enabling Act
required to make this Indenture, the Bond Purchase Agreement, the Land Use
Restriction Agreement and the Bonds the valid obligations of the Issuer which
they purport to be; and, when executed and delivered by the parties hereto, this
Indenture, the Land Use Restriction Agreement and the Bond Purchase Agreement
will each constitute a valid and binding agreement of the Issuer and be
enforceable in accordance with its terms, except as enforceability may be
subject to the exercise of judicial discretion in accordance with general
equitable principles and to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws for the relief of debtors heretofore or hereafter
enacted to the extent that the same may be constitutionally applied.
(c) When delivered to and paid for by the initial purchaser or
purchasers in accordance with the terms of the Bond Purchase Agreement and this
Indenture, the Bonds will constitute valid and binding special, limited
obligations of the Issuer enforceable in accordance with their terms, except as
enforceability may be subject to the exercise of judicial discretion in
accordance with general equitable principles and to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws for the relief of debtors
heretofore or hereafter enacted to the extent that the same may be
constitutionally applied, and will be entitled to the benefits of this
Indenture.
Section 802. Payment of Bonds; Trustee's Rights with Respect to the Loan;
------------------------------------------------------------
Cooperation with Trustee. The Issuer agrees that it will promptly pay or cause
- ------------------------
to be paid the principal of and interest on all Bonds as herein provided. The
Issuer agrees that the Trustee may enforce all rights of the Issuer (except
those rights not assigned under this Indenture) and all obligations of the
Borrower with respect to the Loan for and on behalf of the Bondholders, whether
or not the Issuer is in default hereunder. The Issuer agrees that, except as
provided herein, it will not mortgage, encumber or alienate any part of the
Pledged Receipts. The Issuer further agrees to provide assurances to the same
extent as required of the Borrower under the first paragraph of Section 1006.
All agreements of the Issuer in this Section 802 are subject to the
limitation described in Section 508.
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<PAGE>
ARTICLE 9 - Representations and Covenants of the Borrower
The Borrower hereby confirms to the Issuer and the Trustee its
representations and warranties made or incorporated by reference in Section 5 of
the Reimbursement Agreement, and hereby further represents and warrants and, as
to Sections 904, 905, 906, 907 and 908 covenants as follows:
Section 901. Legal Proceedings. There is no action, suit, proceeding or
-----------------
investigation at law or in equity before or by any court or public board or body
pending or, to the knowledge of the borrower, threatened against it, wherein
an unfavorable decision, ruling or finding would in any material respect
adversely affect the business, assets or condition (financial or otherwise) of
the Borrower or the transactions contemplated by the Basic Agreements, or which
in any way would adversely affect the validity of the Basic Agreements.
Section 902. Compliance with Law; Consents, etc. The Borrower is not in
----------------------------------
violation of any term or provision of its partnership agreement, or in material
violation of any term or provision of any mortgage, lease, agreement or other
instrument which is material to its business or assets, or of any judgment,
decree, governmental order, statute, rule or regulation by which it is bound or
to which it or any of its assets is subject. The execution, delivery and
performance of and compliance with the Basic Agreements will not violate or
constitute a default under the partnership agreement of the Borrower or of any
term or provision of any mortgage, lease, agreement or other instrument, or of
any judgment, decree, governmental order, statute, rule or regulation by which
the Borrower is bound or to which any of its assets is subject. No approval by,
authorization of, or filing with any federal, state, or municipal or other
governmental commission, board, or agency or other governmental authority is
necessary in connection with the execution and delivery of any of the Basic
Agreements by the Borrower other than those not obtainable at this time which
are not required to be obtained at this time, except for necessary approvals
under the Enabling Act, which have been, or by the time of delivery of the Bonds
will have been, obtained.
Section 903. Adequacy of Disclosure. Neither this Indenture nor the
----------------------
Reimbursement Agreement or any other document, certificate or statement
furnished to the initial purchaser or purchasers or the Issuer by or on behalf
of the Borrower in connection with the transactions contemplated hereby or
thereby contains any untrue statement of a material fact or omits to state a
material fact pertaining to the Borrower, the Project, the Mortgaged Property
necessary in order to make the statements contained herein and therein not
misleading.
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<PAGE>
Section 904. Acquisition, Construction and Completion of Project.
---------------------------------------------------
(a) The Borrower has entered into a substantial binding obligation to
purchase the land for the Project, and the Borrower intends to commence
construction of the Project within six months of the date hereof, pursuant to
which the Borrower is obligated to expend at least the lesser of $100,000 or 2-
1/2% of the total cost of acquisition and construction of the Project and will
proceed with due diligence to complete the Project in accordance with the
provisions hereof;
(b) The Borrower reasonably expects that the total cost of
acquisition, construction and development of the Project will be at least
$13,500,000 and the Borrower reasonably expects to complete the acquisition,
development and construction of the project and to expend the full amount
remaining in the Project Fund for Project Costs within 36 months after the
delivery of the Bonds;
(c) Substantially all (at least 90%) of the aggregate amount
disbursed from the Project Fund (minus amounts expended for "Neutral Project
Costs" as shown on Schedule C of Exhibit 904A hereto) to pay or reimburse
Project Costs shall be applied to pay or reimburse qualified Project Costs and
that not more than an insubstantial portion (not more than 10%) of the aggregate
amount disbursed from the Project Fund (minus amounts expended for "Neutral
Project Costs" as shown on Schedule C of Exhibit 904A hereto) to pay or
reimburse Projects Costs shall be applied to pay or reimburse Project Costs
other than Qualified Project Costs. In connection with this covenant, Borrower
shall execute the Borrower's Certificate attached hereto as Exhibit 904A;
(d) Any and all contracts to acquire any part of the Project which
were entered into prior to April 15, 1985 (with respect to which payments are to
be made from the proceeds of Bonds as Qualified Project Costs) were, on such
date, fully executory in nature, and none of the burdens or benefits of
ownership of any property which was the subject of such contracts had accrued to
or been imposed upon the Borrower or any 'related person," as such term is
defined in the Code, prior to such date;
(e) The Borrower shall submit to the Trustee, prior to or upon the
date of each disbursement from the Project Fund, a statement (which statement
may be contained in the Borrower's requisition for payment hereunder) certifying
that the full amount of such disbursement will be applied to pay or reimburse
Project Costs and that after taking into account the proposed
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<PAGE>
disbursement substantially all (at least 90%) of the aggregate disbursements
from the Project Fund (minus amounts expended for "Neutral Project Costs", as
shown on Schedule C of Exhibit 904A hereto) will have been applied to pay or
reimburse the Borrower for paying Qualified Project Costs;
(f) Upon the completion of the Project the Borrower shall submit to
the Issuer and the Trustee a certificate of completion (which certificate shall
be signed by the Bank) which, in addition to the requirements of Section 602
hereof, will contain the following (i) the Borrower's statement that the project
has been substantially completed and is ready and available for occupancy as of
a specified date (which shall be the "Completion Date"); (ii) the Borrower's
statement, of the aggregate amount expected to be disbursed from the Project
Fund upon the Completion Date; and (iii) the Borrower's certification that all
of the amounts expected to be disbursed from the Project Fund will be applied to
pay or reimburse Project Costs and that none of the amounts disbursed from the
Project Fund are expected to be applied to pay or reimburse costs or expenses
other than project Costs; and (iv) the Borrower's certification that
substantially all (at least 90%) of the amounts disbursed from the Project Fund
(minus amounts expended for "Neutral Project Costs" as shown on Schedule C of
Exhibit 904A hereto) will be applied to pay or reimburse Qualified Project Costs
and that no more than an insubstantial amount (not more than 10%) of the amounts
disbursed form the Project Fund will be applied to pay or reimburse costs or
expenses other than Qualified Project Costs;
(g) Money on deposit in any fund or account in connection with the
Bonds, whether or not such money was derived from other sources, will not be
used by or under the direction of the Borrower in a manner which would cause the
Bonds to be "arbitrage bonds" within the meaning of Section 103(c) of the Code,
and the Borrower specifically agrees that the investment of money in any fund
created hereunder shall be restricted as may be necessary to prevent the Bonds
from being "arbitrage bonds" under the Code;
(h) The Borrower will not take or omit to take any action if such
action or omission would cause interest on the Bonds to become subject to
federal income taxation, except during such period as the Bonds are owned by a
"substantial user" of the Project or a "related person" and except for,, any
federal tax characterized as a "minimum" or "preference tax to the extent such
tax affects the includability of interest on the Bonds in the income of the
recipient thereof; and
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<PAGE>
(i) Prior to the commencement of the Qualified Project period, the
Borrower will appoint a Monitoring Agent and enter into a Monitoring Agreement
substantially in the form attached hereto as Exhibit 904B, with such substantive
changes, modifications or deletions as may be approved by Bond Counsel.
Section 905. Residential Rental Property. The Borrower hereby
---------------------------
acknowledges and agrees that the Project is to be owned, managed and operated as
a project for "residential rental property" as such term is defined in Section
103(b)(4)(A) of the code. To that end, the Borrower hereby represents, warrants
and covenants for the Qualified Project Period or until the Bonds are no longer
Outstanding Bonds, whichever is later, as follows:
(a) That the Project will be acquired and constructed for the purpose
of providing multifamily residential rental property, and that the Project shall
be owned, managed and operated as a project to provide multifamily residential
property comprised of a building or structure or several proximate and
interrelated buildings or structures owned by the same person for federal income
tax purposes, financed by the Bonds and containing one or more dwelling units
and facilities functionally related and subordinate to such units, in accordance
with Section 103(b)(4)(A) of the Code;
(b) That substantially all of the Project will consist of units of
similar quality and type of construction, containing facilities for living,
sleeping, eating, cooking and sanitation for a single person or a family;
(c) That none of the dwelling units in the Project shall at any time
be utilized on a transient basis, shall ever be leased or rented for a period of
less than thirty days, and shall ever be used as a hotel, motel, dormitory,
fraternity house, sorority house, rooming house, hospital, sanitarium or rest
home;
(d) That the dwelling units in the Project shall be leased, rented or
available for lease or rental to members of the general public, including Lower-
Income Tenants;
(e) That the Project is located on a single tract of land or on two
or more contiguous tracts of land, and that all of the buildings, structures and
facilities which are part of the Project comprise a single geographically and
functionally integrated project for residential rental property, as evidenced by
the ownership, management, accounting and operation of the Project;
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<PAGE>
(f) That the Borrower has no present plan nor does there exist any
contractual arrangement, formal or informal, to convert the Project during the
period of this covenant to any use other than use as residential rental
property; and
(g) That, if the Project contains fewer than five units, none of the
units will at any time be occupied by the "owner" of the Project for federal
income tax purposes.
Section 906. Lower Income Tenants. The Borrower will execute the Land Use
--------------------
Restriction Agreement to satisfy the requirements of Section 103(b)(4)(A) of the
Code and the Enabling Act and to meet the foregoing requirements, the Borrower
will for the Qualified Project Period (or such other period specified):
(a) (i) rent initially (or hold available for rent) at least 20% of
the completed dwelling units in the Project to Lower-Income Tenants, prior to
the satisfaction of which no additional units shall be rented or leased to
persons other than Lower-Income Tenants, and (ii) after initial rental occupancy
of such dwelling units by Lower-Income Tenants, at least 20% of the completed
dwelling units in the Project shall be rented to and occupied (or held available
for rent if previously rented to and occupied by Lower-Income Tenants) by Lower-
Income Tenants as required by Section 103(b)(4)(A) of the Code;
(b) obtain and maintain on file Income Certifications from each
Lower-Income Tenant each certification dated or confirmed within five days
immediately prior to the initial occupancy of such tenant in the Project in the
form attached hereto as Exhibit 906A;
(c) file with the Issuer (with a copy to the Bank) reports
substantially in the form attached hereto as Exhibit 906B within 30 days after
the end of each calendar quarter, commencing with the first calendar quarter
during the Qualified Project Period.
(d) for the entire term of the Bonds, maintain complete and accurate
records pertaining to the dwelling Units occupied or to be occupied by all
tenants in the Project, and permit any duly authorized representative of the
Trustee, the Issuer, the Bank, the Monitoring Agent, the Department of the
Treasury or the Internal Revenue Service to inspect the books and records of the
Borrower pertaining to the Income Certifications of Lower-Income Tenants
residing in the Project.
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<PAGE>
Section 907. Tax-Exempt Status of the Bonds.
------------------------------
(a) The Borrower will not take or permit, or omit to take or cause to
be taken, any action that would adversely affect the exemption from federal
income taxation of the interest on the Bonds and, if it should take or permit,
or omit to take or cause to be taken, any such action, the Borrower shall take
all lawful actions necessary to rescind or correct such actions or omissions
promptly upon having knowledge thereof;
(b) The Borrower will take such action or actions as may be
necessary, in the opinion of Bond Counsel, to comply fully with all applicable
rules, rulings, policies, procedures, regulations or other official statements
promulgated, proposed or made by the Department of the Treasury or the Internal
Revenue Service pertaining to obligations issued under Section 103(b)(4)(A) of
the Code;
(c) The Borrower will file of record such documents and take any
other steps as are necessary, in the opinion of Bond Counsel, in order to insure
that the requirements and restrictions of this Indenture will be binding upon
all owners of the Project, including, but not limited to, the execution and
recordation of the Land Use Restriction Agreement. The Borrower hereby covenants
to include such requirements and restrictions in any documents transferring any
interest in the Project to another to the end that such transferee has notice
of, and is bound by such restrictions and to obtain the agreement from any
transferee to so abide.
Section 908. Modification and Termination of Special Tax Covenants.
-----------------------------------------------------
(a) Subsequent to the issuance of the Bonds and prior to their
payment in full (or provision for the payment thereof having been made in
accordance with the provisions of this Indenture), Sections 905 and 906 of this
Indenture may not be amended, changed, modified, altered or terminated except as
permitted pursuant to this Section 908. Anything to the contrary
notwithstanding, the Issuer, the Trustee, the Bank and the Borrower hereby agree
to amend this Indenture to the extent required or permitted, in the opinion of
Bond Counsel, for interest on the Bonds to remain exempt from federal income
taxation under Section 103(b)(4)(A) of the Code. The party requesting such
amendment shall notify the other parties to this Indenture, with a copy of such
requested amendment to Bond Counsel. After review of such proposed amendment,
Bond Counsel Shall render to the Trustee an opinion as to the effect of such
Proposed amendment upon the includability of interest on the
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bonds in the income of the recipient thereof for federal income tax purposes.
The Borrower shall pay an amount to the Trustee sufficient to reasonably
compensate Bond Counsel for rendering such opinion.
(b) The Borrower, the Issuer and, where applicable, the Trustee shall
execute, deliver and, if applicable, the Borrower or the Issuer shall file and
record any and all documents and instruments, including, without limitation, an
amendment to the Land Use Restriction Agreement, necessary to effectuate the
intent of this Section 908, and in the event that the Borrower or the Issuer
fails to file of record such documents or instruments both the Borrower and the
Issuer hereby authorize the Trustee at its option to execute, deliver and, if
applicable, file and record on behalf of the Borrower or the Issuer, as is
applicable, any such document or instrument (in such form as may be approved by
Bond Counsel) if either the Borrower or the Issuer defaults in the performance
of its obligation under this subsection (b); provided, however, that the Trustee
shall take no action under this subsection (b) without first notifying the
Borrower or the Issuer, or both, as is applicable, of its intention to take such
action and providing the Borrower or the Issuer, or both, as is applicable, a
reasonable opportunity to comply with the requirements of this Section 908.
(c) Notwithstanding anything to the contrary contained in this
Section 908, the restrictions provided herein regarding the use and operation of
the Project shall be terminated upon the occurrence of any event of involuntary
noncompliance contemplated by Section 103(b)(4)(A) of the Code and certified by
a certificate of the chief executive officer or chief financial officer of the
managing partner of the Borrower, supported by an opinion of Bond Counsel,
furnished to the Trustee, including fire, seizure, requisition, foreclosure,
transfer of title by deed in lieu of foreclosure, change in federal law or
action of a federal agency, condemnation or similar event after the issuance of
the Bonds which prevents the Issuer from enforcing the requirements of Sections
905 and 906 of this Indenture, so long as the Bonds are redeemed within sixty
days following the date certified by the Authorized Borrower Representative as
of the date of involuntary noncompliance (or within a period of time thereafter
determined by the Trustee to be reasonable).
Section 909. Sale of Project. In the event of any sale, transfer,
---------------
assignment or other disposition of the Project in accordance with the provisions
hereof, the purchaser, transferee or assignee shall assume the obligations of
the Borrower under Article 9 hereof and under the Land Use Restriction
Agreement.
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ARTICLE 10 - Certain Agreements of Borrower
The Borrower agrees as follows:
Section 1001. Borrower to Make Loan Payments Sufficient to Meet Debt
------------------------------------------------------
Service on Bonds and Additional Payments.
- ----------------------------------------
A. Borrower's Loan Payments. The Borrower agrees to pay as a Loan
------------------------
payment to the Trustee a sum in immediately available funds which, including
amounts deposited pursuant to the next following paragraph of this Section 1001
(plus interest accrued thereon) but excluding amounts which are then held for
purposes other than the next succeeding payment of principal, premium, if any,
and interest on the Bonds, equals all payments due on the Bonds on such Payment
Date (excluding amounts excluded pursuant to Section 304(c) hereof). The
Borrower shall receive a credit against its obligation to make Loan payments to
the extent of (i) any moneys drawn by the Trustee under the Letter of Credit,
and (ii) the amount of any other Priority Funds available to make the
corresponding payment with respect to the Bonds.
In any event the Loan payments payable under this Section shall be
sufficient to pay the total amount due with respect to such principal of and
interest and any premium on the Bonds as and when due. If at any time when said
payments are due the balance in the Bond Fund available for said purpose is
insufficient to make such payments, the Borrower forthwith will pay to the
Trustee any such deficiency. Subject to such obligation and the obligation of
the Borrower under the immediately preceding paragraph, the Borrower shall not
be required to make any Loan payment to the extent its application would result
in an excess in the Bond Fund over the amounts necessary to meet obligations
then due and payable from the Bond Fund plus any additional amounts then
required to be maintained in the Bond Fund.
B. Additional Payments. The Borrower agrees to duly make on demand (by
-------------------
the Issuer or the Trustee, as the case may be) Additional Payments as follows:
(a) To the Issuer, as reimbursement for all reasonable costs,
expenses and liabilities paid or incurred by the Issuer in satisfaction of any
obligations-of the Borrower not performed by the Borrower as required hereunder
or under the Bond Purchase Agreement.
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<PAGE>
(b) To the Issuer, as reimbursement for or prepayment of all
reasonable costs, expenses and liabilities paid or incurred or to be paid or
incurred by the Issuer or any of its directors, officers, employees or agents at
the request of the Borrower or as required by this Indenture, the Enabling Act,
other than any rebates due to the United States of America under Section
103(c)(6) of the Code on account of moneys and investments held by the Issuer.
(c) To the Trustee, its reasonable fees and expenses as trustee, bond
registrar and paying agent, including the reasonable fees and expenses of its
attorneys and agents, and any other amounts due to the Trustee under this
Indenture.
C. Bank Obligations. The Borrower agrees to pay all Bank Obligations
----------------
when due.
D. Obligations Unconditional. The Borrower's obligations to make the
-------------------------
payments required by this Indenture shall be absolute and unconditional and
shall not be subject to any right of recoupment or set-off. Until the lien of
this Indenture has terminated and ceased to have effect, the Borrower will not
(i) suspend or discontinue any payments required by this Indenture or (ii) fail
to fulfill its other agreements herein for any cause including without
limitation failure fully to acquire and install the Project, or damage to the
Project, any failure of consideration or commercial frustration of purpose, any
change in federal or state or other laws or administrative rulings or actions or
any failure of the Issuer to fulfill any agreement, duty, liability or
obligation related to this Indenture.
Section 1002. Borrower to Maintain Its Legal Existence. The Borrower will
----------------------------------------
maintain its legal existence and qualification under the laws of the State of
California.
Section 1003. [Not Used].
Section 1004. Borrower to Give Notice of Event Adversely Affecting Tax-
---------------------------------------------------------
Exempt Status of Interest on Bonds. The Borrower will give prompt written
- ----------------------------------
notice to the Trustee and the Bank of the occurrence of any Determination of
Taxability or any basis therefor, and of any allegation by any federal or state
agency that any such event has occurred, of which the Borrower has or acquires
knowledge.
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<PAGE>
Section 1005. Covenants Related to Mortgaged Property.
---------------------------------------
A. Maintenance and Modifications of Mortgaged Property by Borrower;
----------------------------------------------------------------
Restrictions on Prior Liens, etc. Subject to the provisions of this Section
- --------------------------------
1005 and Article 7 (dealing with damage and destruction), the Borrower will
maintain the Mortgaged property in good repair, working order and condition and
will from time to time make or cause to be made all necessary and proper
repairs, replacements and renewals.
The Mortgaged Property and any use thereof by the Borrower or any lessee
shall conform with all applicable zoning, planning, building, environmental and
other regulations of governmental authorities having jurisdiction over the
Borrower, and neither the Borrower nor any lessee shall permit a nuisance
thereon. Subject to the foregoing, the Borrower may at its cost remodel or make
substitutions, modifications and improvements to the Mortgaged Property as it
deems desirable for its uses and purposes and the same shall be the property of
the Borrower and be included as part of the Mortgaged Property and the Project;
provided that the Borrower shall advise the Bank and the Trustee of any such
substitutions, modifications and improvements involving the expenditure of more
than $350,000 in the aggregate or $25,000 individually in any fiscal year.
So long as the Letter of Credit or the Substitute Letter of Credit is
outstanding, except as expressly permitted hereunder, the Borrower will not sell
or transfer any part of the Mortgaged Property, or create, incur, assume or
permit to exist any encumbrance, lien or charge of any kind on the Trust Estate
(except Permitted Encumbrances) without the written consent of the Bank. The
Borrower shall not suffer or permit any mechanics lien or other encumbrance to
remain against the Trust Estate by reason of work, labor, services or materials
supplied or claimed to be supplied, in connection with the Mortgaged Property;
provided that after notice to the Trustee and the Bank, the Borrower may contest
promptly the validity or the amount of any such lien or encumbrance by
appropriate proceedings timely instituted, unless the Trustee or the Bank shall
notify the Borrower that, in the opinion of its counsel, by nonpayment of any
such items the lien of this Indenture as to any part of the Trust Estate will be
subject to loss or forfeiture, in which event the Borrower shall promptly cause
such mechanics' lien or other encumbrance to be discharged or dissolved.
B. Disposition of Portions of Mortgaged Property. The Borrower in its
---------------------------------------------
sound discretion may sell or otherwise dispose of any machinery or equipment or
other personal property included in the Mortgaged Property owned by it which it
determines has become
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<PAGE>
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary,
Provided:
(a) substitute property having equal or greater utility (but not
necessarily having the same function) in the operation of the facility at which
the replaced property was located is installed anywhere at such facility; such
removal and substitution will not impair operating utility or change the nature
of such facility to the extent that it would not constitute the type of facility
operated prior to such replacement; and such property shall be free of all liens
and encumbrances (other than Permitted Encumbrances) and shall become a part of
the Mortgaged Property; or
(b) the Project Supervisor shall certify that removal of such
Property, together with any substitution, will not materially impair the
efficiency of the Borrower's operations or adversely affect the Structural
integrity of such facility or change the nature of such facility to the extent
that it would not constitute the type of facility operated prior to such
replacement; and (except as hereinafter provided) any disposition proceeds or
trade-in credit are paid into the Bond Fund.
Any damage to structures not being removed shall be repaired at the cost of
the Borrower, utilizing insurance Proceeds to the extent available.
Except as may be waived in writing by the Bank, the Borrower shall Promptly
report to the Trustee and the Bank each such removal, substitution, sale and
other disposition and shall pay to the Trustee any amounts required hereunder;
but no such report or payment need be made unless the aggregate fair market
value of all machinery or equipment or other Personal Property included in the
Mortgaged Property sold or otherwise disposed of exceeds $350,000 in the
aggregate or $25,000 individually in any fiscal year.
Notwithstanding any other provision in this Indenture, the Borrower, with
the written approval of the Bank, may sell or dispose of all or any part of the
Mortgaged Property.
C. Taxes, Other Governmental Charges and Utility Charges. The Borrower
-----------------------------------------------------
shall duly pay or cause to be paid all taxes and governmental charges of any
kind that may at any time be lawfully assessed or levied against or with respect
to the Mortgaged Property, all utility and other charges incurred in the
operation, maintenance, use, occupancy and upkeep of the Mortgaged Property are
all assessments and charges lawfully made by any governmental body for public
improvements that may be
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secured by a lien on the Mortgaged Property. However, the Borrower may contest
in good faith any such items, assessments and other charges and, in such event,
may Permit the taxes, assessments or other charges so contested to remain unpaid
during any period, including appeals, when the Borrower is in good faith
contesting the same, so long as adequate reserves have been established and
enforcement of the contested item is effectively stayed, unless the Trustee or
the Bank shall notify the Borrower that, in the opinion of Its counsel, by
nonpayment of such items the lien of the Indenture as to any part of the Trust
Estate will be subject to loss or forfeiture, in which event the Borrower shall
Promptly cause such taxes and charges to be discharged.
D. Right of Access. The Borrower agrees that upon reasonable request In
---------------
writing to the Project Supervisor, the Issuer, the Trustee and the Bank and
their representatives may at all reasonable times examine and inspect the
Mortgaged Property.
E. Location. The Borrower will not change its name or the location of
--------
its Principal Place of business without notice to the Trustee and the Bank at
least thirty days prior to such change.
Section 1006. Instruments of Further Assurance; Recordings and Filing.
-------------------------------------------------------
The Borrower will do, execute, acknowledge and deliver or cause to be so
Performed such supplemental indentures and such further acts, instruments and
transfers as the.Trustee or the Bank may reasonably require for the better
assuring, transferring, Pledging, assigning and conferring unto the Trustee and
the Bank the Property and rights herein described and the income and revenue
Pledged hereby.
The Borrower will cause this Indenture and any necessary financing
statements, and other instruments (and Supplements and amendments to any of the
foregoing) to be recorded and filed as may be required by law in order to
preserve fully and protect the security of the Bank and the holders of the Bonds
and the rights of the Trustee hereunder.
The Trustee shall cause to be filed any continuation statements or
instruments of a similar character which, in its opinion, are required by law in
order to Preserve and protect the security of the Bondholders and the Bank.
Section 1007. Insurance and Worker's Compensation Coverage. The Borrower
--------------------------------------------
will insure or cause to be Insured the Mortgaged Property in the amount and with
the coverage of the Required Property Insurance Coverage. Any insurance policy
Issued pursuant to this Section shall be so written as to name the Trustee and
the Bank as additional insureds and to make losses
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with respect to the Mortgaged Property payable directly to the Trustee to be
held by the Trustee in a separate insurance loss account and disbursed in the
manner provided in Section 701.
The Borrower will cause all such policies of insurance to (i) provide that
all insurance proceeds shall be adjusted with and payable to the Trustee and the
Bank, (ii) include waivers by the insurer of all claims for insurance premiums
against the Trustee or the Bank, and (iii) provide that any losses shall be
payable to the Trustee and the Bank notwithstanding any act or failure to act or
negligence by either of the Trustee or the Bank, or violation of warranties,
declarations or conditions contained in any policy and notwithstanding
foreclosure or other proceedings or notice of sale of such property or any
change in title or ownership of such property.
The Borrower will carry or cause to be carried Required public Liability
Insurance applicable to the Mortgaged Property. Proceeds of such insurance shall
be applied against the related liability. The Borrower will maintain all
worker's compensation coverage required of it by the applicable laws of the
State of California.
All insurance acquired hereunder shall be with generally recognized
responsible insurance companies authorized to do business in the State of
California selected by the Borrower as approved by the Bank. Such insurance may
be blanket insurance and shall provide that it may not be cancelled or
materially altered without 30 days' prior written notice to the Trustee and the
Bank. The Borrower shall furnish the Trustee and the Bank (and keep updated)
evidence of such insurance in such form as the Trustee or the Bank may require.
Substitutions for or omissions from the coverage required by this Article
may be made upon the written consent of the Bank.
Section 1008. Indemnification of Issuer, Bank and Trustee. Notwithstanding
-------------------------------------------
its insurance agreements, the Borrower shall to the extent not prohibited by
applicable law indemnify and save harmless the Issuer, the Bank and the Trustee
and their respective directors, officers, employees and agents against and from
(a) all claims by or on behalf of any person arising out of (i) any condition of
the Mortgaged Property, or (ii) the acquisition, installation or use of it, or
(iii) any accident, injury or damage to any person occurring in or about the
Mortgaged Property, or (iv) any breach or default by the Borrower of any of its
obligations under the Basic Agreements, or (v) any act or omission of the
Borrower or any of its agents, contractors, servants, employees, or licensees,
or (vi) to the
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extent not Prohibited by applicable law, the offering, issuance, sale or resale
of the Bonds, or (vii) in the case of the Trustee, all losses, costs, charges,
expenses, judgments and liabilities to third parties arising out of its
acceptance, performance or administration of this Indenture and the transactions
contemplated hereby and (b) all reasonable costs, counsel fees, expenses or
liability reasonably incurred in connection with any such claim or any action or
Proceeding brought thereon. Any indemnification of the Trustee under clause (i),
(ii) or (iii) shall not be effective if the claim arises while the Trustee is in
possession of the Mortgaged Property Pursuant to the provisions of the First
Deed of Trust, If any action or proceeding is brought against the Issuer, the
Bank or the Trustee or any such director, officer, employee or agent by reason
of any indemnified claim, the Borrower upon notice from the affected party shall
resist or defend such action or proceeding. Subject to the foregoing, the
Issuer, the Bank and the Trustee shall cooperate and join with the Borrower at
the expense of the Borrower as may be required in connection with any action
taken or defended by the Borrower.
The Issuer, the Bank and the Trustee and their respective directors,
officers, employees and agents shall be entitled to the advice of counsel (who
may also be counsel for the Borrower or any Bondholder) and shall be wholly
Protected as to action taken or omitted to be taken in good faith in reliance on
such advice. They may rely conclusively on any communication or other document
furnished to them under the Basic Agreements and reasonably believed by them to
be genuine. They shall not be liable for any action (i) taken by them in good
faith and reasonably believed by them to be within the discretion or powers
conferred upon them, or (ii) in good faith not taken by them because reasonably
believed to be beyond the discretion or powers conferred upon them, or (iii)
taken by them Pursuant to any direction or instruction by which they are
governed by the Basic Agreements, or (iv) omitted to be taken by them by reason
of the lack of any direction or instruction required hereby or by the Bond
Purchase Agreement for such action; nor shall they be responsible for the
consequence of any error or judgment reasonably made by them. The Issuer, the
Bank and the Trustee shall in no event be liable for the application or
misapplication of funds, or for other acts or defaults, by any Person, except
their own directors, officers and employees and others specified in Section
1201(b). When any consent or other action by them is called for by the Basic
Agreements, they may defer such action pending such investigation, inquiry, or
supporting evidence as they may require. They shall not be required to take any
remedial action (other than the giving of notice) unless indemnity reasonably
satisfactory to them is furnished for any
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expense or liability to be incurred thereby. They shall be entitled to
reimbursement for expenses reasonably incurred or advances reasonably made, with
interest at the FNBB Base Rate, in the exercise of their rights or the
performance of their obligations hereunder, to the extent that they act without
previously obtaining indemnity. No permissive right or power to act which they
may have shall be construed as a requirement to act; and no delay in the
exercise of a right or power shall affect the subsequent exercise of that right
or power. The Issuer shall not be required to take notice of any breach or
default by the Borrower under any Basic Agreement, except when given notice
thereof by the Trustee. No recourse shall be had by the Borrower, the Trustee,
the Bank or any Bondholder for any claim based on any Basic Agreement against
any director, officer, employee or agent of the Issuer alleging Personal
liability on the part of such person unless such claim is based upon the willful
dishonesty of or intentional violation of law by such person.
Section 1009. Inconsistencies Between Indenture and Reimbursement
---------------------------------------------------
Agreement. With respect to any obligations of the Borrower under this Article X
- ---------
owing to the Bank, any inconsistency between the Provisions of this Indenture
and those contained in the Reimbursement Agreement shall be interpreted in favor
of the agreements contained in the Reimbursement Agreement.
PART V
------
EVENTS OF DEFAULT
-----------------
ARTICLE 11 - Default Provisions and Remedies of Trustee, Bank, Bondholders
and Issuer
Section 1101. Events of Default; Defaults. The occurrence of any of the
---------------------------
following events shall constitute an event of default" hereunder:
(a) Failure by the Issuer to pay interest on any Bond when due and
payable.
(b) Failure by the Issuer to pay any Principal or premium on any Bond
when due and payable, whether at stated maturity or by acceleration or pursuant
to any redemption or Purchase requirements under Section 401.
(c) Failure by the Borrower to make any Loan payment or Additional
Payment when due and payable.
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(d) Failure by the Borrower or the Issuer to observe or perform any
other covenant, condition or agreement on its part to be observed or performed
in this Indenture or the Bonds, for a period of 30 days after notice of such
failure shall have been given to the Borrower and the Bank by the Trustee or the
Issuer or to the Issuer and the Bank by the Trustee, unless (l) the Trustee
receives an opinion of Bond Counsel stating that (i) such failure does not cause
the interest on the Bonds to cease to be exempt from federal income taxation or
(ii) such failure can be remedied with the effect of Permitting the interest on
the Bonds to continue to be exempt from federal income taxation and (iii) such
failure does not cause a violation of the Enabling Act by the Issuer or the
Borrower and (2) such failure is remedied within the period of time determined
by Bond Counsel to be necessary to permit interest on the Bonds to continue to
be exempt from federal income taxation.
(e) Receipt by the Trustee of notice from the Bank that an "Event of
Default" within the meaning of the Reimbursement Agreement has occurred.
(f) The Letter of Credit shall be revoked or terminated for any
reason prior to its stated expiration date and a Substitute Letter of Credit
shall not have been issued within 30 days after such revocation or termination,
or the Bank shall wrongfully refuse to honor the Letter of Credit.
(g) The material inaccuracy or incompleteness of any material
representation or warranty made in writing by or on behalf of the Borrower in
connection with the transactions contemplated hereby.
(h) The occurrence of a Bankruptcy.
(i) An occurrence of an Act of Bank Bankruptcy unless a Substitute
Letter of Credit has been issued within 30 days after such event.
(j) The occurrence of any default under the Land Use Restriction
Agreement.
(k) Receipt by the Trustee, on or after March 1, 1986, of notice from
the Remarketing Agent that the Remarketing Agent has not received the opinion of
Bond Counsel described in Section 501A.
The term "default" hereunder means a default by the Issuer or the Borrower
which, with the passage of time or giving of notice or both, would constitute an
event of default.
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The Borrower agrees to notify the Issuer and the Trustee promptly in
writing of the occurrence of any known event of default.
Within five days after actual knowledge of an event of default under
subsection (a), (b), (c) or (e) above by an Officer in its Corporate Trust
Division, the Trustee shall give written notice, by registered or Certified
mail, to the Issuer, the Borrower, the Bank and all of the Bondholders, and upon
notice as provided in Section 1201(d) shall give similar notice of any other
event of default.
Section 1102. Acceleration. Upon occurrence of any event of default
------------
described in the subsection (a), (b), (e), (f), (h), (i) or (k) of Section 1101,
the Trustee shall immediately, and upon the occurrence of an event of default
described in any other subsection of Section 1101 the Trustee shall, upon and
only upon the written request of the Bank, declare all Bonds then outstanding to
be due and payable immediately, and, upon the declaration, all Principal and
interest accrued thereon shall become immediately due and payable, and there
shall be an automatic corresponding acceleration of the Borrower's indebtedness
on the Loan; Provided, however, that if there shall have occurred any event of
-------- -------
default under subsection (h) or (i) of Section 1101, the Principal of and
Premium, if any, on all Bonds then outstanding and the interest accrued thereon
automatically shall become immediately due and payable without any action by the
Trustee. Interest shall accrue to the Payment date determined by the Trustee
(which Payment date shall be not later than 15 days following the acceleration)
or the actual payment date, if later.
The Provisions of this Section 1102 are subject to the condition that with
respect to an event of default under subsection (e) of Section 1101, any waiver
by the Bank of any "Event of Default" under the Reimbursement Agreement and
rescission and annulment of its consequences shall constitute a waiver of the
corresponding event of default under this Indenture and a rescission and
annulment of the consequences thereof. No such waiver, rescission and annulment
shall extend to or affect any subsequent event of default or impair any right or
remedy consequent thereon.
Notwithstanding the foregoing, no waiver, rescission or annulment of an
event of default hereunder shall be made if the Bank shall theretofore have
honored in full a drawing under the Letter of Credit in respect of such event of
default.
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Section 1103. [Not used].
Section 1104. Remedies; Rights of Bank and Bondholders.
----------------------------------------
Upon acceleration under Section 1102, or upon the occurrence of an event of
default under subsection (h) or (i) of Section 1101, whether or not acceleration
has occurred, the Trustee immediately shall draw upon the Letter of Credit as
Provided in Section 503(b) in an amount equal to the Principal of the Bonds,
together with interest thereon to the Payment Date established by the Trustee
under Section 1102.
Upon the continuance of an event of default, if so requested by the Bank
or, unless and until the Principal of and interest on the Bonds shall be paid in
full, a Majority of the Bondholders, and if Satisfactory indemnity has been
furnished to it, the Trustee shall exercise such of the rights and Powers
conferred by this Indenture or the First Deed of Trust as the Trustee, being
advised by counsel, shall deem most effective to enforce and protect the
interests of the Bondholders and the Bank.
No remedy under this Indenture or the First Deed of Trust is intended to be
exclusive, and to the extent Permitted by law each remedy shall be cumulative
and in addition to any other remedy hereunder or now or hereafter existing;
Provided, however, that upon acceleration under Section 1102 the Trustee shall
first draw upon the Letter of Credit as Provided in Section 503(b).
No delay or omission to exercise any right or power shall impair such right
or power or constitute a waiver of any default or event of default or
acquiescence therein; and each such right and power may be exercised as often as
deemed expedient.
No waiver by the Trustee, the Bank or the Bondholders of any default or
event of default shall extend to any subsequent default or event of default.
Section 1105. Right of Bank and Bondholders to Direct Proceedings.
---------------------------------------------------
Anything in this Indenture to the contrary notwithstanding, the Bank and, so
long as Bonds are outstanding, a Majority of the Bondholders shall have the
right at any time, by an instrument or instruments in writing executed and
delivered to the Trustee, to direct the method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other
proceeding hereunder; provided that such direction shall be in accordance with
applicable law and this Indenture, and Provided that the Trustee shall be
indemnified to its satisfaction. In the event of a disagreement between the Bank
and a Majority of the Bondholders in the exercise of their
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rights hereunder, then so long as the Bonds have been accelerated under Section
1102 and are outstanding, the direction of a Majority of the Bondholders shall
be controlling.
Section 1106. Appointment of Receiver. Upon the occurrence and
-----------------------
continuance of an event of default and commencement of judicial Proceedings to
enforce the rights of the Trustee and of the Bondholders and the Bank under this
Indenture, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver or receivers of the Mortgaged Property, Pending such
proceedings, with such power as the court making such appointment shall confer.
Section 1107. Application of Moneys. Upon the occurrence and continuance
---------------------
of an event of default, there shall be deposited in the Bond Fund all moneys and
proceeds held or received by the Trustee or any receiver Pursuant to this
Indenture or the First Deed of Trust or any related document or the exercise of
any rights granted hereby or thereby, except amounts drawn under the Letter of
Credit, which amounts shall be deposited in the Letter of Credit Fund, and all
moneys in the Letter of Credit Fund shall be applied to the payment of interest
on and principal of (and, during the Fixed Rate Period, premium, if any, on) the
Bonds, and all moneys in the Bond Fund (except funds for which provision has
been made under Section 507) shall be applied after payment of all Costs of
Collection incurred by the Trustee or any receiver (i) to the payment of any
amounts due as Additional Payments under Section 1001B or amounts due under
Section 1008, (ii) then to the payment of interest, including interest on
overdue principal, then due on the Bonds, without regard to when such interest
became due, (iii) then to the payment of principal and premium, if any, then due
on the Bonds, without regard to when such principal became due, and (iv) then to
the payment of any Bank Obligations then remaining due; or in such other order
as may be determined by the Trustee with the written consent of all of the
Bondholders and, if the Issuer is affected thereby, the written consent of the
Issuer. Payments shall be made ratably, according to the amounts due
respectively for interest and principal and premium if any, among Bondholders
entitled to receive the payment being made.
Section 1108. Remedies Vested in Trustee. All rights of action (including
--------------------------
the right to file proofs of claim) under this Indenture or under any of the
Bonds may be enforced by the Trustee without the possession of any of the Bonds
or their production in any proceeding; and any such proceeding instituted by
the Trustee shall be brought in its name, as Trustee, without the necessity of
joining as plaintiffs or defendants any holders of the Bonds or the Bank; and
any recovery of the judgment shall
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be for the benefit of the holders of the outstanding Bonds and the Bank,
subject, however, to the provisions of this Indenture.
Section 1109. Rights and Remedies of Bank and Bondholders.
-------------------------------------------
Neither the Bank nor any Bondholder shall have any right to institute any
proceeding for the enforcement of this Indenture or any right or remedy granted
hereby unless (i) an event of default is continuing, (ii) the Trustee has due
notice thereof and has been notified as provided In Section 1201(d), (iii) the
Bank or the holders of at least 25% in aggregate principal amount of Bonds then
outstanding shall have made written request to the Trustee and shall have
afforded the Trustee reasonable opportunity to exercise its powers or to
institute such proceeding in its own name, and have offered to the Trustee
indemnity satisfactory to It, and (iv) the Trustee shall have failed or refused
to exercise its power or to institute such proceeding. Such notice, request and
offer of Indemnity shall at the option of the Trustee be conditions Precedent to
the execution of the powers and trusts of this Indenture, and to any action for
the enforcement of this Indenture or of any right or remedy granted hereby; it
being understood and intended that neither the Bank nor any one or more holders
of the Bonds shall have any right to affect or prejudice the lien of this
Indenture by its or their action or to enforce any right hereunder except in the
manner herein provided and that proceedings shall be instituted and maintained
in the manner herein provided and for the benefit of the Bank and the holders of
all Bonds then outstanding. Notwithstanding the foregoing, each Bondholder shall
have a right of action to enforce the payment of the principal of and premium,
if any, and interest on any Bond held by it at and after the maturity thereof,
at the place, from the sources and in the manner expressed in such Bond.
Section 1110. Waivers of Events of Default. The Trustee shall waive (in
----------------------------
advance or otherwise) any event of default and its consequences and rescind any
declaration of maturity of principal upon the written request of all of the
Bondholders (or, if the Bonds are no longer outstanding, the Bank) and, with
respect to any right of the Issuer to payment or reimbursement pursuant to
Section 1001B or 1008, the written consent of the Issuer, but no such waiver
(except as specifically provided therein) or rescission shall extend to any
subsequent or other event of default. Notwithstanding the foregoing, the Trustee
shall waive an event of default under Section 1101(e) and its consequences and
rescind any declaration of maturity of principal only upon the express written
consent of the Bank.
Section 1111. Intervention by Trustee. In any judicial Proceeding which
-----------------------
the Trustee believes has a substantial bearing
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on the interests of the Bank or the Bondholders, the Trustee may intervene on
behalf of the Bank or the Bondholders.
Section 1112. Remedies of Issuer on Event of Default. Upon the occurrence
--------------------------------------
and continuance of an event of default, the Issuer (i) shall, if requested by
the Trustee, confirm in writing any acceleration of Loan indebtedness, (ii) may,
upon the request of the Trustee, take such action in law or equity as may appear
desirable to collect any Past due or accelerated Loan indebtedness or other
payments hereunder or to enforce compliance with any obligation or agreement of
the Borrower in this Indenture and (iii) shall have access to and may examine
and make copies of the books, accounts and other data and tax returns of the
Borrower insofar as they pertain to the Mortgaged Property or to the Borrower's
operation thereof. However, the Issuer shall not be required to take any action
which in its opinion might cause it to expend time or money or otherwise incur
any liability unless satisfactory indemnity has been furnished to it. Anything
in this Indenture to the contrary notwithstanding, the Issuer may enforce its
rights under Sections 1001B and 1008 of this Indenture by any lawful available
remedy.
Section 1113. Non-Recourse. If an event of default shall occur hereunder,
------------
the sole remedy of the Trustee, Issuer and Bank shall be hereunder against the
Mortgaged Property and under any other instruments or collateral given as
security for the Borrower's obligations under this Indenture and the Bank
Obligations, and the Borrower shall not have any liability for any deficiency of
the Borrower's obligations under the Loan, or for any default under this
Indenture or the Bank Obligations.
PART VI
-------
THE TRUSTEE
ARTICLE 12 - The Trustee
Section 1201. Acceptance of Trusts. The Trustee accepts the trusts
--------------------
imposed upon it by this Indenture and agrees to perform such trusts, but only
upon the terms and conditions contained herein and in Section 1008.
(a) The Trustee, prior to the occurrence of an event of default and
after the curing of all events of default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture, and no implied agreements or obligations shall be read into this
Indenture against the Trustee. In case an event of default has
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occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in its exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) The Trustee may execute any of its trusts or powers and perform
any of its duties through attorneys, agents, receivers or employees but shall be
answerable for their conduct in accordance with the above standard, except that
as to attorneys, agents and receivers the Trustee shall be answerable only as to
the selection of same in accordance with said standards. The Trustee shall be
entitled to advice of counsel concerning all matters of trust duties hereunder,
and may pay reasonable compensation to all such attorneys, agents, receivers,
employees and counsel as may reasonably be employed.
(c) Any action taken by the Trustee Pursuant to this Indenture upon
the request or authority or consent of any person who at the time of making such
request or giving such authority or consent is the holder of any Bond shall be
conclusive and binding upon all future holders of such Bond.
(d) The Trustee shall not be required to take notice or be deemed to
have notice of any default hereunder, except defaults described in Section
1101(a), (b), (c) or (e), unless an officer in its Corporate Trust Division
shall be notified in writing of such default by the Borrower, the Issuer, the
Bank or by the holders of at least 25% in aggregate principal amount of Bonds
then outstanding. Until such notice is received, the Trustee may conclusively
assume there is no such default.
(e) The Trustee shall not be required to give any bond or surety.
Section 1202. Fees and Expenses of Trustee. The Trustee shall be entitled
----------------------------
to fees for its services rendered hereunder in the amounts of an acceptance fee
of $3,200 payable on the date of delivery of the Bonds to the initial purchaser
or purchasers and an annual fee of $5,000 or such other amount as may be agreed
to from time to time between the Trustee and the Borrower payable annually in
advance on the date of delivery of the Bonds to the initial purchaser or
purchasers and thereafter on the first Wednesday in December in each year,
commencing December 3, 1986. The Trustee also shall be entitled to reimbursement
of all advances, counsel fees and other out-of-pocket expenses reasonably made
or incurred by the Trustee in connection with such services, including but not
limited to wire transfer and telex expenses, and for such reasonable fees and
expenses as it
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may charge after an event of default has occurred and is continuing.
Section 1203. Successor Trustee. Any corporation or association into
-----------------
which the Trustee may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer all or substantially all its
trust business and assets, and any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer, ipso facto, shall be
---- -----
and become successor Trustee hereunder and vested with all the trusts, powers,
discretions, immunities, privileges and all other matters as was its
Predecessor, without the execution or filing of any instrument or any further
act on the part of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that any such successor Trustee shall be a
trust company or bank in good standing having trust powers.
Section 1204. Resignation by Trustee; Removal. The Trustee may at any
-------------------------------
time resign from the trusts hereby created by giving 30 days written notice to
the Issuer, to the Borrower, to the Bank and to each Bondholder, but such
resignation shall not take effect until the appointment of a successor Trustee
and acceptance by the successor Trustee of such trusts. The Trustee may be
removed at any time by an instrument or concurrent instruments in writing
delivered to the Trustee and to the Issuer and signed by a Majority of the
Bondholders or, if the Bonds are no longer outstanding, the Bank.
Section 1205. Appointment of Successor Trustee. If the Trustee hereunder
--------------------------------
shall resign or be removed, or be dissolved, or otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers, or of a receiver appointed by a court, a successor shall be
appointed by the Borrower. At any time within one year after any such vacancy
shall have occurred, a Majority of the Bondholders or, if a Majority of the
Bondholders have not so acted or the Bonds are no longer outstanding, the Bank
may appoint a successor Trustee by an instrument or concurrent instruments in
writing signed by or on behalf of such holders, which appointment shall
supersede any Trustee theretofore appointed by the Borrower. Each successor
Trustee shall be a trust company or bank in good standing having trust powers
and having a reported capital and surplus of not less than $25,000,000. Any such
successor Trustee shall become Trustee upon giving notice to the Borrower, the
Issuer, the Bank and the Bondholders, if any, of its acceptance of the
appointment, vested with all the property, rights and powers of the Trustee
hereunder, without any further act or conveyance. Any predecessor Trustee shall
execute, deliver and record and file
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such instruments as the Trustee may reasonably require to confirm or perfect any
such succession. In the event that a successor Trustee is not appointed within
30 days of the resignation of the Trustee, then the Trustee may petition a court
of competent jurisdiction to appoint its own successor.
Section 1206. Dealing in Bonds. The Trustee and any of its directors,
----------------
officers, employees or agents may become the owners of any or all of the Bonds
secured hereby.
Section 1207. Trustee as Bond Registrar; List of Bondholders. The Trustee
----------------------------------------------
is hereby designated as bond registrar for the Bonds and, as such, will keep on
file a list of names and addresses of the holders of all Bonds; provided,
however, that the Trustee shall be under no responsibility with regard to the
accuracy of the address of any Bondholder. At reasonable times and under
reasonable regulations established by the Trustee, such list may be inspected
and copied by the Borrower or by owners (or a designated representative thereof)
of Bonds then outstanding, such ownership and the authority of any such
designated representative to be evidenced to the satisfaction of the Trustee.
Section 1208. Successor Trustee as Custodian of Funds, Bond Registrar and
-----------------------------------------------------------
Paying Agent. In the event of a change in the office of Trustee, the
- ------------
predecessor Trustee which has resigned or been removed shall cease to be
custodian of any funds it may hold pursuant to this Indenture, and cease to be
the bond registrar and Paying Agent for any of the Bonds, and the successor
trustee shall become such custodian, bond registrar and Paying Agent.
Section 1209. Adoption of Authentication. In case any Bonds shall have
--------------------------
been authenticated but not delivered, any successor Trustee may adopt the
certificate of authentication of the predecessor Trustee and deliver the Bonds
as so authenticated.
Section 1210. Designation and Succession of Paying Agents. After 15 days'
-------------------------------------------
written notice to the Borrower and subject to the Borrower's approval, the
Trustee may designate any other banks or trust companies as Paying Agents.
Any bank or trust company with or into which any Paying Agent other than
the Trustee may be merged or consolidated, or to which the assets and business
of such Paying Agent may be sold, shall be deemed the successor of such Paying
Agent for the purposes of this Indenture. If the posItion of such Paying Agent
shall become vacant for any reason, the Trustee shall, within 30 days
thereafter, appoint a bank or trust company located in the same State as such
Paying Agent to fill such vacancy.
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<PAGE>
The paying Agents shall enjoy the same protective provisions as the
performance of their duties hereunder as are specified in Section 1201 with
respect to the Trustee, insofar as such provisions may be applicable.
Section 1211. Appointment of Co-Trustee. It is the purpose of this
-------------------------
Indenture and the other Basic Agreements that there shall be no violation of any
law of any jurisdiction (including particularly the law of the State of
California) denying or restricting the right of banking corporations or
associations to transact business as Trustee in such jurisdiction. It is
recognized that in case of litigation under this Indenture or any other Basic
Agreement and in particular in case of the enforcement thereof on the occurrence
of an event of default, or in case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the powers,
rights or remedies herein or therein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any other action which may be
desirable or necessary in connection therewith, the Trustee may appoint an
additional individual or institution as a separate or Co-Trustee, in which event
each and every remedy, power, right, claim, demand, cause of action, immunity,
estate, title, interest and lien expressed or intended by this Indenture or any
other Basic Agreement to be exercised by or vested in or conveyed to the Trustee
with respect thereto shall be exercisable by and vest in such separate or Co-
Trustee to exercise such powers, rights and remedies, and every covenant and
obligation necessary to the exercise thereof by such separate or Co-Trustee
shall run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Issuer be
required by the separate or Co-Trustee so appointed by the Trustee for more
fully and certainly vesting in and confirming to him or it such properties,
rights, powers, trusts, duties and obligations, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer. In case any separate or Co-Trustee, or
a successor, shall die, become incapable of acting, resign or be removed, all
the estates, properties, rights, powers, trusts, duties and obligations of such
separate or Co-Trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a successor to Such separate
or Co-Trustee. Any Co-Trustee appointed by the Trustee pursuant to this Section
may be removed by the Trustee, in which case all powers, rights and remedies
vested in the Co-Trustee shall again vest in the Trustee as if no such
Appointment of a Co-Trustee had been made. In no event shall the Trustee be held
liable or responsible for the actions of the Co-Trustee, provided that the Co-
Trustee has been selected with due care.
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<PAGE>
PART VII
--------
SUPPLEMENTAL INDENTURE AND WAIVERS: MISCELLANEOUS
ARTICLE 13 - Supplemental Indentures and Waivers
Section 1301. Supplemental Indentures Not Requiring Consent of
------------------------------------------------
Bondholders. The parties may without the consent of, or notice to, any of the
- ------------
Bondholders, enter into indentures supplemental to this Indenture and financing
statements or other instruments evidencing the existence of a lien as shall not,
in their opinion, be inconsistent with the terms and provisions hereof for any
one or more of the following purposes:
(a) To cure any ambiguity, inconsistency or formal defect or omission
in this Indenture;
(b) To grant to or confer upon the Trustee for the benefit of the
Bondholders and the Bank any additional rights, remedies, powers, or authority
that may lawfully be granted to or conferred upon the Bondholders, the Bank or
the Trustee;
(c) To subject to the lien and pledge of this Indenture additional
revenues, properties or collateral;
(d) To evidence any succession to the Issuer and the assumption by
such successor of the agreements of the Issuer contained in this Indenture and
the Bonds;
(e) To the extent required by law, to permit registration of the
Bonds under the federal Securities Act of 1933, as amended, and the federal
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to
permit qualification of the Indenture under the Trust Indenture Act;
(f) To provide for uncertificated Bonds or, to the extent permitted
by law, for the issuance of coupons and bearer Bonds or Bonds registered only as
to principal without causing interest on such Bonds to be subject to federal
income taxation;
(g) To the extent permitted by Section 908 hereof;
(h) To effect any other change herein which is necessary or proper in
order to obtain a rating of the Bonds by Moody's or S & P equal to the rating
applicable to the Bank or to
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<PAGE>
enable Bond Counsel to render the opinion referred to in section 501A and which,
in the judgment of the Remarketing Agent, is not to the prejudice of the holders
of the Bonds; and
(i) To effect any other change herein which, in the judgment of the
Trustee and the Bank, is not to the prejudice of the holders of the Bonds.
Section 1302. Supplemental Indentures Requiring Consent of Bondholders.
--------------------------------------------------------
In addition to Supplemental indentures Permitted by section 1301, a Majority of
the Bondholders shall have the right, from time to time, to consent to and
approve the execution by the parties hereto of such other indenture or
indentures Supplemental hereto for the purpose of modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or provisions
contained in this Indenture or in any Supplemental indenture; provided, however,
that nothing in this Section contained shall permit (a) an extension of the
stated maturity of the principal of or the interest on any Bond without the
consent of the holder of such Bond; (b) a reduction in the principal amount of
any Bond, the rate of interest thereon or the premium to be paid upon the
prepayment thereof prior to maturity without the consent of the holder of such
Bond; (c) the establishment of a privilege or priority of any Bond or Bonds over
any other Bond or Bonds without the consent of all the Bondholders; (d) a
reduction in the aggregate principal amount of Bonds the holders of which are
required to consent to any such Supplemental indenture without the consent of
the holders of all the Bonds at the time outstanding which would be affected by
the action to be taken; (e) a modification of the rights, duties or immunities
of the Issuer, the Trustee or the Bondholders without the written consent of the
affected party and all the Bondholders; (f) any amendment of the provisions of
this Indenture pertaining to the drawing and application of proceeds of the
Letter of Credit or the definition or application of Priority Funds without the
consent of the holders of all the Bonds outstanding; or (g) subject to the
provisions of Section 1304, any modification, amendment or revocation of the
Letter of Credit without the consent of the holders of all of the Bonds secured
thereby.
If at any time the Issuer shall request the Trustee to enter into any
Supplemental indenture pursuant to this Section, the Trustee shall, upon being
satisfactorily indemnified with respect to expenses, cause notice of the
proposed execution to be made in the manner required for redemptions of
principal of Bonds pursuant to Section 402; provided, however, that failure to
give such notice, or any defect therein, shall not affect the validity of the
proceedings.
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<PAGE>
Such notice shall briefly set forth the nature of the proposed supplemental
indenture and shall state that copies thereof are on file at the corporate trust
office of the Trustee for inspection by all Bondholders. Except as otherwise
provided in this Section 1302, if, within 60 days or such longer period (not to
exceed two years) as shall be prescribed by the Issuer following the final
mailing of such notice, not less than a majority of the Bondholders at the time
of the execution of any such supplemental indenture, shall have consented to and
approved the execution thereof, no holder of any Bond shall have any right to
object to any of the terms and provisions contained therein, or the operation
thereof, or in any manner to question the propriety of the execution thereof, or
to enjoin or restrain the Trustee or the Issuer from executing the same or from
taking any action pursuant to the provisions thereof. Upon the execution of any
such Supplemental indenture as in this Section permitted and provided this
Indenture shall be and be deemed to be modified and amended in accordance
therewith.
Section 1303. Opinion of Counsel. The Trustee shall be entitled to
------------------
receive, and shall be fully protected in relying upon, the opinion of any
counsel approved by it, who may be counsel for the Issuer or the Bank, as
conclusive evidence that any such proposed Supplemental indenture complies with
the provisions of this Indenture and that it is proper for the Trustee, under
the provisions of this Article, to join in the execution of such supplemental
indenture.
Section 1304. Consent of Bank; Amendments to Letter of Credit. Anything
-----------------------------------------------
herein to the contrary notwithstanding, a supplemental indenture under this
Article shall not become effective unless and until the Bank shall have
consented in Writing to the execution and delivery of such Supplemental
indenture. The Letter of Credit may not be amended without the consent of the
holders of all of the Bonds secured thereby except to correct a mistake or
omission so long as such correction is not prejudicial to any Bondholder.
Subject to the foregoing, the Reimbursement Agreement may be amended without
notice to or consent of any Person other than the Bank and the Borrower.
Section 1305. Modification by Unanimous Consent. Notwithstanding anything
---------------------------------
contained elsewhere in the Indenture, the rights and obligations of the Issuer
and of the holders of the Bonds, and the terms and provisions of the Bonds and
this Indenture or any Supplemental indenture may be modified or altered in any
respect with the consent of the Borrower, the Issuer, the Trustee, the holders
of all of the Bonds then outstanding and the Bank.
-73-
<PAGE>
Article 14 - Miscellaneous
Section 1401. Consents, etc., of Bondholders. Any consent, request,
------------------------------
direction, approval, objection or other instrument required by this Indenture to
be executed by the Bondholders may be in any number of concurrent writings of
similar tenor and may be executed by such Bondholders in person or by agent
appointed in writing.
Section 1402. Limitation of Rights. With the exception of rights herein
--------------------
expressly conferred, nothing expressed or implied from this Indenture or the
Bonds shall give to any Person other than the parties hereto and the holders of
the Bonds any right or remedy with respect to this Indenture. This Indenture and
all of the covenants, conditions and provisions hereof are for the sole and
exclusive benefit of the parties hereto and the holders of the Bonds as herein
provided.
Section 1403. Severability. In the event that any provision of this
------------
Indenture shall be held to be invalid in any circumstance, such invalidity shall
not affect any other provision or circumstance.
Section 1404. Notices. All notices, certificates or other communications
-------
hereunder shall be sufficiently given and, except as provided in Section 1201(d)
hereof, shall be deemed given when mailed by registered or certified mail,
postage prepaid, or sent by telegram addressed to the appropriate Notice
Address, with a copy to each other party hereto.
Section 1405. Payments Due on Saturdays, Sundays and Holidays. In any
-----------------------------------------------
case where a Payment Date is a Saturday or Sunday or a day on which the Trustee
is required, or authorized or not prohibited, by law (including executive
orders) to close and is closed, then payment of interest or principal and any
premium due on such day need not be made by the Trustee on such date but may be
made on the next succeeding Business Day on which the Trustee is open for
business with the same force and effect as if made on the Payment Date.
Section 1406. Extent of Issuer Covenants; No Personal Liability. No
-------------------------------------------------
covenant, stipulation, obligation or agreement of the Issuer contained in this
Indenture shall be deemed to be a covenant, stipulation, obligation or agreement
of any present or future director, officer, employee or agent of the Issuer in
his individual capacity; and no such person (including any such person executing
the Bonds) shall be liable personally on the Bonds or be subject to any personal
liability by reason of their issuance.
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<PAGE>
Section 1407. Bonds Owned by Issuer or Borrower. In determining whether
---------------------------------
Bondholders of the requisite aggregate principal amount of the Bonds have
concurred in any direction, consent or waiver under this Indenture, Bonds which
are owned by the Issuer, the Borrower, or any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Borrower (unless the Issuer, the Borrower, or such person owns all Bonds which
are then outstanding, determined without regard to this Section 1407) shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver, only
Bonds of which an officer in the Corporate Trust Division of the Trustee has
actual knowledge are so owned shall be so disregarded. Bonds so owned which have
been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Bonds and that the pledgee is not the Issuer, the Borrower,
or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Borrower (unless such pledgee owns
all Bonds which are then outstanding, determined without regard to this Section
1407). In case of a dispute as to such right, any decision by the Trustee taken
in good faith upon the advice of counsel shall be full protection to the Trustee
in accordance with its standards of performance hereunder.
Section 1408. Captions; Index. The captions, headings and index in this
---------------
Indenture are for convenience only and in no way define or describe the scope or
content of any provision of this Indenture.
Section 1409. Counterparts. This Indenture may be executed in several
------------
counterparts, each of which shall be an original and all of which shall
constitute but one and the same Indenture.
Section 1410. Governing Law; Sealed Instrument. The validity and
---------------------------------
interpretation of this Indenture and the Bonds shall be governed by the laws of
the State of California. It is intended that this Indenture shall have the
effect of a sealed instrument.
Section 1411. Agreements to Constitute Covenants. Words of agreement and
----------------------------------
promises shall also constitute covenants.
-75-
<PAGE>
IN WITNESS WHEREOF, each of the Borrower, the Issuer and the Bank has
caused this Indenture to be executed and delivered in its name and behalf by its
partners or authorized officer and to evidence its acceptance of the trusts
hereby created, the Trustee has caused this Indenture to be executed in its name
and behalf by its authorized officer, all as of the date appearing on page 1.
(Seal) THE REDEVELOPMENT AGENCY OF THE
CITY OF SAN MARCOS
By [signature illegible] By [signature illegible]
-------------------------- -------------------------------
SAN MARCOS RETIREMENT VILLAGE
UNIVERSITY FINANCIAL
CORPORATION, Partner
By [signature illegible]
-------------------------------
Vice President
BRIM & ASSOCIATES, INC.
By [signature illegible]
-------------------------------
Vice President
THE FIRST NATIONAL BANK OF
BOSTON, AS TRUSTEE
By [signature illegible]
-------------------------------
Vice President
SECURITY PACIFIC NATIONAL BANK
By [signature illegible]
-------------------------------
Vice President
By Eugene B. Watson
-------------------------------
Vice President
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 30th day of December, 1985, before me, Barbara J. Juric, the
undersigned Notary Public, personally appeared Lionel E. Burton and
____________________________,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as
_______________________________ and ___________________________ or on behalf of
The Redevelopment Agency of the City of San Marcos therein named, and
acknowledged to me that the Agency executed it.
WITNESS my hand and official seal.
/s/ Barbara J. Juric
-----------------------------
Notary's Signature
(S E A L)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared Wendy A. Warnick,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the Vice President of University Financial Corporation, a partner of the
partnership that executed the within instrument on behalf of the partnership
therein named, and acknowledged to me that the corporation executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-----------------------------
Notary's Signature
(S E A L)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared Bruce A. Schoen,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the Vice President of Brim & Associates, Inc., a partner of the
partnership that executed the within instrument on behalf of the partnership
therein named, and acknowledged to me that the partnership executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-----------------------------
Notary's Signature
(S E A L)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared K. D. Woods,
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as Vice President on
behalf of The First National Bank of Boston therein named, and acknowledged to
me that the bank executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-----------------------------
Notary's Signature
(S E A L)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December 31, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared G. O. Clements.
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as Vice President or on
behalf of Security Pacific National Bank therein named, and acknowledged to me
that the bank executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
-------------------------------
Notary's Signature
(S E A L)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 31st day of December 31, 1985, before me, Kay J. Thornburg, the
undersigned Notary Public, personally appeared Eugene Watson.
/ - / personally known to me
/ X / proved to me on the basis of satisfactory evidence
to be the person(s) who executed the within instrument as Vice President or on
behalf of Security Pacific National Bank therein named, and acknowledged to me
that the bank executed it.
WITNESS my hand and official seal.
/s/ Kay J. Thornburg
------------------------------
Notary's Signature
(S E A L)
<PAGE>
EXHIBIT 301
-----------
FORM OF BOND
________________________________________________________________________________
The form of the Bonds is, for the sake of convenience, shown as a
single, fully registered Bond. Appropriate and necessary changes should be made
in any Bond or Bonds subsequently issued.
________________________________________________________________________________
No. R_ $____________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
THE REDEVELOPMENT AGENCY OF THE CITY OF SAN MARCOS
ADJUSTABLE/FIXED RATE
MULTIFAMILY HOUSING BOND
(SAN MARCOS RETIREMENT VILLAGE)
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
MATURITY DATE December ____, 2010
BOND DATE: As of December 31, 1985
________________________________________________________________________________
THIS BOND IS NOT A GENERAL OBLIGATION OF THE CITY OF SAN MARCOS OR THE
REDEVELOPMENT AGENCY OF THE CITY OF SAN MARCOS NOR A DEBT OR A PLEDGE OF THE
FAITH AND CREDIT OF THE STATE OF CALIFORNIA, BUT IS PAYABLE SOLELY FROM THE
REVENUES PLEDGED FOR ITS PAYMENT IN ACCORDANCE WITH THE DEED OF TRUST, INDENTURE
OF TRUST AND AGREEMENT REFERRED TO BELOW.
________________________________________________________________________________
-1-
<PAGE>
1. Payment Provisions. The Redevelopment Agency of the city of San
------------------
Marcos, (the "Issuer"), for value received, promises to pay to the Registered
Owner of this Bond, or registered assigns or legal representatives (but only
from the special, limited sources and in the manner hereinafter described), the
Principal Amount on the Maturity Date unless redeemed prior thereto as
hereinafter provided, and to pay interest from the Bond Date, at the rates, and
payable on the dates, set forth below on the unpaid principal amount of this
Bond outstanding from time to time.
The final payment of principal and premium, if any, and interest shall
be payable in immediately available funds at the corporate trust office of the
Trustee (hereinafter defined) upon surrender of this Bond, and other payments
(except as otherwise provided herein) shall be payable by wire transfer of
immediately available funds, provided sufficient wire transfer instructions have
been given to the Trustee, and otherwise by check or draft mailed by the Trustee
to the Registered Owner at its address appearing on the bond register kept by
the Trustee, as of the close of business on the Record Date, which when used
herein shall mean (a) with respect to any Adjustable Period Interest Payment
Date (as hereinafter defined), the business day next preceding such Adjustable
Period Interest Payment Date or (b) with respect to any Fixed Period Interest
Payment Date (as hereinafter defined), the fifteenth day of the month next
preceding such Fixed Period Interest Payment Date, or, if such day shall not be
a business day, the next preceding business day.
The terms and conditions of this Bond are continued on the reverse
hereof and such continued terms and provisions shall for all purposes have the
same effect as though fully set forth at this place.
Principal and premium, if any, and interest are payable in lawful
money of the United States of America.
a. Adjustable Rate Period. This Bond shall bear interest from and
----------------------
including the date hereof (except as herein provided) until payment of the
principal thereof shall have been made or provided for in accordance with the
provisions hereof and of the Indenture (hereinafter defined) whether at
maturity, upon redemption or otherwise. Prior to the date on which San Marcos
Retirement Village, a California general partnership, (the "Borrower"), or the
LOC Bank (hereinafter defined) elects to exercise the option Under the Indenture
to convert the interest rate hereon to a fixed rate as hereinbelow described
(the "Conversion Date"), this Bond
-2-
<PAGE>
shall bear interest at a rate (the "Adjustable Rate") equal to the lesser of (a)
12 1/2% per annum and (b) a floating rate established as herein provided.
Except as provided in the last sentence of this paragraph, the
floating rate shall be equal to ARBI plus a fixed interest component ("FIC")
equal to (x) one quarter of one percent (1/4th of 1%) or (y) from and after the
first Wednesday of the Adjustable Rate Interest Period next succeeding the 15th
day after the Remarketing Agent gives notice to the Registered Owners of the
Bonds that the Bonds have been rated AA or better (or the equivalent thereof) by
S&P or Moody's or their respective successors and so long as such rating shall
remain in effect, one-eighth of one percent (1/8th of 1%), provided that:
i. if the Trustee shall have received a notice tendering any of the
Bonds for purchase as described in Section 401(d) of the Indenture and if the
Remarketing Agent (initially The First National Bank of Boston pursuant to a
Remarketing Agreement dated as of December 1, 1985 among the Borrower, the
Trustee and said Bank and including any successor or replacement Remarketing
Agent) shall remarket all or a portion of the Bonds, the floating rate of
interest for all of the Bonds shall be equal to the sum of (A) ARBI, plus (B)
the FIC, plus (C), if required to enable the Remarketing Agent to remarket such
tendered Bonds at par plus accrued interest, an additional interest component
("AIC") determined as hereinafter provided. The AIC shall be equal to that
percentage of interest, determined by the Remarketing Agent in connection with
any remarketing effort and expressed in increments of 1/8th of 1% per annum,
which when added to the sum of ARBI plus the FIC will produce the interest rate
per annum necessary to enable the Remarketing Agent to remarket such Bonds at
par plus accrued interest. The AIC shall become effective with respect to all
Bonds as of the purchase date with respect to Bonds tendered Under Section
401(d) of the Indenture, unless such date occurs after the last Wednesday of a
Adjustable Rate Interest Period, in which case such AIC shall become effective
as of the first Wednesday of the next Adjustable Rate Interest Period; and
ii. if an AIC is added to the floating rate pursuant to the preceding
clause (i), such AIC shall remain in effect Until the end of the Adjustable Rate
Interest Period following the Adjustable Rate Interest Period in which Bonds
Were remarketed (except as provided in clause (iii) below), until a further
adjustment to the floating rate is made pursuant to the preceding clause (i) or
Until the interest rate on the Bonds is otherwise determined as Provided herein;
and
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<PAGE>
iii. if the Remarketing Agent shall have advised the Borrower, the
Issuer, the Trustee and each Registered Owner not less than seven days prior to
the first Wednesday of any Adjustable Rate Interest Period that the
discontinuance of the AIC would result in the Bonds bearing interest at a rate
different from the interest rate per annum necessary to enable the Remarketing
Agent to remarket the Bonds at par plus accrued interest, the floating rate
shall be equal to the floating rate as last adjusted pursuant to the preceding
clause (i) until such time as the floating rate may again be adjusted pursuant
to such clause (i) or until the interest rate on the Bonds is otherwise
determined as provided for herein and;
iv. in the event that the Remarketing Agent shall have determined
(which determination shall be within the judgment and discretion of the
Remarketing Agent) that the Bonds may be remarketed at par plus accrued interest
at an adjustable Rate equal to ARBI, then from and after the first Wednesday of
the Adjustable Rate Interest Period next succeeding the 15th day after the
Remarketing Agent gives notice to the Registered Owners of the Bonds that it has
made such determination and so long as such determination shall remain in
effect, the FIC shall equal zero.
In the event that The First National Bank of Boston discontinues
the announcement of ARBI, the floating rate shall be equal to the average coupon
rate of interest expressed as a percentage of the yield evaluations at par of
United States Treasury obligations having a maturity of 91 days, which is
determined by the Remarketing Agent as necessary to remarket the Bonds at par
plus accrued interest, and which shall be announced by the Remarketing Agent to
the Trustee, the Issuer and the Borrower on Wednesday of each week, beginning on
the first such Wednesday following the discontinuance of ARBI, each change in
such floating rate to take effect on the Wednesday next following its
announcement.
As used herein, "ARBI" means the rate, calculated as a percentage
(the "ARBI Percent") of the FNBB Base Rate, which is announced by The First
National Bank of Boston from time to time, as the annual rate of interest which,
in the sole judgment of The First National Bank of Boston, will result in the
minimum yield attainable on tax-exempt adjustable-rate bonds supported by the
letter of credit of The First National Bank of Boston. ARBI shall change as and
when the FNBB Base Rate changes, provided that (a) ARBI shall not be lower on
any day during any Adjustable Rate Interest Period, than on the first Wednesday
of such Adjustable Rate Interest Period, and (b) changes in the FNBB Base Rate
of which the
-4-
<PAGE>
Trustee is given notice after the last Wednesday in any Adjustable Rate Interest
Period shall become effective on the first Wednesday of the next succeeding
Adjustable Rate Interest Period. Changes in ARBI which result from a change in
the ARBI percent shall become effective with respect to a Adjustable rate
Interest Period only if the Trustee is given notice of such change in the ARBI
Percent at least seven days prior to the first Wednesday of such Adjustable Rate
Interest Period. Changes in the FNBB Base Rate and ARBI Percent shall be
communicated by The First National Bank of Boston to the Trustee and the
Remarketing Agent promptly after they are announced. As used herein, "FNBB Base
Rate" means the per annum rate of interest from time to time announced by The
First National Bank of Boston at its principal office in Boston, Massachusetts
as its Base Rate. As used herein, "Adjustable Rate Interest Period" means each
period during the Adjustable Rate Period commencing on (and including) the first
Wednesday of each calendar month (or in the case of the first such period the
date of delivery of the Bonds to the original purchaser) and ending on (but
excluding) the first Wednesday of the next succeeding calendar month.
Interest prior to the Conversion Date shall be computed on the
basis of a 365 or 366-day year, as applicable, for the number of days actually
elapsed, and shall be payable on (i) the first Wednesday in each calendar month
during the Adjustable Rate Period commencing February 5, 1986, and (ii) the
Conversion Date (each such date being herein referred to as an "Adjustable
Period Interest Payment Date").
b. Fixed Rate Period. Subsequent to the Conversion Date, this Bond
-----------------
shall bear interest at a fixed rate as hereinafter described. Such interest
shall be computed on the basis of a 360-day year, consisting of twelve 30-day
months, and shall be payable on each January l and July l thereafter Until the
principal of and premium, if any, and interest on, this Bond shall have been
paid in full or provision shall have been made for the payment thereof in
accordance with the Indenture (each such date being herein referred to as a
"Fixed Period Interest Payment Date").
Notwithstanding anything herein contained to the contrary, the
interest rate on this Bond shall be established at a fixed rate (the "Fixed
Rate") upon the election by the Borrower (or Under certain circumstances the LOC
Bank as hereinafter defined) to exercise the Option to Covert (as hereinafter
defined) on such date which is a business day as the Borrower (or the LOC Bank)
shall select, subject to the terms and conditions of the Indenture. The
-5-
<PAGE>
Fixed Rate will be the rate of interest certified to the Borrower, the LOC Bank
and the Trustee by the Remarketing Agent no fewer than three business days prior
to the Conversion Date as the minimum rate of interest which, in the opinion of
the Remarketing Agent, is necessary to sell the Bonds in a secondary sale (by
private placement, so long as the Remarketing Agent shall be an entity not
allowed to sell the bonds publicly) on the Conversion Date at a price equal to
100% of the outstanding principal amount thereof; provided, however, that such
rate of interest shall not be less than 75% nor more than 125% of an index
computed as hereinafter described (the "Fixed Interest Index") as of the
Computation Date (as hereinafter defined). The Fixed Interest Index shall mean
the interest rate index, determined by the Remarketing Agent and announced to
the Trustee, the Issuer and the Borrower from time to time, based upon yield
evaluations at par (on the basis of a term approximately equal to the time
remaining until the maturity of the Bonds) of not less than ten component
issuers of comparable credit quality selected by the Remarketing Agent which may
include, without limitation, issuers of industrial development revenue bonds and
other limited and special obligation bonds, the interest on which is exempt from
federal income taxation. In the event the Letter of Credit (hereinafter defined)
remains outstanding and available on and after the Conversion Date or a
substitute credit facility is issued and available on and after such date, the
component issuers are required to be of the same rating category as shall then
be assigned to the Bonds (or, if the Bonds are not rated, the long-term
obligations of the issuer of the Letter of Credit or such substitute credit
facility, as the case may be) by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P"). In the event the Letter of Credit will
not remain outstanding and available on and after the Conversion Date and no
substitute credit facility will be issued and available on and after the
Conversion Date, then the component issuers shall be of the same credit quality
as the Borrower in the judgment of the Remarketing Agent. The specific issuers
included in the component issuers may be changed from time to time by the
Remarketing Agent in its discretion. In the event the Fixed Interest Index
cannot be determined by the aforementioned method, such Index will be equal to
95% of the most recent Bond Buyer Revenue Bond Index; provided that if the Bond
Buyer Revenue Bond Index is no longer published, then such Index will be equal
to 90% of the average of the yield evaluations at par of United States Treasury
obligations having a term to maturity within one year of the regaining time to
maturity of the Bonds as computed by the Remarketing Agent; and provided further
that if such Index cannot be determined by any of such methods, then it will be
equal to 12 1/2%.
-6-
<PAGE>
As and for a sinking fund for the Bonds subsequent to the
Conversion Date, the Issuer shall cause to be deposited into the Bond Fund on
the first anniversary of the Conversion Date and on the same day of each year
thereafter an amount which shall amortize the principal amount of Bonds
outstanding at the Fixed Rate from the first anniversary of the Conversion Date
to and including the Maturity Date so as to produce substantially equal debt
service payments (principal and interest) on the Bonds in each such year (after
taking into account considerations relating to the marketability of the Bonds).
Such amounts shall be set forth in a supplemental indenture executed and
delivered for such purpose.
c. Option to Convert. The Borrower (or under certain circumstances
-----------------
the LOC Bank hereinafter defined) may exercise the right to convert to a fixed
rate (the "Option to Convert") at any time on or after the six month anniversary
of the Bond Date by giving written notice to the Issuer, the trustee and the LOC
Bank stating (i) its election to convert to the Fixed Rate, which notice shall
specify the date as of which the Fixed Interest Index shall be computed (the
"Computation Date") (which date shall not be more than five business days from
the date of such notice), (ii) the Conversion Date, which date shall not be less
than 20 nor more than 60 days from the date the Borrower gives such notice,
(iii) whether the Letter of Credit has been extended and the terms thereof, or
whether a substitute credit facility has been obtained and the terms thereof,
(iv) a debt service schedule for the Bonds and (v) a form of notice of
redemption satisfying the requirements of the indenture and containing all the
information required to be included in such notice. Such notice shall be
accompanied by an opinion of Bond Counsel stating that the establishment of the
Fixed Rate and the purchase and resale of the Bonds in connection therewith are
authorized and permitted by the Indenture and the Enabling Act, and will not
have an adverse effect on the exemption from federal income tax of interest on
the Bonds.
2. Effect of Determination of Taxability. The Bonds shall be
-------------------------------------
redeemed by the Issuer (but only from the limited sources and in the manner
hereinafter described), prior to stated maturity, in whole, upon the occurrence
of a Determination of Taxability (hereinafter defined). The redemption price for
the Bonds to be redeemed in such event shall be equal to the sum of the
outstanding principal amount thereof plus accrued and unpaid interest thereon to
the redemption date, at the Adjustable Rate or the Fixed Rate, as the case may
be, plus if the Determination of Taxability occurs during the Fixed Rate Period
(hereinafter defined) a premium equal to 3% of the outstanding principal amount
of the Bonds.
-7-
<PAGE>
"Determination of Taxability" means a determination that the interest
income on any of the Bonds does not qualify as exempt interest under Section 103
of the Internal Revenue Code of 1954, as amended ("exempt interest"), for a
reason other than that a Registered Owner is a "substantial user" of the Project
or a "related person" of the Borrower within the meaning of Section 103(b)(13)
of said Code, which determination shall be deemed to have been made upon the
occurrence of the first to occur of the following:
a. the date on which the Trustee receives an opinion of Bond Counsel
that the interest income on any of the Bonds does not qualify as exempt
interest; or
b. the date on which the Trustee receive notice that any change in
law or regulation has become effective or that the Internal Revenue Service has
issued any private ruling, technical advice or any other written communication
with or to the effect that the interest income on any of the Bonds does not
qualify as exempt interest; or
c. the date on which the Borrower receives notice from the Trustee
in writing that the Trustee has been advised by any Registered Owner that the
Internal Revenue service has issued a thirty-day letter or other notice which
asserts that the interest on the Bonds does not qualify as exempt interest.
Any such redemption shall be made not less than 15 days after the
Determination of Taxability. Any Determination of Taxability shall be conclusive
as to the Issuer, the Borrower and the Registered Owner.
3. Description of Bond Issue. This Bond is one of an issue of
-------------------------
$13,500,000 Adjustable/Fixed Rate Industrial Development Revenue Bonds (San
Marcos Retirement Village Project) (the "Bonds") issued under an Indenture of
Trust and Agreement dated as of December 1, 1985 (together with any supplements,
the "Indenture") among the Borrower, the Issuer, The First National Bank of
Boston, as Trustee (the "Trustee", which term includes any successors in said
trust), and Security Pacific National Bank. The proceeds of the Bonds will be
loaned (the "Loan") by the Issuer to the Borrower Under the Indenture to finance
costs of acquiring, improving and equipping residential dwelling units and
facilities for the elderly (the "Project"), including costs incidental thereto
and to the financing thereof, for use by the Borrower within the City of San
Marcos, California (the "City"), thereby providing for development and
employment opportunities. The Bonds are
-8-
<PAGE>
issued pursuant to and in full compliance with the Constitution and laws of the
State of California and pursuant to Chapter 8 (commencing with Section 3375) of
Part 1 of Division 24 of the health and Safety Code of the State of California,
as amended, and resolutions duly adopted by Issuer, which resolutions also
authorize the execution and delivery of the Indenture.
Simultaneously with the delivery of the Bonds, there has been
delivered to the Trustee an irrevocable direct draw letter of credit (the
"Letter of Credit") issued by Security Pacific National Bank (the "LOC Bank")
pursuant to a Reimbursement Agreement between the Borrower and the LOC Bank,
dated as of December 1, 1985 (the "Reimbursement Agreement"), to provide for the
payment of principal of and premium, if any, on the Bonds, and up to 46 days'
interest (subject to reinstatement as provided therein) accrued on the Bonds. By
its terms, the Letter of Credit will expire on December 31, 1992, but may be
extended, renewed or replaced by a substitute credit facility (including an
irrevocable transferable letter of credit, insurance policy, guaranty, surety
bond or other agreement) on or before such date, if the Borrower shall furnish
to the Trustee (i) an opinion of Bond Counsel stating that the delivery of such
substitute credit facility to the Trustee is authorized under the Indenture and
complies with the terms thereof, (ii) an opinion of counsel in form and
substance reasonably satisfactory to the Trustee (and substantially similar in
content with respect to the substitute credit facility as those opinions
originally rendered with respect to the Letter of Credit in connection with the
original issuance of the Bonds) to the effect that the substitute credit
facility is the valid, binding and enforceable obligation of the bank or other
institution issuing it and that payments on the Bonds out of the proceeds of a
drawing on the substitute credit facility will not constitute voidable
preferences under the federal Bankruptcy Code or other applicable laws and
regulations and (iii) written evidence from Moody's, if this Bond is rated by
such rating agency, and S&P, if this Bond is rated by such rating agency in each
case to the effect that such rating agency has reviewed the proposed substitute
credit facility and that the substitution of the proposed substitute credit
facility for the Letter of Credit will not, by itself, result in a reduction of
its rating of this Bond from that which then Prevails. The Borrower, at its
election, may, with the consent of the LOC Bank, extend the credit facility or
may provide for a Substitute Letter of Credit for the period after the
expiration of the Letter of Credit.
The obligations of the Borrower to pay or cause to be paid Loan
payments sufficient for the prompt payment when
-9-
<PAGE>
due of the principal of, premium, if any, and interest on the Bonds are expected
to be secured by a first deed of trust on and security interest in certain
property of the Borrower (the "Mortgaged Property"). As security for the
performance by the Borrower of its obligations under the Reimbursement Agreement
to reimburse the LOC Bank with respect to drawings under the Letter of Credit,
the Borrower is expected to grant to the Trustee for the benefit of the LOC
Bank, a second deed of trust on and security interest in any Mortgaged Property.
The Bonds are to be equally and ratably secured and entitled to the
protection given by the Indenture and the Letter of Credit or any substitute
credit facility. Reference is hereby made to such documents for a description of
the nature and the extent of the security for the Bonds, the rights, duties and
obligations and immunities of the Issuer, the Trustee and the Registered Owners
and the terms upon which the Bonds are or may be issued and secured.
4. Exchange and Transfer. This Bond is exchangeable for fully registered
---------------------
bonds in denominations of not less than $500,000 and integral multiples of
$50,000 during the Adjustable Rate Period and not less than $5,000 and integral
multiples thereof during the Fixed Rate Period, as Provided in the Indenture.
This Bond is transferable on the bond register upon its Surrender at
the corporate trust office of the Trustee, accompanied by a written instrument
of transfer in form satisfactory to the Trustee, duly executed by the Registered
Owner or its attorney or legal representative, as provided in the Indenture.
The Issuer and the Trustee may treat the Registered Owner as the absolute owner
hereof for all purposes and shall not be affected by any notices to the
contrary.
5. Redemption. Principal of the Bonds is subject to redemption as
----------
follows:
a. Optional Redemption. The Bonds may be called for redemption on
-------------------
or prior to the Conversion Date, as Provided by Section 401(a) of the Indenture,
by the Issuer at the direction of the Borrower (but only from the limited
sources and in the manner hereinabove described), in whole or in part in the
amount of $500,000 or any integral multiple of $50,000 above $500,000, from time
to time on any Adjustable Period Interest Payment Date in each January, April,
July and October, at a redemption price equal to the principal amount thereof
together with accrued interest thereon to the
-10-
<PAGE>
Adjustable Period Interest Payment Date fixed for redemption; provided, however,
that no such redemption may be effected prior to July 1, 1986, and, provided
further that the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of Credit.
The Bonds may be called for redemption subsequent to the fifth
anniversary of the Conversion Date, as provided by section 401(a) of the
Indenture, by the Issuer at the direction of the Borrower on any Interest
Payment Date (but only from the limited sources and in the manner hereinabove
described) as a whole or from time to time in part in the amount of $500,000 or
any integral multiple of $50,000 above $500,000, at a redemption price equal to
the principal of and accrued interest on the Bonds to the date fixed for
redemption plus a premium equal to 3% in the first year the Bonds are so subject
to redemption, declining 1% per year thereafter until the premium equals zero;
provided that the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of Credit.
b. Extraordinary Redemption. Principal of the Bonds shall be
------------------------
redeemed in whole but not in part by the Issuer (but only from the limited
sources and in the manner hereinbelow described), at the option and direction of
the Borrower, on any date at a redemption price of 100% of the principal amount
redeemed, plus accrued interest to the redemption date, if any of the following
events shall have occurred:
i. The Project or any production facility served thereby shall
have been damaged or destroyed to such extent that, in the opinion of the
Borrower, the Project cannot be reasonably restored within a period of twelve
months from the date of such damage or destruction, or the Borrower is thereby
prevented from carrying on its normal operation of the Project for a period of
twelve months from the date of such damage or destruction; or
ii. Title to or the temporary use of all or Substantially all of
the Project or any production facility Served thereby shall have been taken or
condemned by a competent authority, which taking or condemnation results or is
likely to result in the Borrower being thereby prevented from carrying on its
normal operation of the Project for a period of twelve months; or
-11-
<PAGE>
iii. As a result of changes in the constitution of the United
States of America or of the State of california or of legislative or
administrative action (whether state or federal) or by final decree or judgment
of any court or administrative body (whether state or federal), the Bonds or the
Indenture become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed therein or
unreasonable burdens or excessive liabilities are imposed upon the Borrower, by
reason of the operation of the project; or
iv. There shall have occurred a change in the economic
availability of raw materials, manufactured products, energy sources, operating
supplies or facilities necessary for the operation of the Project or a
technological or other change which in the reasonable judgment of the Borrower
renders the project uneconomic, impractical or infeasible for the purposes for
which originally acquired, improved and equipped.
provided that the Borrower has deposited money with the Trustee in sufficient
amounts to provide Priority Funds or has obtained the consent of the Bank to pay
the redemption price with a draw on the Letter of Credit.
To exercise its option pursuant to this subparagraph (b) the
Borrower shall give notice of its intention to redeem to the Issuer and the
Trustee within twelve months after the occurrence of an event described above.
The notice shall refer to the applicable section of this paragraph, describe and
give the date of such event and direct the redemption of all outstanding Bonds
on a Specified date which shall not be earlier than 30 days following the date
of such notice.
c. Mandatory Redemption. Principal of the Bonds shall be redeemed
without premium from funds deposited in the Bond Fund pursuant to subparagraphs
(a) and (b) of section 501B or pursuant to 502(e) of the indenture to the
extent, in the manner and at the times Provided for therein at 100% of the
principal amount redeemed in whole and not in part, plus accrued interest to
the redemption date. The Bonds shall be redeemed, as provided in Paragraph 2
above, upon a Determination of Taxability.
-12-
<PAGE>
d. Tender for Purchase upon Election of Bondholder. As provided in
Section 401(d) of the Indenture, on or prior to the Conversion Date this Bond
may be tendered for purchase on the demand of the Registered Owner (but only
from the limited sources and in the manner hereinabove described) on any
business day at the purchase price specified in the next paragraph of this Bond
upon delivery to the Trustee at its principal office of a written notice in the
form of such notice appended hereto at the time of issuance of this Bond (a
"Bondholder's Election Notice") which (i) states the principal amount of this
Bond, (ii) states the date on which this Bond shall be purchased, which date
shall not be prior to the seventh day next succeeding the date of the delivery
of such notice to the Trustee (provided, however, that if the seventh day next
succeeding the date of such delivery is not a business day such date may be the
next preceding business day), (iii) irrevocably requests such purchase, and (iv)
contains an undertaking of the registered owner hereof to deliver this Bond to
The First National Bank of Boston, as depositary (the "Depositary"), as provided
in such notice.
By the acceptance of this Bond, the Registered Owner agrees that
if there are funds available for such purpose in the Bond Purchase Fund
established with the Depositary under the Depositary Agreement dated as of
December 1, 1985 among the Trustee, the Borrower and the Depositary, then any
Bond tendered to the Depositary for purchase as Provided in the preceding
Paragraph shall be, on the date specified in the Bondholders Election Notice,
purchased at a purchase price equal to the Principal amount thereof plus accrued
interest, if any, to the date of Purchase; provided, however, that if the
Purchase date for any Bond is an Interest Payment Date, the purchase price
thereof shall be the principal amount thereof and interest on such Bond shall be
paid to the Registered Owner in the normal course.
NOTICE BY THE REGISTERED OWNER OF TENDER OF THIS BOND IS
IRREVOCABLE. BY ACCEPTANCE OF THIS BOND THE REGISTERED OWNER AGREES (1) THAT
UPON RECEIPT BY THE DEPOSITARY OF THE PURCHASE PRICE FROM A PURCHASER HEREOF THE
REGISTERED OWNER SHALL SURRENDER THIS BOND TO THE DEPOSITARY, (2) THE OWNERSHIP
OF THIS BOND SHALL BE TRANSFERRED TO THE PURCHASER WHETHER OR NOT SO SURRENDERED
TO THE DEPOSITARY, (3) THEREAFTER THIS BOND SHALL NOT BE CONSIDERED AN
OUTSTANDING BOND UNDER THE INDENTURE AND (4) THE REGISTERED OWNER SHALL BE
ENTITLED ON AND AFTER THE PURCHASE DATE ONLY TO RECEIVE PAYMENT FROM THE
PURCHASE PRICE SO DEPOSITED WITH THE DEPOSITARY, WITHOUT FURTHER ACCRUAL OF
INTEREST.
-13-
<PAGE>
e. Tender for Redemption or Purchase upon Expiration of Letter of
Credit or Occurrence of Conversion Date. As Provided in Section 401(e) of the
Indenture, this Bond shall be redeemed by the Issuer or Purchased in accordance
with the terms of the Depositary Agreement at a price equal to the principal
amount thereof plus accrued interest to the redemption date seven days prior to
the date of expiration of the Letter of Credit and on the Conversion Date. In
the event such redemption is in connection with the occurrence of the conversion
Date no redemption shall take place with respect to Bonds Purchased by the
Borrower's designee in accordance with the Indenture.
By acceptance of this Bond, the Registered owner agrees that any
Bonds called for redemption in connection with the occurrence of the Conversion
Date Pursuant to Section 401(e) of the Indenture may be purchased in lieu of
redemption, by the Borrower's designee, which may not be the Borrower or a
subsidiary or affiliate of the Borrower at a purchase price for each Bond equal
to the Principal amount thereof plus interest, if any, thereon to the date of
payment. The Purchase price will be paid from moneys deposited by the purchaser
into an account designated by the Trustee.
f. Notice of Redemption; Selection of Bonds to be Redeemed. Any
redemption either as a whole or in part, shall be made upon notice given by mail
at least ten days prior to the date fixed for redemption to the Registered
Owners of Bonds to be redeemed; provided, however, that failure duly to give
such notice by mail to any Registered Owner, or any defect therein, shall not
affect the validity of the Proceedings for the redemption of any of the other
Bonds. On the date designated for redemption, notice having been given as
provided in the Indenture, the Bonds or portions thereof so called for
redemption shall become and be due and payable at the redemption price Provided
for redemption of such Bonds or such portions thereof on such date, and, if
moneys for payment of the redemption price and the accrued interest shall be
held by the Trustee or any paying agent, all as provided in the Indenture,
interest on such Bonds or such portions thereof so Called for redemption shall
cease to accrue, such Bonds or such portions thereof so called for redemption
shall cease to be entitled to any benefit or security for redemption under the
Indenture, and the owners thereof shall have no rights in respect of such Bonds
or such Portions thereof so called for redemption except to receive payment of
the redemption price thereof and the accrued interest so held by the Trustee or
by any paying agent. If a portion of this Bond shall be called for redemption, a
new registered Bond without coupons in
-14-
<PAGE>
principal amount equal to the unredeemed portion hereof will be issued to the
registered owner upon the surrender hereof.
If less than all of the Bonds shall be called for redemption
pursuant to the foregoing subparagraphs (a) or (c), the Particular Bonds or
portions of Bonds to be redeemed shall be selected by the Trustee in the manner
provided in Section 403 of the Indenture. All payments upon partial redemption
of the Bonds shall be of amounts of not less than $50,000 during the Adjustable
Rate Period and $5,000 during the Fixed Rate Period. Notice of any redemption
shall be given to the extent, and in the manner, required by the Indenture. That
portion of this Bond called for redemption shall cease to bear interest on the
specified redemption date provided sufficient Priority Funds (as defined in the
indenture) to redeem such portion and to pay accrued interest thereon to the
redemption date are on deposit with the Trustee at that time. Thereafter such
portion shall cease to be outstanding under the Indenture.
6. Additional Provisions. The Registered Owner shall have no right to
---------------------
enforce the provisions of the Indenture or to institute or appear in Proceedings
with respect to the Indenture or its enforcement except as provided in the
indenture. In certain events as provided in the Indenture, the principal of all
the Bonds then outstanding under the Indenture may become or be declared due and
payable before their stated maturity, together with interest accrued thereon.
Modifications or alterations of the Indenture, or of any supplements thereto,
may be made only as Provided by the indenture.
The Bonds shall not constitute the personal obligation, either jointly
or severally, of any director, officer, employee or agent of the Issuer.
-15-
<PAGE>
This Bond shall not be valid or entitled to any security or benefit
under the Indenture until the certificate of authentication hereon shall have
been signed by the Trustee.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed,
and its corporate seal to be hereunto affixed by the _________________________
of __________________________.
(Seal) THE REDEVELOPMENT AGENCY OF THE
CITY OF SAN MARCOS
Attest:
By _____________________________ By ____________________________
-16-
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the aforementioned Indenture.
The First National Bank of Boston,
as Trustee
By ________________________________
Authorized Officer
-17-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, _________________________________ , the undersigned,
hereby sells, assigns, and transfers unto _________________________
Please insert Social Security or other identifying number of assignee
________________________________________________________________________________
________________________________________________________________________________
(please print or typewrite name and address including zip code of transferee)
________________________________________________________________________________
the within Bond and all rights thereunder and hereby irrevocably constitutes and
appoints
________________________________________________________________________________
attorney to transfer the within Bond on the books kept for registration thereof,
with full power of substitution in the premises.
Dated: _______________________________
____________________________________________________________
NOTICE: The signature to this assignment must correspond
with the name as it appears upon the face of the within Bond
in every particular, without alteration or enlargement or
any change whatever
-18-
<PAGE>
EXHIBIT 401
-----------
FORM OF BONDHOLDER'S ELECTION NOTICE
Date ___________________________________________________________________________
To: The First National Bank of Boston, as Trustee under the Indenture of Trust
and Agreement dated as of December 1, 1985 (the "Indenture") among The
Redevelopment Agency of the City of San Marcos, San Marcos Retirement
Village, The First National Bank of Boston, as Trustee and Security Pacific
National Bank
Attention: Corporate Trust Division
Gentlemen:
Pursuant to the provisions of the Indenture, the undersigned hereby
irrevocably request(s) the purchase of all or a portion of the Bond described
below.
1. The Bond is one of the The Redevelopment Agency of the City of San
Marcos Adjustable/Fixed Rate Multifamily Housing Bonds (San Marcos
Retirement Village Project), numbered R__, the Principal amount of
which is $______________; and if only a portion of the Bond is
requested to be purchased, the Principal amount of such portion is
$__________ (which must be an integral multiple of $100,000).
2. The date on which the Bond shall be Purchased (a day other than a
Saturday, Sunday or other day on which banks are authorized or
required to be closed in the City of Boston or the City of San Diego,
but not prior to the seventh calendar day immediately following the
date of delivery of this Notice) shall be ____________.
3. The name of the registered owner is _______________________________
and the address of such owner is __________________________________
__________________________________________________________________.
-19-
<PAGE>
4. The person to whom or to whose order the proceeds of the purchase of
the Bond are to be paid, and the address of such payee is
__________________________________________________.
I (we) hereby undertake to deliver such Bond to the Depositary at 100
Federal Street, Boston, Massachusetts 02110 no later than 10:00 A.M., Boston
time, on the business day set forth in paragraph 2 above.
Name and signature of registered owner or registered owner's
duly authorized attorney-in-fact:
Name Signatures
---- ----------
-20-
<PAGE>
EXHIBIT 501
-----------
COST OF ISSUANCE
DISBURSEMENTS
----------------
<TABLE>
<S> <C>
Letter Of Credit Fee $102,845
Bond Counsel 37,000
Trustee Fee 8,200
Placement Fee 101,250
Annual Fee 16,875
Bank's Attorney 45,000
Borrower's Attorney 40,000
Printing and rating 15,000
Trustee Counsel Fee 5,250
Application & Filing (City of San Marcos) 1,500
Trustee Out-Of-Pocket 2,750
--------
TOTAL $375,670
</TABLE>
<PAGE>
EXHIBIT 601
-----------
THE PROJECT
The Project includes the construction in the City of San Marcos,
California, of a two and three-story wood frame building containing
approximately 170,000 square feet or floor space and will be approximately
a 212-unit congregate rental facility for the elderly. Common areas will
include a central kitchen and dining room with seating capacity for
approximately 200 individuals. Activity areas and lounge space will be
provided, as well as a beauty and barber shop, administrative offices,
laundry, public restrooms and open areas for recreation Approximately 4
elevators will be located throughout the facility. The grounds will be
landscaped. Approximately 120 parking spaces will be provided for residents,
guests, and employees.
The 212 units include approximately 38 studio units, approximately 140 one-
bedroom units, and approximately 34 two-bedroom units. An emergency call system
will connect each apartment unit to the central reception area. The Project will
include a full service dietary program, housekeeping, security services and
emergency call.
<PAGE>
EXHIBIT 904A
------------
BORROWER'S CERTIFICATE OF PROJECT COSTS
---------------------------------------
Each of the undersigned, as members of the Executive committee of San
Marcos Retirement Village, a California general partnership (the "Borrower"), DO
HEREBY CERTIFY to The Redevelopment Agency of the City of San Marcos (the
"Issuer")
1. I am a member of the Executive Committee of the Borrower, which is the
owner of a residential congregate care housing project known as "San Marcos
Retirement Village" (the "Project"), and am authorized to execute and deliver
this certificate on behalf of the Borrower. The Borrower has applied to the
Issuer for a loan (the "Loan") to finance a portion of the cost of the Project.
2. The total cost of the Project is not less than $ . The total cost
to be financed by the Loan and Investment earnings on the Loan is $ ,
which is the total of the costs in the categories and amounts set forth in
schedules A, B and C hereto.
3. The costs set forth in Schedules A, B and C are
reasonable estimates of the cost of the Project, and such estimates will be
reasonable upon issuance of the governmental obligations issued to finance the
Project (the "Bonds").
4. Except as set forth on Schedules B and C hereto:
(a) All of the costs of the Project are used to provide "residential
rental property" as provided in Section 103(b)(4)(A) of the Internal Revenue
Code of 1954, as amended (the "Code") and the Federal Income Tax Regulations
(the "Regulations") promulgated thereunder, and are either:
(i) amounts which are chargeable to capital account to increase
the federal tax bases of the land and depreciable property which constitute the
Project (or would be so chargeable with a proper election by the Borrower or but
for a proper election by the Borrower to deduct such amounts), or
(ii) amounts which represent the costs of securing the loan, and
which may be deducted for federal income tax purposes ratably over the life of
the Loan or may be chargeable to the Project capital account; and
<PAGE>
(b) With respect to all the land and depreciable property whose costs
are listed on Schedule A:
(i) improvements on the land consist of buildings or structures
each containing one or more similarly constructed units or one or more proximate
buildings or structures which have similarly constructed units (including all
such buildings that are owned for federal tax purposes by the same person and
financed pursuant to a common plan),
(ii) all of the aggregate number of units in the buildings
described in 4(b)(i) above are used other than on a transient basis, are
available to members of the general public, and are complete facilities for
living, sleeping, eating, cooking and sanitation,
(iii) all of the units in the buildings described in 4(b)(i)
above will be rented or available for rental on a continuous bases during the
longer of the remaining term of the Bonds or the qualified project period as
defined in Section 103(b)(12)(B) of the Code,
(iv) land and other facilities that are functionally related and
subordinate to the facilities described in this section 4(b) are of a character
and size commensurate with the number and size of the living units, and
(v) in the event one unit in a building is occupied by the
owner thereof, such building must contain at least 5 units.
For purposes of the above, buildings are proximate if they are located on a
single tract of land or any parcel or parcels of land which are contiguous
except for the interposition of a road, street, stream or similar property. For
purposes of the above, the qualified project period shall be a period beginning
on the first day on which at least 10% of the aggregate number of units in
buildings described in 4(b)(i) above are first occupied (or, if later, the date
of issuance of the Bonds) and ending on the later of the date:
(a) which is 10 years after the date on which at least 50% of
aggregate number of units are first occupied,
(b) which is that number of days after which any of the units are
first occupied equal to 50% of the total number of days in the term of those
Bonds with the longest maturity, or
<PAGE>
guidelines established by the Internal Revenue Service set forth in Rev. Proc.
62-21, 1962-2 C.B.418.
IN WITNESS WHEREOF, I have signed this Certificate on December 31, 1985,
and I declare under penalty of perjury that the foregoing statements are true to
the best of my knowledge after investigation.
SAN MARCOS RETIREMENT VILLAGE
By ____________________________________
Bruce Schoen
By ____________________________________
P.Garcia Ovies
<PAGE>
Schedule A
(Qualifying Costs)
(All qualifying costs must be costs paid or incurred
after the inducement resolution)
1. Land cost
Acquisition $______________
Site improvements $______________
2. Building costs
Construction $______________
Acquisition $______________
Remodeling $______________
Moving $______________
3. Machinery and equipment $______________
4. Personal property installed in project $______________
5. Interest during construction on
qualifying costs $______________
6. Ongoing letter of credit fee during
construction attributable to
qualifying costs $______________
7. Title and guaranty expenses $______________
8. Architect's fees $______________
9. Financing fees
(excluding bond issuance costs) $______________
10. Legal and accounting fees
(excluding bond issuance costs) $______________
11. Inspection fees $______________
12. Other costs (specify) $______________
Project Mgmt./Construction Mgmt. $______________
Pre-opening Marketing $______________
<PAGE>
Schedule B
(Non-qualifying costs)
1. Any expenditures paid or incurred prior
to issuer's inducement resolution for
the bond or other similar official
action (including architect's fees,
costs of plans and specifications and
legal and financing charges) $______________
2. Post-construction interest $______________
3. Post-construction premiums and
letter of credit fees $______________
4. Real estate taxes after completion of
construction $______________
5. Management fees $______________
6. Developer's profit $______________
7. Interest during construction on non-
qualifying costs $______________
8. Ongoing letter of credit fees during
construction attributable to non-
qualifying costs $______________
9. Other costs (please specify) $______________
<PAGE>
Schedule C
(Neutral costs)
1. Fees
Bond counsel $______________
Company counsel $______________
Other counsel $______________
Application and filing $______________
Remarketing $______________
Financial Consulting $______________
Trustee Fee $______________
2. Other costs in connection with the
bonds (please specify) $______________
3. Interest Reserve $______________
4. Insurance premiums paid at closing or
paid during construction period $______________
5. Initial letter of credit fee $______________
6. Placement Fee $______________
<PAGE>
EXHIBIT 904B
MONITORING AGREEMENT
This MONITORING AGREEMENT (sometimes herein this "Agreement"), is made as
of the ______ day of ________________ , 19___ by and among
___________________________ (the "Monitoring Agent"), a
_________________________________ firm whose principal offices are located at
______________________________________________________________________________
SAN MARCOS RETIREMENT VILLAGE, a California partnership (the "Borrower") and THE
FIRST NATIONAL BANK OF BOSTON (the Trustee"), the trustee under an Indenture of
Trust and Agreement (the "Indenture") dated as of December 1, 1985, among The
Redevelopment Agency of the City of San Marcos (the "Issuer"), the Borrower,
Security Pacific National Bank and the Trustee in connection with a project
known as San Marcos Retirement Village project (the "Project").
WHEREAS, the Issuer has issued $13,500,000 of its Adjustable/Fixed Rate
Multifamily Housing Bonds (San Marcos Retirement Village Project) (the "Bonds"),
the proceeds of which have been or will be loaned by the Issuer to the Borrower
(the "Loan"), pursuant to the Indenture, the proceeds of the Loan to be used by
the Borrower to finance the construction, acquisition and equipping of the
Project; and
WHEREAS, in order to preserve the tax-exempt status of the bonds under
Section 103 of the Internal Revenue Code of 1954, as amended, and rulings and
regulations promulgated thereunder ("Section 103"), the Borrower and the Issuer
have entered into a certain Land Use Restriction Agreement dated as of December
1, 1985 (the "Land Use Restriction Agreement"), whereby the Borrower has agreed
that the Project shall be operated in a manner so as to comply with the
requirements of Section 103; and
WHEREAS, to assure compliance with the terms and conditions of the Land Use
Restriction Agreement and with the requirements of Section 103, the Trustee
desires to employ a monitoring agent to monitor and to enforce the terms and
conditions of the Land Use Restriction Agreement and to assist the Trustee in
performing its duties thereunder; and
WHEREAS, the Monitoring Agent is engaged in the business of originating and
servicing mortgage loans financed by the issuance of tax-exempt bonds and notes
and as such is capable of undertaking, on behalf of the Trustee, to monitor and
to enforce the
-1-
<PAGE>
terms and conditions of the Land Use Restriction Agreement so as to assure
compliance with Section 103 requirements.
NOW THEREFORE, the Trustee and the Monitoring Agent agree as follows:
I. DEFINITIONS
-----------
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Land Use Restriction Agreement unless the context clearly indicates
otherwise.
II. POWERS AND DUTIES
-----------------
A. Lower-Income Requirement. Monitoring Agent shall, prior to the
------------------------
beginning of the Qualified Project Period, undertake to determine through review
of the Income Certifications, the form of which is attached to the Land Use
Restriction Agreement, from each prospective tenant and other reasonable means
that the Lower-Income Requirement is satisfied during the Qualified Project
Period and that all requirements of Paragraph 1 of the Land Use Restriction
Agreement are continually satisfied for the periods required therein.
Monitoring Agent shall receive from the Borrower an Income Certification
from each prospective tenant who is to be the initial occupant of a Lower-Income
Unit within ten (10) days after entering into a lease with such tenant and at
least ten (10) days prior to said tenant's occupancy of the Lower-Income Unit.
B. Monthly and Annual Reviews. Monitoring Agent shall undertake a
--------------------------
periodic review of Project operations through review of quarterly and annual
reports and Income Certifications and annual certificates of the Borrower to
determine that the Project is being operated in compliance with the requirements
of the Land Use Restriction Agreement. Periodic review by the Monitoring Agent
shall include the following procedures:
1. Monthly Review
--------------
a. Monitoring Agent shall receive from the Borrower Within ten (10)
days after the end of each month, Income Certifications for each tenant who
commenced occupancy of a Lower-Income Unit during the preceding month and shall
review the Income Certifications for compliance with low or moderate income
standards (Note: Individuals who are qualifying individuals upon initial
occupancy continue to be qualifying individuals even though they subsequently
cease to be of low or moderate income).
-2-
<PAGE>
b. Monitoring Agent shall review Income Certifications and make a
quarterly review of the books of the managing agent of the Project to determine
that Lower-Income Units have not been either subleased or subsequently leased to
other than qualifying individuals, and not occupied for a temporary period
exceeding thirty-one (31) days by other than a qualifying individual.
2. Annual Review.
-------------
a. Monitoring Agent shall receive from the Borrower within twenty
(20) days after the anniversary of the beginning of the Qualified Project Period
a certification by the Borrower supporting reports:
(i) Indicating the number and percent of units in the Project that
were Lower-Income Units at all times during the year preceding the date of such
certification.
(ii) Certifying that the rental requirements set forth in Paragraph 5
of the Land Use Restriction Agreement has been met from the beginning of the
Qualified Project Period to date.
(iii) Certifying that any of the Lower-Income Units which were vacant
at any time during the preceding year were not at any time occupied by other
than a qualifying individual for a period exceeding thirty-one (31) days.
(iv) Certifying that all things necessary and all actions required to
assure compliance with the obligations of the Borrower under the Land Use
Restriction Agreement, and to assure management and operation of the Project in
accordance with the requirements under Section 103, have been done, do exist and
are continuing.
(v) Any non-compliance with the requirements under the Land Use
Restriction Agreement shall, upon notice or discovery and within a period not to
exceed sixty (60) days, be immediately cured, so that the Project is in full
compliance with these requirements.
b. Monitoring Agent shall within forty-five (45) days following the
anniversary of the beginning of the Qualified Project Period submit a written
report to the Issuer and the Trustee regarding the prior year s operation of the
Project, which shall include a certification by the Monitoring Agent that to the
best of the Monitoring Agent's knowledge and belief, upon reasonable
investigation, the Project has been operated in compliance with the terms and
conditions of the Land Use Restriction Agreement.
-3-
<PAGE>
C. Notice of Non-Compliance. Monitoring Agent shall act on behalf of
------------------------
the Issuer and the Trustee to assure compliance by the Borrower with the terms
and conditions of the Land Use Restriction Agreement, and where the Borrower
fails to comply with the terms and conditions of the Land Use Restriction
Agreement, to notify the Borrower, the Issuer and the Trustee of such non-
compliance within ten (10) days of notice or discovery of much non-compliance.
D. Notice of Certain Facts. Monitoring Agent shall, upon notice from the
-----------------------
Borrower or upon discovery otherwise of any of the following, give immediately
(within fifteen (15) days) notice of such facts to the Issuer and the Trustee,
and where appropriate the Borrower:
1. Involuntary loss of the Project by the Borrower including losses
resulting from fire, requisition, foreclosure, transfer of title, deed in
lieu of foreclosure.
2. Planned conversion of the Project to a cooperative or a
condominium.
3. Any non-compliance with the requirements under the Land Use
Restriction Agreement.
E. Notice of Cure. Monitoring Agent, upon notice or discovery of any
--------------
non-compliance with the Land Use Restriction Agreement, shall give written
notice by registered or certified mail of said non-compliance to the Borrower,
the Issuer, and the Trustee immediately within fifteen (15) days) upon such
notice or discovery and undertake at the direction of the Issuer, within a
reasonable period (not more than sixty (60) days), to effect a cure of any non-
compliance.
F. Agency. Monitoring Agent shall carry out on behalf of the Trustee all
------
of the actions specified in subparagraphs A through E above as agent for the
Trustee, and shall have no power or authority (expressed or implied) beyond the
express power and authority set out herein.
III. LIMITATIONS
-----------
Monitoring Agent has no power or authority, express, implied or otherwise,
other than those expressly granted above. The Issuer shall have no liability
for any costs, expenses or damages Incurred by or against Monitoring Agent
except to the extent expressly provided in the Indenture.
-4-
<PAGE>
IV. TERMINATION
-----------
A. This Agreement may be terminated for cause by the Trustee upon written
notice by it being mailed or delivered to the Monitoring Agent's address last
known to the Trustee or upon oral notice by the Trustee, followed by such
written notice, or by Monitoring Agent upon actual written notice to the
Trustee.
B. Termination of this Agreement in accordance with subsection A above
shall in no way affect the parties' rights and liabilities under subparagraph D
hereof.
C. Any attempt on the part of the Monitoring Agent to assign or otherwise
transfer any or all of its duties under this Agreement shall result in the
termination of this Agreement and all power and authority of the Monitoring
Agent, expressed herein or otherwise implied, shall expire immediately upon such
attempted assignment or transfer.
D. The Trustee, at its option, shall have the right to cancel this
Agreement, without cause or reason, by giving notice to Monitoring Agent of not
less than twenty (20) days. In the event of such cancellation, all rights and
duties of Monitoring Agent and its rights to further compensation hereunder
shall cease with respect to this Agreement, and Monitoring Agent shall transfer
and deliver to or on the order of Trustee all information in its possession
relating to the performances by the Borrower of its obligations under the Land
Use Restriction Agreement which are in the possession of the Monitoring Agent or
under its custody or control.
V. CONFIDENTIALITY
---------------
Monitoring Agent recognizes and agrees that any and all information
regarding non-compliance with Section 103 and the Land Use Restriction Agreement
shall be confidential as between the Monitoring Agent, the Issuer, the Borrower
and the Trustee, and that the Monitoring Agent shall not otherwise disclose any
fact or information regarding said non-compliance to any person, group or agency
without the prior written consent of the Trustee and the Issuer.
VI. COMPENSATION
------------
A. As full compliance for performing the duties herein provided and the
monitoring procedures performed by the Monitoring Agent, the Monitoring Agent
shall be entitled to receive an initial fee of $____________ and a quarterly fee
of $____________ to be increased annually by the percentage increase in
applicable median income. The Monitoring Agent shall be required to pay all
-5-
<PAGE>
expenses incurred by it in connection with its monitoring under this Agreement,
but will be reimbursed for any expenses and attorney's fees incurred by it in
connection with the following:
(i) Expenses and attorney's fees resulting enforcement upon the
direction of the Trustee or the Issuer any provision of the Land Use Restriction
Agreement.
(ii) Extraordinary expenses incurred in connection with the
investigation of non-compliance by the Borrower with the Land Use Restriction
Agreement outside of the scope of the review procedure described hereunder.
VII. AMENDMENT
---------
If, as a result of an amendment to the Land Use Restriction Agreement, the
duties and procedures set out herein with respect to review for compliance with
the Land Use Restriction Agreement must be amended to assure compliance with the
amended Land Use Restriction Agreement and the requirements of Section 103 or
any successor provision, then this Agreement shall be subject to amendment with
respect to the duties and compensation of the Monitoring Agent.
VIII. TERM OF AGREEMENT
-----------------
Unless sooner terminated or canceled as herein provided or by mutual
agreement, this Agreement shall continue in full force and effect during the
period the Land Use Restriction Agreement is in effect.
IX. CAPTIONS
--------
The captions of the paragraphs of this Agreement are inserted only as a
matter of convenience and for reference only and they in no way define, limit or
describe the scope of any paragraph of this Agreement or the intent of any
provision hereof.
X. SEVERABILITY
------------
If any provision of this Agreement shall be held or deemed to be or shall,
in fact, be illegal, inoperative or unenforceable, the same shall not affect any
other provision or provisions herein contained or render the same invalid,
inoperative or Unenforceable to any extent whatsoever.
-6-
<PAGE>
XI. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with the
applicable laws of the State of California, except to the extent that the laws
of the United States may prevail.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives.
By ___________________________________
Title _______________________________
SAN MARCOS RETIREMENT
By Brim and Associates, Inc.
By _____________________________
Name:
Title:
By University Financial
Corporation
By _____________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By _____________________________________
Title __________________________________
-7-
<PAGE>
EXHIBIT 906A
------------
INCOME CERTIFICATION
--------------------
The undersigned hereby (certify) (certifies) that:
1. This Income Certification is being delivered in connection with the
undersigned's application for occupancy of Apartment #_____ in the San Marcos
Retirement Village, in the city of San Marcos, California.
2. List all the occupants of the apartment, the relationship (if any) of
the various occupants, their ages, and indicate whether they are students (for
this purpose, a student is any individual who has been, or will be, a full-time
student at an educational institution during five months of the year in which
this application is submitted, other than correspondence school, with regular
facilities and students).
<TABLE>
<CAPTION>
Student
Occupant Relationship Age (Yes or No)
- ---------- ------------ --- -----------
<S> <C> <C> <C>
(a) _________________ _______________ ___ ___________
(b) _________________ _______________ ___ ___________
(c) _________________ _______________ ___ ___________
(d) _________________ _______________ ___ ___________
(e) _________________ _______________ ___ ___________
</TABLE>
3. Are any of the students listed in 2 above eligible to file a joint
return for Federal income tax purposes?
Yes No
4. The total anticipated income for each person listed in 2 above during
the 12 month period commencing with the date occupancy will begin including:
full amount, before any payroll deductions of wages, salaries,
overtime, commissions, fees, tips and bonuses; net income from operation of
a business or profession; interest and dividends and other net income from
real or personal property; periodic payments from social security,
annuities, insurance policies, retirement funds, pensions, disability or
death benefits and other similar types of periodic payments; payments in
lieu of earnings, such as
-1-
<PAGE>
unemployment and disability compensation, workers compensation and
severance pay; public assistance income, where payments include
amounts specifically designated for shelter and utilities; periodic
and determinable allowances such as alimony and child support, and
regular contributions or gifts from persons not residing in the
dwelling; all regular and special pay and allowances of members of the
Armed Forces (whether or not living in the dwelling) who are the head
of the family or spouse; and any earned income tax credit to the
extent it exceeds income tax liability;
but excluding:
casual, sporadic or irregular gifts; amounts which are Specifically
for reimbursement of medical expenses; lump sum additions to family
assets, such as inheritances, insurance payments (including payments
under health and accident insurance and workers' compensation),
capital gains and settlement for personal or property losses; amounts
of educational scholarships paid directly to the student or the
educational institution, and amounts paid by the government to a
veteran for use in meeting the costs of tuition, fees, books and
equipment, but in either case only to the extent used for such
purposes; special pay to a serviceman head of a family who is away
from home and exposed to hostile fire; relocation payments under Title
II of the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970; foster child care payments; the value of coupon
allotments for the purchase of food pursuant to the Food Stamp Act of
1964 which is in excess of the amount actually charged for the
allotments; payments received pursuant to participation in ACTION
volunteer programs; and income from the employment of children
(including foster children) under the age of 18 years;
is as follows:
<TABLE>
<CAPTION>
Anticipated
Occupant Annual Income
-------- -------------
<S> <C> <C>
(a) ____________________________________ __________________________
(b) ____________________________________ __________________________
(c) ____________________________________ __________________________
(d) ____________________________________ __________________________
(e) ____________________________________ __________________________
Total __________________________
</TABLE>
-2-
<PAGE>
5. If any of the occupants listed in 2 above has any Savings, bonds,
equity in real property, or other form of capital investment (but do not include
necessary items such as furniture or automobiles),* enter the following amounts:
a. the total value of all such assets owned by all such persons:
$______________,
b. the amount of income expected to be derived from such assets in
the 12 month period commencing with the occupancy of the unit:
$_______________, and
c. the amount of such income in 5(b) which is included in 4:
$______________.
6. RESIDENT'S STATEMENT: The information on this form is to be used to
determine maximum income for eligibility. I/We have provided, for each person
set forth in Section 2, either (1) an Employer's Verification of current
anticipated annual income, if the occupant is currently employed or (2) copies
of their most recent federal income tax return, if a return was filed for the
most recent year. I/We certify that the statements above are true and complete
to the best of my/our knowledge and belief and are given under the penalty of
perjury.
Date: (a) ______________________________________________
(b) ______________________________________________
(c) ______________________________________________
(d) ______________________________________________
(e) ______________________________________________
______________________
* Include the value over and above actual consideration received, except in a
foreclosure or bankruptcy, of any asset disposed of for less than fair market
value within two years of the date of this Income Certification.
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
7. BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day, personally appeared _________________________, known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _______ day of ______________,
19__.
----------------------------------------
Notary Public in and for San Diego
County, California
My commission expires: _________________
8. OWNER/DEVELOPER'S STATEMENT: The family or individual(s) named in
Section 2 of this Income Certification is eligible under the provisions of the
Land Use Restriction Agreement, to live in a unit in the Project, as defined in
the Indenture of Trust Agreement among its owner, Security Pacific National
Bank, The Redevelopment Agency of the City of San Marcos and The First National
Bank of Boston, as trustee, and, the anticipated annual income from paragraph 4
and, if applicable, from paragraph 5 will be $___________. Thus, the family or
individual(s) constitute(s):
_______ a. Lower-Income Resident;
_______ b. An Eligible Resident other than a Lower-Income
Resident.
- --------------------------------- ---------------------------------
Signature of Owner's Date
Authorized Representative
-3-
<PAGE>
SUBJECT: DEVELOPER INSTRUCTIONS FOR INCOME CERTIFICATION
In order to qualify as tax-exempt under Section 103(b)(4)(A) of the
Internal Revenue Code, 15 percent or more in the case of targeted area projects,
or 20 percent or more in the case of any other project, of the units in each
multi-family residential rental project must be occupied by individuals of low
or moderate income. In addition, state law requires that the balance of the
units in such project be occupied by income-eligible persons. The purpose of the
Income certification is to assist in determining whether the occupants of a
particular unit are of "low or moderate" income for federal tax purposes or
income-eligible for state law purposes.
Part I of the Certificate asks for the Project Name, project Address
et al., and should be filled out by a representative of the Developer.
- -- --
Similarly Part II of the certificate asks for the Apartment Address et al. and
-----
should also be filled out by a representative of the Developer.
Part III, Section I of the Certificate asks the occupants to list
their names, relationship, ages, and whether they are students. Part II, Section
2 of the Certificate asks whether any of the students listed in Part III,
Section l are able to file a joint return for Federal income tax purposes (i.e.,
are they married). Part III, Section 3 of the Certificate asks each occupant to
list his/her anticipated annual income, as defined. Finally, Part III, Section 4
asks the occupants to estimate the value of all "capital investments" (excluding
necessary items"), the estimated amount of income expected to be derived from
these "capital investments" that has already been included in Part III, Section
3 of the Certificate. The occupant is referred to in instructions on the reverse
of the Certificate to assist him/her in filling out the various Sections.
The information provided in Sections 1 through 4 of Part III of the
Certificate should be sufficient to determine whether an individual(s) or the
family constitutes a lower-income resident for Federal income tax purposes, and
whether the individual(s) or the family constitutes an eligible resident for
state law purposes, if applicable.
The Income Tax Regulations provide that the occupants of a unit shall
not be considered "of low or moderate income" if all of the occupants are
students no one of whom is entitled
-1-
<PAGE>
to file a joint return for Federal income tax purposes. Thus, if Section III,
Section 1 of the Certificate indicates that all of the occupants are students,
---
and if Part III, Section 2 of the Certificate indicates that none of the
- --- ----
students are able to file a joint return for Federal income tax purposes, (i.e.,
none of the students are married) the occupants are not "lower-income residents"
even if the occupants have no income. It should be noted, however, that even
though the occupants may not qualify as "lower income" for Federal income tax
purposes, they may, in fact, qualify as "eligible residents" for State purposes.
Assuming the occupants of the units are not all students, none of whom
are entitled to file a joint return for Federal income tax purposes, the next
step in filling out the certificate is to determine the "anticipated annual
income" of the occupants of the unit for the "certification year. The
"certification year" is the twelve-month period of time that begins on the date
the unit is first occupied. Thus, if the certification is completed before the
prospective occupants move in, the occupants should recertify the Certificate on
the date they actually move into the unit so that you may determine whether they
qualify as lower-income occupants.
All payments from all sources received by the Family head (even if
temporarily absent) and each additional member of the Family household, they
main exception being the income from employment of children (including foster
---------- --------
children) under the age of 18 years that are members of the household, should be
included in "anticipated annual income." For example, if a 17-year old son or
daughter has a part- or full-time job that pays $5,000 per year and has income
from bank deposits of $100 per year, only the $100 should be listed. Part III,
Section l of the Certificate indicates the various relationships of the
occupants in a household and their ages.
Once the anticipated annual income in Part III, Section 3 of the
Certificate has been totaled, you should determine whether the occupants have
"capital investment," including capital investments of any children in the
family, of more than $5,000 listed in Part III, Section 4a of the Certificate.
If the "capital investments" exceed $5,000, "anticipated annual income" will be
the sum of the amount totaled in Part III, Section 3 of the Certificate plus the
----
greater of, if any, (a) the actual amount of income in Part III, Section 4b,
- -------
minus the amount of income enumerated in Part III, Section 4c, if any, or (b)
the "imputed amount of income" minus the amount of income enumerated in Part
III, Section 4c, if any. The "imputed amount of income" is the
-2-
<PAGE>
value of the assets listed in Part III, Section 4a of the Income Certification
multiplied by the "current passbook Savings rate" as determined by the United
States Department of Housing and Urban Development. (The "current passbook
savings rate" will vary from time to time and will first be available around
October 1, 1984; if the "current passbook savings rate" is unavailable, you
should multiply the value of the assets by 10%. For example, if the prospective
occupants list assets of $7,000 in Part III, Section 4a of the Income
Certification, and the "current passbook savings rate" is 6%, the "imputed
amount of income is $420.
The "anticipated annual income" of Part III, Section 3 of the
Certificate plus, if the capital investments exceed $5,000, the necessary
adjustments of Part III, Section 4 of the Certificate, as discussed in the
preceding paragraph should be entered in the blank on the third line of the
Owner/Developer Statement portion of the certificate. If this amount does not
exceed 80 percent of the median gross income for the area, the occupants qualify
as a lower-income residents and (a) should be checked in the Owner/Developer
portion of the Certificate. If this amount exceeds 80 percent of the median
gross income of the area, the occupants do not qualify as lower-income
---
residents. In such case, the occupants still may qualify as "eligible residents"
for state law purposes and, if they so qualify (b) should be checked in the
Owner/Developer portion of the Certificate.
The "low or moderate" income requirement must be met for the
"qualified project period." Thus, 20 percent, or 15 percent in the case of a
targeted area, of the occupants at any one time must be of lower income
beginning at the time when 10 percent of the units are first occupied. For
example, if a project in a non-targeted area contains 200 units, the low income
restrictions need not be met until 20 units have been occupied. However, as
---
soon as 20 units have been occupied, 4 Units must actually be occupied by
--------
occupants of "low or moderate" income, or must have been previously occupied by
occupants of "low or moderate" income, i.e., it is not sufficient that 4 units
are reserved for lower income families.
--------
It should be noted that a unit occupied by an individual or family who
at the commencement of such occupancy is of lower income is treated as occupied
by such an individual or family during their occupancy of such an individual of
family during their occupancy of such unit, even though they later cease to be
of lower income. Further, if a tenant has occupied a unit for a length of time
and decides to add a roommate, the "anticipated annual income" of the new tenant
-3-
<PAGE>
when he/she first occupies the unit, and the "anticipated annual income of the
existing tenant when he/she first occupied the unit must be aggregated to
determine whether the unit may continue to be certified as being occupied by
"low or moderate" income individuals. If, however, the occupants of a unit move
into another unit in the project, the second unit will be treated as occupied by
a lower-income occupant only if the occupants qualified as lower income at the
time of the move. Moreover, if a lower-income occupant moves out of a unit, such
unit is treated as occupied by an individual or family of lower income until
reoccupied at which time the character of the unit shall be redetermined.
-4-
<PAGE>
EXHIBIT 906B
------------
COMPLIANCE CERTIFICATE
----------------------
The undersigned, on behalf of San Marcos Retirement Village, a California
partnership (the "Company"), has read and is thoroughly familiar with the
provisions of the various loan documents associated with the issuance by The
Redevelopment Agency of The City of San Marcos (the "Issuer"), of its
$13,500,000 Adjustable/Fixed Rate Multifamily Housing Bonds (San Marcos
Retirement Village Project), which documents include the following: (1) the Land
Use Restriction Agreement dated as of __________ 1986 (the "Agreement") among
the Company, The First National Bank of Boston, a national banking association
(the "Trustee") and the Issuer and (2) the Indenture of Trust and Agreement
between the Issuer, the Company and Security Pacific National Bank, and the
Trustee dated as of December 1, 1985 (the "Indenture").
The undersigned hereby certifies on behalf of the Company that during the
entire calendar quarter immediately preceding the date of this certificate, (i)
the following number of units in the Project were first occupied during such
calendar quarter by Lower-Income Tenants (as such terms are defined in the
Agreement) and (ii) the following number and percentages of dwelling units in
the Project were either occupied by Lower-Income Tenants or were held vacant and
available for such occupancy for all of such period:
<TABLE>
<CAPTION>
Percent of
Total Number Total Units
Number Newly Units Occupied Occupied
Occupied Units or Available or Available
<S> <C> <C> <C>
Lower-Income
Tenants: ______________ ______________ ______________%
All Tenants: ______________ ______________ ______________%
</TABLE>
The Company further certifies that attached hereto is a listing of all
tenants who commenced occupancy or terminated occupancy of a unit in the Project
during the preceding month, identified by name and unit number.
<PAGE>
The undersigned hereby certifies that the representations, warranties and
agreements of the Company contained in the Land Use Restriction Agreement are
and true and correct and have been duly performed by the Company in all
respects, all as of the date of this certificate, and that to the best of the
Company's knowledge the Company is not in default under any of the above
documents, with the exception of the following (if none, please so state):
SAN MARCOS RETIREMENT VILLAGE, a
California partnership
By: __________________________________
Date:_____________________
<PAGE>
Exhibit 10.13
FORM OF LEASE
-------------
New Pond Village Associates
THIS LEASE ("LEASE") is made and entered into as of the ____ day of
__________, 1996, by and between (i) NEW POND VILLAGE ASSOCIATES, a
Massachusetts general partnership ("LESSOR"), and (ii) ATRIA COMMUNITIES, INC.,
a Delaware corporation ("LESSEE").
RECITALS:
- --------
A. Lessor owns the real property and the improvements thereon located in
Walpole, Massachusetts, more particularly described on EXHIBIT A attached hereto
and made a part hereof ("REAL PROPERTY"), and certain tangible personal property
used on, or in connection with, the Real Property (the Real Property and such
personal property are hereinafter collectively referred to as the "LEASED
ASSETS").
B. Lessor desires to lease and ultimately convey the Leased Assets to
Lessee, and Lessee desires to lease and ultimately acquire the Leased Assets
from the Lessor.
AGREEMENT:
- ---------
NOW, THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
1. LEASE OF LEASED ASSETS. For the term, at the rent and otherwise
upon the terms, conditions and provisions hereinafter contained, Lessor hereby
leases unto Lessee, and Lessee hereby leases from Lessor, the Leased Assets.
2. TERM. This Lease shall be for a term of 99 years commencing as of
the date hereof and ending on the ninety-ninth anniversary of the date hereof.
3. RENT. Lessee hereby covenants and agrees to pay to Lessor as rent
for the Leased Assets during the Term hereof an amount equal to the amount
Landlord is required to pay under the indebtedness secured by that certain
Mortgage and Trust Indenture by and between Landlord and First National Bank of
Boston, as Trustee, dated November 1, 1990, Securing Resident Mortgage Bonds
(New Pond village Project) Series A, as amended from time to time ("MORTGAGE"),
insofar as such payments relate to the Leased Assets.
4. DELIVERY AND ACCEPTANCE. Lessee hereby acknowledges that Lessor has
delivered the Leased Assets to Lessee in good operating condition and repair at
the time of delivery. The Leased Assets leased hereby are being leased "AS IS"
and Lessor specifically disclaims any warranties with respect to the Leased
Assets including, but not by way of limitation, all express or implied
warranties of quality, merchantability or fitness for a particular purpose.
<PAGE>
5. QUIET ENJOYMENT. Lessor hereby covenants and agrees to and with
Lessee that if Lessee shall not be in default hereunder, Lessee shall have, at
all times during the Term hereof, the peaceable and quiet enjoyment and
possession of the Leased Assets without any manner of hinderance from Lessor or
any person or persons lawfully claiming the Leased Assets.
6. ALTERATIONS. Lessee shall not make any structural alterations to
any improvements on the Real property, and shall not remove or demolish any
improvements on the Real property, without first obtaining Lessor's written
approval thereto, which consent may only be withheld if such would result in a
default under the terms of the Mortgage. Lessor hereby agrees to seek the
consent of the holder of the Mortgage ("MORTGAGEE") to any such alteration,
removal or demolition upon request of Lessee.
7. INSURANCE
(a) In addition to the rent specified herein, Lessee will, at all
times, at its sole cost and expense, obtain for the benefit of Lessor, wherein
Lessor and the Mortgagee shall be a named insured, property and casualty
insurance in respect of the Leased Assets in an amount and value, and having
such terms, so as to comply with the terms of the Mortgage. Such insurance shall
be contracted with insurance companies authorized and licensed to do business in
the Commonwealth of Massachusetts. The proceeds of such insurance shall be
payable to Lessor and Lessee as their interest may appear.
(b) In addition to the rent specified herein, Lessee will also
carry and maintain, at all times, at its sole cost and expense, public liability
insurance with respect to the Leased Assets, in such reasonable amount as are
required under the terms of the Mortgage. Lessor and the Mortgagee (if required
under the terms of the Mortgage) shall be named a party insured by such policy.
(c) At the request of Lessor, Lessee shall deliver to Lessor a
certificate of insurance by or on behalf of each insurer stating the coverage,
named insurers and limits of each such policy.
(d) If Lessee fails to maintain any of the insurance required to
be maintained by it for the benefit of Lessor, Lessor shall have the right, in
addition to all other rights available to it, but not the obligation, to
purchase such insurance for its own benefit and the same shall be immediately
due and owing as additional rental hereunder by Lessee to Lessor, together with
interest thereon at the rate of 18% per annum.
8. RISK OF LOSS.
(a) All risk of loss or damage to the Leased Assets shall be
borne by Lessee. In the event of loss or damage
-2-
<PAGE>
to the Leased Assets, Lessee shall immediately give written notice thereof to
Lessor and to the insurance company utilized by Lessee to insure the Leased
Assets, and shall furnish such information and execute such documents as may be
required to collect the proceeds of any applicable insurance policy or policies.
(b) If all or any part of the Leased Assets which are personal
property is lost or damaged so that it is economically unfeasible to repair it,
Lessee agrees to immediately pay to Lessor, in cash, an amount equal to the
amount, if any, Lessor is required to pay to the Mortgagee as a result thereof.
Thereupon, this Lease shall terminate with respect to the Leased Assets
involved. Upon such termination, Lessee shall be entitled to the Leased Assets
involved in their then existing condition. Lessor shall deliver to Lessee a bill
of sale with respect to the Leased Assets involved, which bill of sale shall
contain no representations or warranties, express or implied, including any
warranty of quality, merchantability or fitness for a particular purpose.
(c) If all or a portion of the Leased Assets which are personal
property is only partially damaged so that it is economically feasible to repair
it, if required by the Mortgage, Lessee shall, at its sole cost and expense,
repair such Leased Asset so as to comply with the terms of the Mortgage.
(d) If all or a portion of the Real Property is damaged or
destroyed and under the terms of the Mortgage the Real Property need not be
repaired and Lessee elects not to make repair, Lessee shall make whatever
payment is required to be made under the Mortgage as a result thereof to the
extent it relates to the Leased Assets.
(e) If all or any portion of the Real Property is damaged so that
it is economically feasible to repair it, then this Lease shall remain in full
force and effect with respect to the Real Property, and Lessee shall, at its
sole cost and expense, repair the Real Property to the extent required under the
terms of the Mortgage. If Lessee repairs the Real Property pursuant to this
Section 8(e), Lessor shall reimburse Lessee for such repairs to the extent of
the insurance proceeds received by it.
9. TAXES. In addition to the rent specified herein, Lessee agrees to
pay when due, at its sole cost and expense, all taxes and assessments now or
hereafter imposed by any Federal, state or local governmental authority or
agency upon the Leased Assets, upon this Lease or upon the use or operation of
the Leased Assets, regardless of whether assessed to Lessor or Lessee. If it is
not possible to obtain a separate tax assessment with respect to the Leased
Assets, Landlord and Tenant shall equitably determine the taxes attributable to
the Leased Assets and Tenant shall pay such amount to Landlord which shall pay
the
-3-
<PAGE>
tax to the appropriate taxing authority. Upon written demand of Lessor, Lessee
will deliver written receipt evidencing payment of such taxes to Lessor. If
Lessee fails to pay any of said taxes when due, such failure shall be a default
hereunder and Lessor shall have the right, in addition to all other rights and
remedies available to it, to pay such taxes on behalf of Lessee and the same
shall be immediately due and owing as additional rental hereunder by Lessee to
Lessor, together with interest thereon at the rate of 18% per annum.
10. UTILITIES. In addition to the rent provided for herein, Lessee
hereby agrees to pay for all heat, water, sewer service charges, gas,
electricity and other public utilities used in or about the Real Property, and
all such utilities shall be metered to the Real Property in Lessee's name
(unless Lessor determines otherwise and elects to bill Lessee therefor at
Lessor's cost). Lessee has inspected the Real Property with respect to the
availability of all such utilities and is satisfied with the same. Lessee shall
be solely responsible for running any additional utility lines, if necessary, to
the Real Property and shall bear all costs related thereto without reimbursement
from Lessor.
11. NO LIABILITY. Lessor shall not be liable to Lessee for loss of use
of the Leased Assets or interruption of Lessee's business if the Leased Assets
fail to function, shall be out of use for repairs or service, or for any other
causes whatsoever, and any such loss of use shall not relieve Lessee from the
obligation to pay the rental provided for herein at the time specified herein.
12. OPERATION IN CONFORMITY WITH LAWS. Lessee shall use and operate
the Leased Assets in strict conformity with all of the laws, rules, orders,
ordinances and regulations of the United States and all applicable Federal,
state and local agencies and authorities, regarding the use, operation and
possession of the Leased Assets. Lessee hereby agrees to indemnify Lessor for,
and hold Lessor harmless from, any and all liabilities, claims, suits, actions,
damages, demands, penalties, fines and forfeitures which may be asserted against
Lessor or the Leased Assets arising out of, or resulting from, any violation of
any of the aforesaid laws, rules, orders, ordinances and regulations, or out of
Lessee's use or operation of the Leased Assets.
13. ASSIGNMENT OR SUBLETTING. Lessee may assign this Lease or sublet
or rent out the Leased Assets, only with the prior written consent of Lessor,
which consent will not be unreasonably withheld.
14. LIENS. Lessee hereby agrees that it will not place, or permit the
placement of, any liens or encumbrances on the Leased Assets except to the
extent such liens or encumbrances are permitted under the terms of the Mortgage.
-4-
<PAGE>
15. MAINTENANCE. In addition to the rent specified herein, Lessee
agrees, at its sole cost and expense, to at all times keep the Leased Assets in
good operating condition and repair, and keep the Leased Assets in mechanical
condition adequate to comply with all rules and regulations of any applicable
regulatory bodies, the underwriter of the insurance policies carried by Lessee
and the terms of the Mortgage. Lessor, its agents and representatives, shall
have the right at any time to inspect the Leased Assets and any part thereof to
determine its or their condition and to ascertain whether or not Lessee is
complying with the covenants and agreements herein contained relating to the
proper care and maintenance of the Leased Assets.
16. ACQUISITION OF LEASED ASSETS. Lessor hereby agrees to convey to
Lessee, and Lessee hereby agrees to acquire from Lessor, the Leased Assets at
such time as Lessor is legally permitted to convey the Real Property to Lessee
under all applicable zoning laws and ordinances and the Mortgagee has consented
to such conveyance (to the extent such consent is required). In exchange for the
conveyance of the Leased Assets to Lessee, Lessee shall assume all of Lessor's
obligations under the Mortgage and the indebtedness secured thereby. Lessor
hereby agrees to use its best efforts to obtain the requisite zoning and consent
of the Mortgagee to permit the conveyance provided for above.
17. FINANCIAL REPORTING AND TAX CHARACTERIZATION. Lessor and Lessee
intend that this Lease be treated for financial reporting and Federal income tax
purposes as a transfer by Lessor to Lessee of the Leased Assets and the
assumption by Lessee of the indebtedness assumed by the Mortgage and agree that
they will not take any position which is inconsistent with the foregoing.
18. DEFAULT. In the event: (i) Lessee defaults in the performance of
any of the terms, conditions, covenants or agreements herein contained and such
default is not cured within 30 days after the giving of notice by Lessor to
Lessee of such default, (ii) of (a) the entry of a decree or order for relief by
a court having jurisdiction in the premises in respect of Lessee in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, or appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Lessor or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days, or (b) the commencement by Lessee of
a voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or the consent by it to the appointment of, or
taking possession by, a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of
-5-
<PAGE>
Lessee or for any substantial part of its property, or the making by it of any
assignment for the benefit of creditors, or the failure of Lessee generally to
pay its debts as such debts become due, or the taking of corporate action by
Lessee in furtherance of any of the foregoing, or (iii) any execution,
attachment or other writ shall be levied upon the Leased Assets, then, in such
event, all of which acts or events shall be considered as defaults hereunder,
Lessor, in addition to all other rights available to it at law or in equity,
shall have the following remedies:
(a) Lessor may institute a suit to collect any and all sums due
Lessor by virtue of the provisions of this Lease, or for any and all damages
that may accrue by virtue of Lessee's breach of this Lease, or both.
(b) Lessor may sue to restrain by injunction any violation or
threatened violation of the terms, covenants, conditions or provisions of this
Lease.
(c) Lessor may, upon notice to Lessee, terminate this Lease and
obtain possession of the Leased Assets with or without process of law. Lessee
shall be responsible for and pay all costs of Lessor in connection with
obtaining possession of the Leased Assets. Lessee hereby waives any claim for
damages arising out of the taking of the Leased Assets by Lessor in such event.
All remedies of Lessor provided for herein shall be cumulative and shall be in
addition to those remedies provided by law or at equity.
19. NOTICES. All notices and other communications required or
permitted hereunder shall be sufficiently given if in writing and personally
delivered against a written receipt, if delivered to a reputable express
messenger service (such as Federal Express, UPS or DHL Carrier) for overnight
delivered, when transmitted by confirmed telephone facsimile (fax) or sent by
registered, express or certified U.S. mail, postage prepaid, addressed as
follows:
If to Lessor: New Pond Village Associates
c/o Vencor, Inc.
3300 Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
(Fax) 502-596-4075
Attention: General Counsel
If to Lessee: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
(Fax) 502-596-4160
Attention: General Counsel
-6-
<PAGE>
or to such other address as either party hereto shall furnish to the other in
writing. Notices shall be deemed given when personally delivered, when delivered
to an express messenger service, when transmitted by confirmed fax or when
deposited in the U.S. mail in accordance with the foregoing provisions. However,
the time period in which a response to any such notice, demand or request must
be given shall commence to run from the date of personal delivery, the date of
delivery by a reputable messenger service, the date on the confirmation of a
fax, or the date on the return receipt, as applicable.
20. BINDING AGREEMENT. This Lease shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
21. CAPTIONS; SECTION REFERENCES. The captions and section headings
used herein are for convenience only, shall not be deemed part of this Lease and
shall not in any way restrict or modify the context or substance of any
paragraph hereof. All references herein to Sections shall refer to Sections of
this Lease unless the context clearly requires otherwise.
22. ENTIRE AGREEMENT. This Lease contains the entire understanding
between Lessor and Lessee with respect to the Leased Assets, and supersedes all
prior and contemporaneous understandings, both oral and written, between and
among them respecting the subject matter hereof.
23. WAIVER. The failure on the part of either party to insist in any
instance upon the strict observance by the other of any provision of this Lease
shall not be construed as a waiver of that or any other provision of this Lease.
24. APPLICABLE LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts without regard to
its conflict of laws rules.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year first above written.
LESSOR:
NEW POND VILLAGE ASSOCIATES
By: First Healthcare Corporation,
General Partner
By:___________________________
Title:________________________
-7-
<PAGE>
LESSEE:
ATRIA COMMUNITIES, INC.
By:________________________________
Title:_____________________________
-8-
<PAGE>
EXHIBIT A
---------
[Insert Real Property Description]
<PAGE>
Exhibit 10.14
FORM OF
REVOLVING CREDIT
----------------
PROMISSORY NOTE
---------------
$15,000,000.00 JUNE 25, 1996
LOUISVILLE, KENTUCKY
FOR VALUE RECEIVED, ATRIA COMMUNITIES, INC. promises to pay, on or before
the final maturity date stated below, to the order of VENCOR, INC. (the
"Payee"), its successors and assigns, at 3300 Providian Center, Louisville,
Kentucky 40202 or at such other place as the holder hereof may from time to time
designate in writing, the principal sum of $15,000,000.00 or the outstanding
principal amount of loans and advances under this Note not in excess of such
sum, in lawful money of the United States, together with interest on the
outstanding principal balance thereof at the rate described below (from time to
time the "Interest Rate"). If an "Event of Default" (as described below) shall
exist, the rate of interest payable upon the outstanding principal balance of
this Note shall, at the option of Payee increase to a rate (the "Default Rate")
equal to two percent (2%) in excess of the Interest Rate and shall continue at
such rate during the period that such Event of Default shall exist.
1. INTEREST RATE. The principal balance of this Note shall bear interest
at a rate per annum equal to one percent (1%) over the Prime Rate from time to
time in effect. The "Prime Rate" as used herein, on any day, shall mean the
interest rate per annum most recently designated and announced by National City
Bank of Kentucky ("Bank") from time to time as its Prime Rate in effect at its
principal office. The Prime Rate is not necessarily the best or lowest rate
offered by Bank. The interest rate which the principal balance of this Note
bears shall be adjusted from time to time on the same day the Prime Rate is
changed by Bank. All interest upon sums owing under this Note shall be computed
over an assumed year of three hundred sixty (360) days and over the actual
number of days elapsed.
2. PAYMENT OF INTEREST. Interest shall be payable in quarterly
installments, the first of which being due and payable on the first day of the
first of January, April, June or September following the date of the first
disbursement of principal in respect of this Note and subsequent installments
being due and payable on the first day of each calendar quarter (based upon the
months just named) thereafter until this Note is paid in full. This Note may be
prepaid in whole or in part without premium or penalty and, so long as there is
no Event of Default under this Note, advances may be requested against the
undisbursed maximum principal balance of this Note provided, all repayments or
prepayments shall be in the sum of $100,000.00 or multiples thereof.
3. COMMENCEMENT OF ADVANCES; PAYMENT OF PRINCIPAL; APPLICATION OF PAYMENTS.
Maker may obtain advances of the principal balance of this Note upon written
request to Payee commencing upon the date when the initial public offering of
Maker's capital stock is made. All advances requested by 10:00 a.m. prevailing
Louisville, Kentucky time on a business day shall be funded on the same business
day. Any advance requested at a later time shall be made on the next business
day. The principal balance of this Note, if not sooner paid, shall be repaid to
Payee in its entirety one year from the date of the initial public offering of
Maker's capital stock, unless the maturity date of this Note shall be extended
by Payee in its sole discretion. Payments received by Payee in respect of this
Note shall be applied first to expenses incurred by Payee in collecting this
Note, then to accrued delinquency or other charges hereof, then to accrued
interest due on the principal balance of this Note and then to the principal
balance of this Note.
<PAGE>
4. LATE PAYMENT CHARGE. In the event interest on this Note is not paid on
or before the 10th of the month in which it is due, a late charge of 5% of the
amount of such payment so overdue may be charged by the holder thereof.
5. EVENTS OF DEFAULT. Upon the occurrence of any of the events described
below ("Event of Default"), Payee may elect to declare this Note and all other
obligations of Maker to Payee to be in default and require the immediate payment
of the entire unpaid principal balance of this Note and all other such
obligations plus accrued interest and any delinquency or other charges. The
Events of Default are:
1) The failure to pay any installment or payment due in respect of
this Note when due; or
2) A default by Payee under the terms of any loan or other financing
arrangement to which Payee is a party pursuant to the terms of which Payee is
directly, immediately or contingently liable for the payment of any sum in
excess of $5,000,000.00; or
3) The dissolution or winding-up of the business of Maker; or
4) The failure of Payee at any time prior to the maturity date of this
Note or any extension thereof, to maintain a net worth (based upon generally
accepted accounting principles consistently applied) of at least $50,000,000.00.
5) The failure to pay, comply with or perform any other obligation to
Payee under other notes or agreements with Payee; or
6) The filing of any future petition by or against Maker under any
bankruptcy, receivership, insolvency or similar laws relating to relief for
debtors.
Maker and all persons now or hereafter liable, whether primarily or
secondarily, for the whole or any part of the indebtedness evidenced by this
Note jointly and severally:
(a) agree to remain and continue bound for the payment of the
principal of and interest on this Note notwithstanding any extension or
extensions of the time of the payment of said principal or interest, or any
change or changes in the amount or amounts to be paid under and by virtue of the
obligation to pay provided for in this Note, or any change or changes by way of
release or surrender of any collateral, real or personal, held as security for
the payment of this Note, and waive all and every kind of notice of such
extension or extensions, change or changes, and agree that same may be made
without the joinder of any such persons;
(b) waive presentment, notice of dishonor, protest, notice of protest
and diligence in collection, and all exemptions, whether homestead or otherwise,
to which they or any of them may now or hereafter be entitled under the laws of
Kentucky or of any other state;
(c) agree, upon default, to pay all costs of collecting, securing or
attempting to collect, or secure this Note, including a reasonable attorney's
fee, whether same be collected or secured by suit or otherwise, providing the
collection of such costs and fees are permitted by applicable law.
6. SAVINGS CLAUSE. None of the terms and provisions contained in this
Note, or any other document or instrument now or hereafter securing the
indebtedness evidenced hereby or
-2-
<PAGE>
related hereto shall ever be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate in
excess of the maximum interest rate permitted to be charged by the laws of the
Commonwealth of Kentucky. Neither the Maker nor any other party now or
hereafter becoming liable for the payment of this Note shall be liable for the
payment of interest at a rate in excess of the maximum interest rate that may be
lawfully charged under the laws of the Commonwealth of Kentucky, and the
provisions of this paragraph shall control over all other provisions hereof and
of any other instrument executed in connection herewith or executed to secure
the indebtedness evidenced hereby which may be in apparent conflict with this
paragraph. In the event the holder shall collect monies which are deemed to
constitute payments in the nature of interest which would otherwise increase the
effective interest rate on this Note to a rate in excess of that permitted to be
charged by the laws of the Commonwealth of Kentucky, all such sums deemed to
constitute interest in excess of the maximum rate shall be refunded to the
undersigned in cash and the undersigned hereby agrees to accept such refund.
7. CERTAIN WAIVERS. Payee shall have the right, without notice, to deal
in any way and at any time with Maker, and to grant Maker an extension of time
for payment of this Note or any other indulgence or forbearance whatsoever, and
may release any collateral for the payment of this Note and/or modify the terms
of any agreement securing or relating hereto, and may release Maker, any
guarantor or accommodation party from liability for payment of this Note, in
every instance without the consent of Maker or any guarantor or accommodation
party, and without in any way affecting the liability of Maker hereunder or of
any guarantor or accommodation party, and without waiving any rights which Payee
may have under this Note, any agreements securing or relating hereto, or by law.
8. MISCELLANEOUS. If any provision, or portion thereof, of this Note, or
the application thereof to any persons or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Note, or the application of such
provision, or portion thereof, to any other person or circumstances shall not be
affected thereby, and each provision of this Note shall be valid and enforceable
to the fullest extent permitted by law. In the event of any inconsistency
between the terms hereof and those of any instrument securing payment hereof,
the holder hereof shall have the sole option to elect which os such provisions
shall govern.
9. GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
effective as of the date first above written.
ATRIA COMMUNITIES, INC.
BY:_____________________
ITS:____________________
("Maker")
-3-
<PAGE>
Exhibit 21
Subsidiaries of Atria Communities, Inc., a Delaware corporation
---------------------------------------------------------------
Tucson Retirement Center Limited Partnership, an Oregon limited partnership
San Marcos Retirement Village, a California general partnership
Castle Gardens Retirement Center Limited Partnership, an Oregon limited
partnership
Evergreen Woods, Ltd., a Florida limited partnership
Woodhaven Partners, Ltd., a Florida limited partnership
Lantana Partners, Ltd., a Florida limited partnership
Hillcrest Retirement Center, Ltd., an Oregon limited partnership
Topeka Retirement Center, Ltd. Limited Partnership, a Missouri limited
partnership
Sandy Retirement Center Limited Partnership, an Oregon limited partnership
Twenty-Nine Hundred Associates, Ltd., a Florida limited partnership
Hillhaven Properties, Ltd., an Oregon corporation
Fairview Living Centers, Inc., an Oregon corporation
Twenty-Nine Hundred Corporation, a Florida corporation
Phillippe Enterprises, Inc., an Indiana corporation
<PAGE>
EXHIBIT 23.2
The following consent is in the form that will be signed upon the completion
of the reorganization described in Note 1 to the combined financial statements
of the Company.
/s/ Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" and
"Selected Combined Financial Data" and to the use of our report dated June 14,
1996, except for Notes 1 and 7 as to which the date is , 1996, in the
Registration Statement (Form S-1) and related Prospectus of Atria Communities,
Inc. for the registration of 5,000,000 shares of its Common Stock.
Louisville, Kentucky
June 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Atria's
combined financial statements for the quarter ended March 31, 1996 and for the
year ended December 31, 1995 and is qualified in its entirety by reference to
such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 3,954 2,819
<SECURITIES> 0 0
<RECEIVABLES> 698 650
<ALLOWANCES> (93) (89)
<INVENTORY> 122 123
<CURRENT-ASSETS> 4,860 3,746
<PP&E> 154,746 154,237
<DEPRECIATION> (24,166) (23,027)
<TOTAL-ASSETS> 141,577 140,917
<CURRENT-LIABILITIES> 5,446 4,522
<BONDS> 104,640 104,506
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 27,984 28,447
<TOTAL-LIABILITY-AND-EQUITY> 141,577 140,917
<SALES> 0 0
<TOTAL-REVENUES> 12,611 47,976
<CGS> 0 0
<TOTAL-COSTS> 6,004 22,698
<OTHER-EXPENSES> 2,427 9,386
<LOSS-PROVISION> 7 79
<INTEREST-EXPENSE> 982 4,322
<INCOME-PRETAX> 1,927 5,925
<INCOME-TAX> 761 2,341
<INCOME-CONTINUING> 1,166 3,584
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (146)
<CHANGES> 0 0
<NET-INCOME> 1,166 3,438
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
