<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ATRIA COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT SPECIFIED IN ITS CHARTER)
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DELAWARE 8361 61-1303738
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
515 WEST MARKET STREET, SUITE 200
LOUISVILLE, KENTUCKY 40202
(502) 596-7540
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
AUDRA J. ECKERLE
GENERAL COUNSEL
ATRIA COMMUNITIES, INC.
515 WEST MARKET STREET, SUITE 200
LOUISVILLE, KENTUCKY 40202
(502) 596-7540
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
IVAN M. DIAMOND
GREENEBAUM DOLL & MCDONALD PLLC
3300 NATIONAL CITY TOWER
LOUISVILLE, KY 40202
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THESE SECURITIES TO THE
PUBLIC: From time to time after this registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, 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, 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(d)
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. [_]
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 PER SHARE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.10.................. 2,500,000 shares $16.625 $41,562,500 $12,595
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee. This
estimate has been calculated in accordance with Rule 457 under the
Securities Act of 1933 and is based on the average of the high and low
prices per share as reported on the National Association of Securities
Dealers--National Market System on November 19, 1997.
----------------
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>
PROSPECTUS
2,500,000 SHARES
ATRIA COMMUNITIES, INC.
COMMON STOCK
(PAR VALUE $.10 PER SHARE)
This prospectus relates to 2,500,000 shares (the "Shares") of the Common
Stock, par value $.10 per share ("Common Stock"), of Atria Communities, Inc.
(the "Company") which may be offered and issued by the Company from time to
time in connection with the acquisition by the Company directly, or indirectly
through subsidiaries, of various businesses or assets, or interests therein.
The Shares may be issued in mergers or consolidations, in exchange for shares
of capital stock, partnership interests or other assets representing an
interest, direct or indirect, in other companies or other entities, or in
exchange for tangible or intangible assets, including assets constituting all
or substantially all of the assets and business of such entities. Shares may
also be reserved for issuance pursuant to, or offered, issued and sold upon
exercise or conversion of, warrants, options, convertible instruments or
rights issued by the Company from time to time in connection with any such
acquisition.
The Company anticipates that the terms of acquisitions involving the
issuance of Shares will be determined by direct negotiations with the owners
or controlling persons of the businesses or assets to be acquired, and that
the Shares so issued will be valued at prices based on or related to market
prices for the Common Stock on the Nasdaq National Market System at or about
the time the terms of an acquisition are agreed upon or at or about the time
of delivery of such Shares, or based on average market prices for periods
ending at or about such times. No underwriting discounts or commissions will
be paid, although brokers' or finders' fees may be paid from time to time in
connection with specific acquisitions. Under some circumstances, the Company
may issue Shares in full or partial payment of such fees. Any person receiving
any such fees may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
With the consent of the Company, this Prospectus may also be used by persons
("Selling Stockholders") who have received or will receive Shares in
connection with acquisitions and who may wish to sell such Shares under
circumstances requiring or making desirable its use. See "Resales of Shares".
The Shares will, prior to their issuance, be listed on the Nasdaq National
Market subject to official notice of issuance. The Common Stock is traded
under the symbol "ATRC." The last reported sale price of the Common Stock on
the Nasdaq National Market on November 24, 1997, was $16.875 per share.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational and reporting requirements of
the Securities and Exchange Act of 1934 (the "Exchange Act") and, in
accordance therewith, is required to file proxy statements, reports and other
information with the Securities and Exchange Commission (the "Commission").
The Registration Statement, as well as any such report, proxy statement and
other information filed by the Company with the Commission, may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the SEC: Northeast Regional Office, 7
World Trade Center, 13th Floor, New York, New York 10048; and Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such filings may also be obtained from the
Commission through the Internet at http://www.sec.gov.
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. For each such statement concerning a contract, agreement or other
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission, reference is made to such exhibit or other filing for a
more complete description of the matter involved and each such statement is
qualified in its entirety by such reference.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent accounting firm. The Company
also intends to furnish such other reports as it may determine or as may be
required by law.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference: The Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996; the Company's Quarterly
Reports for the quarters ended March 31, 1997, June 30, 1997 and September 30,
1997; the Company's Current Report on Form 8-K dated April 1, 1997; and the
description of the Common Stock contained in the Company's Registration
Statement on Form 8-A, as the same may be amended.
All documents and reports subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering made by this
Prospectus shall be deemed to be incorporated by reference herein. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document which is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE FROM AUDRA J.
ECKERLE, GENERAL COUNSEL, ATRIA COMMUNITIES, INC., 515 WEST MARKET STREET,
SUITE 200, LOUISVILLE, KENTUCKY 40202 (TELEPHONE (502) 596-7540). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST
FIVE BUSINESS DAYS PRIOR TO THE DATE ON WHICH A FINAL INVESTMENT DECISION IS
TO BE MADE.
THE COMPANY
Atria is a leading national provider of assisted and independent living
services for the elderly. At September 30, 1997, the Company operated 37
communities in 17 states with a total of 3,890 units. The Company also had
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33 assisted living communities under development, including 17 communities
under construction. The Company's communities included 1,878 assisted living
units and 2,012 independent living units. The Company owns 30 of its
communities, holds a majority interest in two communities, leases two
communities and manages three communities.
Assisted living is a rapidly emerging component of the non-acute health care
system for the elderly. The assisted and independent living industries serve
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. Assisting living residents
typically require assistance with two or more activities of daily living
("ADLs"), such as eating, grooming and bathing, personal hygiene and
toileting, dressing, transportation, walking and medication supervision. The
independent living industry serves the long-term care needs of the elderly who
require only occasional assistance with ADLs.
According to industry estimates, the assisted living industry represented
approximately $12.0 billion in revenue in 1996. The Company believes that
growth in the demand for assisted and independent living services is being
driven by: the growing elderly population segment; changing societal patterns
that make it difficult for families to provide in-home care for the elderly;
increasing recognition among the elderly and their families that assisted and
independent living facilities afford a cost-effective, independent, secure and
attractive lifestyle; and the limited supply of purpose-built assisted living
facilities currently available.
Atria's objective is to expand its position as a leading national provider
of high-quality assisted living services. Key elements of the Company's
strategy are to continue to: (i) develop or acquire, in geographic clusters,
60 to 85 additional assisted living communities consisting of approximately
5,400 to 7,650 units by the year 2000 (including the 33 communities under
development at September 30, 1997 and the communities developed or acquired
since the Company's initial public offering to achieve regional density); (ii)
convert at least 750 of its existing independent living units to assisted
living units by the year 2000 (approximately 250 per year); (iii) focus on
private pay, middle- and upper-income residents; (iv) develop network
relationships and strategic alliances with leading national and regional
health care providers; (v) offer a broad range of high-quality services that
meet the individual needs of residents to enable them to "age in place"; and
(vi) develop the Atria prototype model in targeted markets to increase brand
awareness and achieve construction and operational efficiencies.
Prior to completion of the Company's initial public offering in August 1996
(the "IPO"), certain of the Company's assisted and independent living
communities had been operated by Vencor, Inc. ("Vencor") and its predecessors
for over a decade. Vencor operates an integrated network of health care
services primarily focusing on the needs of the elderly. In July 1997, the
Company completed a public offering of 6.9 million primary shares of Common
Stock (the "Secondary Offering"). In the fourth quarter of 1997, the Company
sold $143.75 million of 5.0% Convertible Subordinated Notes due 2002 (the
"Notes") in an offering exempt from registration under the Securities Act
pursuant to Rule 144A (the "Note Offering"). At September 30, 1997, Vencor
owned 42.8% of the Company's outstanding Common Stock.
The Company's executive offices are located at 515 West Market Street, Suite
200, Louisville, Kentucky 40202, and its telephone number is (502) 596-7540.
RECENT DEVELOPMENTS
In April 1997, the Company acquired American ElderServe Corporation
("American ElderServe"), an Atlanta based operator of assisted living
communities, for approximately $30.5 million in cash, stock and assumption of
debt. At the time of the acquisition, American ElderServe operated 12 assisted
living communities consisting of 503 units (six of the communities were owned;
one was leased; and five were managed under contract). The Company terminated
the management contracts on four of the five managed communities during July
1997. At the time of the acquisition, American ElderServe had six additional
communities under construction, one of which opened in April 1997, and the
remainder of which are scheduled to open by the end
3
<PAGE>
of 1997. In connection with the acquisition, Andy L. Schoepf, the former
President and Chief Executive Officer and principal shareholder of American
ElderServe, joined the Company as its Chief Operating Officer, received
636,487 shares of Common Stock (including certain demand and incidental
registration rights with respect thereto) and was subsequently elected a
director of the Company.
In connection with the American ElderServe acquisition, the Company entered
into a development agreement with Elder HealthCare Developers, LLC ("Elder
HealthCare"), a Georgia limited liability company owned 10% by Atria and 90%
by Assisted Care Developers, LLC ("Assisted Care Developers"). Assisted Care
Developers is wholly-owned by George A. Schoepf, former Executive Vice
President of American ElderServe and the brother of Andy L. Schoepf. Elder
HealthCare has the exclusive right to develop assisted living communities for
the Company in nine southeastern states. The Company has agreed that Elder
HealthCare will develop at least 15 communities in this southeast region over
the next three years; nine of those communities are currently under
development. The Company will have the first option to purchase any such
development community at the lesser of its fair market value or the cost to
develop and operate such community through the time of purchase plus $666,666.
The Company may exercise its option to purchase a community only after the
community's operations become profitable as defined in the development
agreement. Under the terms of the Operating Agreement of Elder HealthCare, as
amended, Elder HealthCare will fund the development, construction and working
capital needs of its communities by use of third party financing. If such
financing is unavailable or insufficient to cover all of the construction and
start-up costs associated with any of such communities, Atria will extend the
necessary funds or guarantees to Elder HealthCare. Assisted Care Developers
has agreed to indemnify the Company for up to 90% of any loss suffered by
Atria as a result of the default of Elder HealthCare on any loan either
extended or guaranteed by Atria. The Company will manage communities developed
by Elder HealthCare from the day they commence operations. See "Risk Factors--
Increased Leverage and Risks of Indebtedness."
The Company is in the process of completing the acquisition from The Carra
Company, LLC ("Carra") of five assisted living community development sites
located in Tennessee, Texas and Alabama. Carra will complete the development
of these communities pursuant to development agreements with the Company. The
total cost to acquire and complete the development of these communities will
be approximately $24.4 million. The development of one of these communities,
with 92 units located in Memphis, Tennessee, was completed in March 1997. A
second 84-unit community located in Memphis opened in September 1997.
Communities to be developed at the remaining three sites are scheduled to open
from late 1997 through early 1998.
In June 1997, the Company and MedGroup Management, Inc. ("MedGroup"), a
wholly-owned for-profit subsidiary of Jewish Hospital HealthCare Services,
Inc. ("Jewish HealthCare") reached an agreement regarding the development of
assisted living communities within the market areas of Jewish HealthCare
facilities. MedGroup has an exclusive right of first refusal to be the sole
participant with Atria in the development of assisted living communities in
southern Indiana and central Kentucky. Three communities are currently under
development in the greater Louisville area. Jewish HealthCare is one of the
largest operators of health care facilities in Kentucky and southern Indiana,
with a network of 36 health care facilities.
In February 1997, the Company acquired a 102-unit assisted living community
and a 48 bed, 27-unit memory impairment and dementia care community. Both of
these communities are located in Knoxville, Tennessee. In September 1997, the
Company opened a 48-unit assisted living community in Memphis, Tennessee.
In July 1997, the Company completed the Secondary Offering. The Company
intends to use the net proceeds from the Secondary Offering, approximately
$91.0 million, to finance the development and acquisition of assisted living
communities and for general corporate purposes.
In October 1997, the Company completed the Note Offering. The Notes will be
convertible into shares of Common Stock commencing on January 14, 1998, unless
previously redeemed or repurchased, at a conversion price of $20.86 per share,
subject to certain adjustments. The net proceeds of the Note Offering will be
used by
4
<PAGE>
the Company to finance the development and acquisition of additional assisted
living facilities and for working capital and other general corporate
purposes.
Additionally, in October 1997, the Company purchased the assets of a
retirement community in Stamford, Connecticut for approximately $14.0 million.
This community was previously owned by Vencor and has been managed by the
Company since April 1997.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
The statements contained or incorporated by reference in this Prospectus
that are not historical facts constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the Company to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things: (i) the successful and timely
implementation of the Company's acquisition and development strategy; (ii) the
Company's ability to obtain financing on acceptable terms to finance its
growth strategy and to operate within the limitations imposed by financing
arrangements; (iii) the cost of implementing the Company's acquisition and
development strategies; and (iv) other factors referenced in this Prospectus.
See "Risk Factors." The Company does not undertake to update any forward-
looking statement that may be made from time to time by, or on behalf of, the
Company.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus.
Financial Risks Associated with Expansion Program. During the first 12
months of operations, a newly developed assisted living community containing
90 units is expected to incur operating losses of between $150,000 and
$250,000. Once opened, the Company estimates that it will take an average of
12 months for a community to achieve targeted occupancy levels. 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.
Development and Construction Risks. The Company intends to develop or
acquire 60 to 85 additional assisted living communities consisting of
approximately 5,400 to 7,650 units by the year 2000 (including the 33
communities being developed at September 30, 1997 and the communities
developed and acquired since the Company's IPO). 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 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 site acquisitions, shortages of, or 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.
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
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process on a contractual basis. Final approval of all development sites is
made by officers of the Company. If the Company is unable to expand its
development staff or 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.
Increased Leverage and Risks of Indebtedness. In connection with the sale of
the Notes, the Company incurred $144 million in additional indebtedness and
increased the ratio of its long-term debt to its total capitalization to 56.9%
at September 30, 1997 (after giving effect to the net proceeds of the Note
Offering, including the exercise of the related over-allotment option and the
application of the net proceeds therefrom). As a result of this increased
leverage, the Company's principal and interest obligations will increase
substantially. The degree to which the Company will be leveraged could
adversely affect the Company's ability to obtain additional financing for
working capital, acquisitions or other purposes and could make it more
vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also adversely affect its liquidity, as a substantial
portion of available cash from operations may have to be applied to meet debt
service requirements and, in the event of a cash shortfall, the Company could
be forced to reduce other expenditures and forego potential acquisitions to be
able to meet such requirements.
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.
In August 1996, Atria entered into a $200.0 million bank credit facility
(the "Credit Facility") which has a maturity of four years and may be extended
at the option of the banks for one additional year. The obligations under the
Credit Facility are secured by substantially all of Atria's property, the
capital stock of its present and future principal subsidiaries and all
intercompany indebtedness owed to Atria by its subsidiaries. The Credit
Facility contains certain customary financial covenants and other
restrictions.
Under the terms of the Operating Agreement of Elder HealthCare, as amended,
Elder HealthCare will fund the development, construction and working capital
needs of its communities by use of third party financing. If such financing is
unavailable or insufficient to cover all of the construction and start-up
costs associated with any of such communities, Atria will extend the necessary
funds or guarantees to Elder HealthCare. Assisted Care Developers has agreed
to indemnify the Company for up to 90% of any loss suffered by Atria as a
result of the default of Elder HealthCare on any loan either extended or
guaranteed by Atria. The Company will manage communities developed by Elder
HealthCare from the day they commence operations. The Company may exercise its
option to purchase a community only after the community's operations become
profitable. If the Company fails to exercise its option, Elder HealthCare will
not be obligated to obtain new financing to replace the financing provided by
Atria.
Risk of Rising Interest Rates. At September 30, 1997, $61.3 million in
principal amount of the Company's indebtedness bore interest at floating
rates. In addition, other 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.
Restrictions Associated with Bond and HUD Financing. At September 30, 1997,
ten of the Company's assisted living and independent living communities
(containing 1,149 units) have been financed in whole or in part by industrial
revenue bonds or HUD financing. Under the terms of the HUD financing, the
Company is required to obtain HUD approval prior to taking certain actions,
including raising prices. In addition, 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 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
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<PAGE>
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 and could accelerate the maturity dates of these financings. At
September 30, 1997, outstanding amounts under both types of financing totaled
$69.4 million. The Company does not presently expect to seek additional
industrial revenue bond or HUD financing. However, the Company may assume
financings of these types pursuant to acquisitions of additional communities.
Consequences of Default. There can be no assurance that the Company will
generate sufficient cash flows from operations to cover required interest,
principal and operating lease payments. Any payment or other default could
cause the lender to foreclose upon the communities securing such indebtedness
with a consequent loss of income and asset value to the Company. In certain
cases, indebtedness secured by a community is also secured by a pledge of the
Company's interests in the community. In the event of a default with respect
to any such indebtedness, the lender could avoid the judicial procedures
required to foreclose on real property by foreclosing on the pledge instead,
thus accelerating the lender's acquisition of the community. Further, because
most of the Company's mortgages contain cross-default and cross-
collateralization provisions, a default by the Company on one of its payment
obligations could adversely affect a significant number of the Company's other
communities.
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 assisted living communities. The Company recently acquired (i)
American ElderServe, an operator of 12 assisted living communities with 503
units, and (ii) two assisted living communities with a total of 129 units in
Knoxville, Tennessee. There can be no assurance that the Company will be able
to integrate successfully the operations of these communities or institute
Company-wide systems and procedures to operate successfully the combined
enterprises. 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, purchase price,
financial performance of the communities after acquisition and ability of the
Company to integrate effectively the operations of acquired communities. A
strategy of growth by acquisition also involves the risk of assuming unknown
or contingent liabilities of the acquired businesses, which could be material,
individually or in the aggregate. Any failure by the Company to identify
suitable candidates for acquisition, to integrate or operate acquired
communities effectively or to insulate itself from unwanted liabilities of
acquired businesses may have a material adverse effect on the Company's
business, financial condition and results of operations.
Limited History as a Stand-alone Company. Although the Company's
predecessors have operated assisted and independent living communities for
over a decade, the Company itself has only operated as a stand-alone company
since August 1996. Prior to August 1997, the Company received certain
administrative services from Vencor, including finance and accounting, human
resources, risk management, legal, marketing and information systems support,
pursuant to an administrative services agreement dated August 19, 1996 (the
"1996 Administrative Services Agreement"). Upon the expiration of this
agreement in August 1997, the Company and Vencor entered into an
administrative services agreement (the "New Administrative Services
Agreement") with respect to marketing, human resources and information systems
support. The New Administrative Services Agreement will expire on December 31,
1997, unless the Company requests Vencor to provide information systems
support for an additional 90 days. Although there can be no assurance that
upon termination of this agreement the Company will have adequate staffing to
perform the functions Vencor currently performs for the Company, the Company
is currently implementing plans to insource most of these services, or
contract with third parties for the provision of these services. The costs
associated with securing these services from third parties or insourcing these
services may exceed the costs associated with the provision of these services
by Vencor.
Principal Stockholder. At September 30, 1997, Vencor held 42.8% of the
outstanding Common Stock and, accordingly, is in a position to influence
significantly the management and operations of the Company. Three of the eight
Company directors are officers or directors of Vencor and only three directors
of the Company are
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independent directors who are not Vencor affiliates or employees of the
Company. Vencor has entered into a Voting Agreement pursuant to which it has
agreed to vote all of its shares of Common Stock at any meeting at which
directors are elected in favor of the election of independent directors so
that after such election, if such persons are elected, there will be at least
two independent directors. The Voting Agreement continues in effect until
August 2001 so 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.
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 principal stockholder, 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 members of the Board of Directors and the retention of
independent financial and other advisors. 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 subject to approval
by a majority of the disinterested members of the Board of Directors.
The Company and Vencor have entered into certain agreements, including the
1996 Administrative Services Agreement, an Incorporation Agreement, a Tax
Sharing Agreement, a Registration Rights Agreement, a Guaranty Fee Agreement
and certain Services Agreements (the "Vencor Agreements"), in connection with
the Contribution Transaction. These agreements specify certain services to be
provided to the Company by Vencor. For example, prior to 1997, Vencor provided
certain administrative services to the Company, including finance and
accounting, human resources, risk management, legal and information systems
for an annual fee approximating $458,000. Pursuant to the Incorporation
Agreement, the Company paid Vencor $150,000 for its assistance in connection
with the IPO. The maximum guaranty fee that the Company intends to pay Vencor
in connection with the Guaranty Fee Agreement is $1,125,000 per year. Except
for the New Administrative Services Agreement, these agreements were
negotiated by officers of Vencor and the Company while the Company was a
wholly owned subsidiary of Vencor. Accordingly, there is no assurance that (i)
the terms and conditions of these arrangements are as favorable to the Company
as those the Company could have obtained from unaffiliated third parties; or
(ii) such arrangements will not be terminated or 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
complete or similar restrictions prohibiting Vencor from developing, acquiring
or operating its own assisted or independent living facilities.
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 Company currently estimates that
the net proceeds from the Note Offering, together with existing capital
resources and financing commitments, will be sufficient to fund its
development and acquisition program through mid-1999. 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.
Variations in Operating Results. Although the Company has been profitable,
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.
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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 relies on
Vencor to provide certain 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--Limited History as a Stand-alone Company," and "--Relationship with
Vencor; Conflicts of Interest."
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 services from their own financial resources. In the
event that managed care becomes a significant factor in the assisted living
industry, the amount the Company receives for its services could be adversely
affected. In addition, inflation or other circumstances that 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.
Competition. The assisted living industry is highly competitive. The Company
faces competition from numerous local, regional and national providers of
assisted and independent living and long-term care services. 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 or results of operations.
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 requirements 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 an adverse impact on the Company's operations. 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 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.
Federal and state fraud and abuse or anti-self referral statutes and
regulations, such as Medicare/Medicaid anti-kickback laws, Stark I and II,
certain provisions of the Health Insurance Portability and Accountability Act
of 1997 and the Balanced Budget Act of 1997 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 and other
health care providers offer certain services to residents of the Company's
communities. Fraud and abuse oversight is increasing and the application of
these laws has been expanded to include payors beyond Medicare and Medicaid,
such as indemnity insurers, managed care organizations and other private
payors. These laws have been broadly interpreted to apply to certain
relationships between health care providers and sources of patient referral.
These laws and regulations are extremely complex and have been the subject of
little judicial or
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regulatory interpretation. Similarly, state laws vary, are sometimes vague and
have seldom 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 supplies from participation in the
Medicare and Medicaid programs. There can be no assurance that such laws will
be interpreted in a manner consistent with the practices of the Company.
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 that also may require modifications to existing and planned
communities 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.
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
currently 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 costs and substantial
claims. The Company maintains insurance policies in amounts and with 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 that 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 of 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 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, the Company's Board of Directors is
divided into three classes, each of which serves 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. As
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a result, third parties may be discouraged from attempting to acquire or take
control of the Company. See "Risk Factors--Principal Stockholder" and
"Description of Capital Stock--Certain Corporate Governance Matters."
Possible Volatility of Stock Price. The Company's Common Stock has been
quoted on the Nasdaq National Market since August 1996. 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.
RESALES OF SHARES
With the consent of the Company, this Prospectus may be used by Selling
Stockholders who have received or will receive Shares in connection with
acquisitions and who may wish to sell such Shares under circumstances
requiring or making desirable its use. The Company may consent to the use of
this Prospectus by Selling Stockholders for a limited period of time and
subject to limitations and conditions that may be varied by agreement between
the Company and one or more Selling Stockholders. Agreements with Selling
Stockholders permitting the use of this Prospectus may provide that an
offering of Shares be effected in an orderly manner through securities
dealers, acting as brokers or dealers, selected by the Company; that Selling
Stockholders enter into custody agreements with one or more banks with respect
to such Shares; and that sales be made only by one or more of the methods
described in this Prospectus, as appropriately supplemented or amended when
required. The Company will not receive any of the proceeds from any sale of
Shares offered hereby by a Selling Stockholder.
Shares may be sold by Selling Stockholders hereunder on one or more
exchanges or otherwise; directly to purchasers in negotiated transactions; by
or through brokers or dealers in ordinary brokerage transactions or
transactions in which the broker solicits purchasers; in block trades in which
the broker or dealer will attempt to sell Shares as agent but may position and
resell a portion of the block as principal; in transactions in which a broker
or dealer purchases as principal for resale for its own account; through
underwriters or agents; or in any combination of the foregoing methods. Shares
may be sold at a fixed offering price, which may be changed, at the prevailing
market price at the time of sale, at prices related to such prevailing market
price or at negotiated prices. Any brokers, dealers, underwriters or agents
may arrange for others to participate in any such transaction and may receive
compensation in the form of discounts, commissions or concessions from Selling
Stockholders and/or the purchasers of Shares. The proceeds to a Selling
Stockholder from any sale of Shares will be net of any such compensation and
of any expenses to be borne by the Selling Stockholder. If required at the
time that a particular offer of Shares is made, a supplement to this
Prospectus will be delivered that describes any material arrangements for the
distribution of Shares and the terms of the offering, including, without
limitation, the names of any underwriters, brokers, dealers or agents and any
discounts, commissions or concessions and other items constituting
compensation from the Selling Stockholder.
Selling Stockholders and any brokers, dealers, underwriters or agents that
participate with a Selling Stockholder in the distribution of Shares may be
deemed to be "underwriters" within the meaning of the Securities Act, in which
event any discounts, commissions or concessions received by any such brokers,
dealers, underwriters or agents and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Company may agree to indemnify Selling Stockholders and/or any such
brokers, dealers, underwriters or agents against certain civil liabilities,
including liabilities under the Securities Act, and to reimburse them for
certain expenses in connection with the offering and sale of Shares.
Selling Stockholders may also offer shares of Common Stock issued in past
and future acquisitions by means of prospectuses under other available
registration statements or pursuant to exemptions from the registration
requirements of the Securities Act, including sales that meet the requirements
of Rule 144 or Rule 145(d) under the Securities Act.
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<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. At September 30, 1997, 23,372,387 shares of
Common Stock were issued and outstanding, and no shares of Preferred Stock
were issued or outstanding. In the fourth quarter of 1997, the Company sold
$143.75 million principal amount of the Notes, which are convertible into
shares of Common Stock commencing on January 14, 1998, unless previously
redeemed or repurchased, at a conversion price of $20.86 per share, subject to
certain adjustments.
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 of Directors out of funds legally available therefor. 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.
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. The Credit Facility prohibits the
Company from paying cash dividends.
National City Bank acts as the transfer agent and registrar for the Common
Stock.
PREFERRED STOCK
The Board of Directors 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
Pursuant to the Company's Restated Certificate of Incorporation and the
Amended and Restated By-laws, the Board is divided into three classes. Two
classes of directors consist of three directors each and one class consists of
two 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 three-
year terms 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
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<PAGE>
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; (iv) 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 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.
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 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
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<PAGE>
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 AGREEMENTS
The Company has granted demand and incidental registration rights to both
Vencor and Andy L. Schoepf, the Company's Chief Operating Officer, for the
registration under the Securities Act of shares of Common Stock owned by them.
Vencor is permitted four demand registrations. Mr. Schoepf is permitted one
demand registration. The Company will pay the fees and expenses for the demand
registration of Mr. Schoepf and two demand registrations of Vencor, as well as
all incidental registrations, while Vencor and Mr. Schoepf will pay all
underwriting discounts and commissions. The registration rights of Vencor
expire August 20, 2001 and the registration rights of Mr. Schoepf expire April
1, 1999. The registration rights are subject to certain conditions and
limitations, including the right of underwriters to limit the number of shares
included in a registration.
The Company has agreed to file with the Commission by January 7, 1998, use
its best efforts to cause to be declared effective within 120 days following
such filing and use all reasonable efforts to keep effective for two years, a
registration statement covering the resale of the Notes, and the Common Stock
issuable upon conversion of the Notes, by the holders thereof who satisfy
certain conditions relating to the provision of information in connection with
such registration statement. The Company will be permitted to suspend the use
of the prospectus that is a part of such registration statement during certain
periods and under certain circumstances.
SHARES ELIGIBLE FOR FUTURE SALE
At September 30, 1997, the Company had outstanding 23,372,387 shares of
Common Stock. The 6,900,000 shares sold in the Secondary Offering and the
5,750,000 shares sold in the Initial Public Offering are freely tradable
without restriction or further registration under the Securities Act. The
Company has outstanding 10,636,487 shares which 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 or pursuant to an exemption therefrom,
including Rule 144. The remaining 85,900 shares outstanding have been issued
pursuant to the Company's Non-Employee Directors 1996 Stock Incentive Plan,
the Company's 1996 Stock Incentive Plan and the exercise of options granted by
the Company to certain Vencor employees. The sum of 45,900 of such shares are
freely tradeable without restriction or further registration under the
Securities Act.
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 one year 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 one percent 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
see 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
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<PAGE>
a sale by such person, and who has beneficially owned such shares for at least
two years, would be entitled to sell such shares without regard to the volume
limitations described above.
The Company has registered or intends to register under the Securities Act
approximately 2,750,000 shares of Common Stock reserved for issuance pursuant
to the Company's incentive compensation programs. At October 31, 1997, there
were outstanding options to purchase 1,498,875 shares of Common Stock. The
options become exercisable in four equal installments beginning one year from
the date of grant.
Vencor is entitled to certain rights with respect to the registration for
sale under the Securities Act of 10,000,000 restricted shares of Common Stock.
Andy L. Schoepf, the Company's Chief Operating Officer, is entitled to certain
rights with respect to the registration for sale under the Securities Act of
636,487 restricted shares of Common Stock. Certain holders of the Notes are
entitled to certain rights with respect to the registration for sale under the
Securities Act of approximately 6,891,180 shares of Common Stock which may be
issued upon conversion of the Notes. See "Description of Capital Stock--
Registration Rights Agreements."
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Greenebaum Doll & McDonald PLLC, Louisville, Kentucky. William C.
Ballard Jr., a director of the Company, is of counsel to Greenebaum Doll &
McDonald PLLC and as of the date of this Prospectus he beneficially owns
23,000 shares of Common Stock.
EXPERTS
The consolidated financial statements of Atria Communities, Inc. appearing
in the Atria Communities, Inc. Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon, included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER 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 DATE SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
The Company................................................................ 2
Risk Factors............................................................... 5
Description of Capital Stock............................................... 12
Shares Eligible for Future Sale............................................ 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
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2,500,000 SHARES
ATRIA COMMUNITIES, INC.
COMMON STOCK
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PROSPECTUS
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1997
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Elimination of Certain Liability. Pursuant to Article IX of the
Registrant's 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 that 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 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 IX of the
Registrant's 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 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 than 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"); (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
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Registrant 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 Registrant as authorized in Article IX
or otherwise.
E. Right of Claimant to Bring Suit. If a claim under Sections B or D 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 makes 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
standards 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 stock holders) 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 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 Articles 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)
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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 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 21 EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
<C> <S> <C>
4.1 Restated Certificate of Incorporation (Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1, Reg. No.
333-06907 is incorporated herein by reference).
4.2 Amended and Restated By-Laws (Exhibit 3.2 to the Regis-
trant's Registration Statement on Form S-1, Reg. No. 333-
06907 is incorporated herein by reference).
5 Opinion of Greenebaum Doll & McDonald PLLC as to the le-
gality of the securities being registered.
23.1 Consent of Greenebaum Doll & McDonald PLLC (included in
Exhibit 5).
23.2 Consent of Ernst & Young LLP.
24 Powers of Attorney (included on signature page of the Reg-
istration Statement).
99 Amended and Restated Operating Agreement of Elder
HealthCare Developers, LLC.
</TABLE>
ITEM 22 UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
Distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8 and the
information required to be included in the post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report
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pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(g) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (f) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
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<PAGE>
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 NOVEMBER
, 1997.
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 BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS W. PATRICK MULLOY, II, J. TIMOTHY WESLEY AND
AUDRA J. ECKERLE AND EACH OF THEM 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 OR 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.
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<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W. Bruce Lunsford Chairman of the Board November 25, 1997
____________________________________
W. Bruce Lunsford
/s/ W. Patrick Mulloy, II Chief Executive Officer, November 25, 1997
____________________________________ President and Director
W. Patrick Mulloy, II
/s/ Andy L. Schoepf Chief Operating Officer and November 25, 1997
____________________________________ Director
Andy L. Schoepf
/s/ J. Timothy Wesley Chief Financial Officer, November 25, 1997
____________________________________ Vice President of
J. Timothy Wesley Development and Secretary
(Chief Financial and
Accounting Officer)
</TABLE>
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<TABLE>
<S> <C> <C>
/s/ Sandra Harden Austin Director November 25, 1997
____________________________________
Sandra Harden Austin
/s/ William C. Ballard Jr. Director November 25, 1997
____________________________________
William C. Ballard Jr.
/s/ Peter J. Grua Director November 25, 1997
____________________________________
Peter J. Grua
/s/ Thomas T. Ladt Director November 25, 1997
____________________________________
Thomas T. Ladt
/s/ R. Gene Smith Director November 25, 1997
____________________________________
R. Gene Smith
</TABLE>
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Exhibit 5
GREENEBAUM DOLL & McDONALD PLLC
3300 NATIONAL CITY TOWER
101 SOUTH FIFTH STREET
LOUISVILLE, KENTUCKY 40202-3197
502/589-4200
FAX 502/587-3695
November 25, 1997
Atria Communities, Inc.
515 West Market Street
Louisville, KY 40202
Ladies and Gentlemen:
We have acted as legal counsel in connection with the preparation of a
Registration Statement on Form S-4 under the Securities Act of 1933, as amended
(the "Registration Statement"), covering an aggregate of 2,500,000 shares of
Common Stock, par value $.10 per share (the "Common Stock"), of Atria
Communities, Inc., a Delaware corporation (the "Company") which may be offered
and issued by the Company from time to time in connection with the acquisition
by the Company directly, or indirectly through subsidiaries, of various
businesses or assets, or interests therein.
We have examined and are familiar with the Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Company, and the various
corporate records and proceedings relating to the organization of the Company
and the proposed issuance of the Common Stock. We have also examined such other
documents and proceedings as we have considered necessary for the purpose of
this opinion.
Based on the foregoing, it is our opinion that the Common Stock has been
duly authorized and, when issued and paid for in accordance with the terms of
the Registration Statement, will be validly issued, fully paid and non-
assessable.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement, and with such state securities administrators as may
require such opinion of counsel for the registration of the Common Stock. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the Rules and Regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Greenebaum Doll & McDonald PLLC
Greenebaum Doll & McDonald PLLC
_____________
LEXINGTON, KENTUCKY COVINGTON, KENTUCKY CINCINNATI, OHIO NASHVILLE, TENNESSEE
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 dated November 25, 1997) and related Prospectus
of Atria Communities, Inc. for the registration 2,500,000 shares of its common
stock and to the incorporation by reference therein of our report dated February
1, 1997 except for Note 11 as to which the date is March 3, 1997, with respect
to the financial statements of Atria Communities, Inc. included in its Annual
Report (Form 10-K) for the year-ended December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Louisville, Kentucky
November 21, 1997
<PAGE>
Exhibit 99
---------------------------------------------
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
ELDER HEALTHCARE DEVELOPERS, LLC
---------------------------------------------
Effective Date
April 1, 1997
Date of Restatement
November 18, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Formation; Name and Organizational Matters........................... 1
1.1 Formation and Name.............................................. 1
1.2 Principal Office................................................ 1
1.3 Purposes........................................................ 1
1.4 Company's Power................................................. 1
1.5 Term............................................................ 2
2. Grant of Exclusive Development Rights................................ 2
3. Capital.............................................................. 2
3.1 Initial Capital Contributions of Members........................ 2
3.2 No Liability of Members......................................... 2
3.3 No Interest on Capital Contributions............................ 2
3.4 Withdrawal of Capital........................................... 2
3.5 Capital Account................................................. 2
3.6 Borrowing by the Company........................................ 3
4. Accounting........................................................... 4
4.1 Books and Records............................................... 4
4.2 Fiscal Year..................................................... 4
4.3 Reports......................................................... 4
4.4 Tax Returns..................................................... 4
4.5 Member's Request for Additional Information..................... 5
4.6 Revaluation of Company Property................................. 5
4.7 Bank Accounts................................................... 5
5. Allocation of Net Income and Net Loss................................ 5
5.1 Net Income and Net Loss......................................... 5
5.2 Allocation of Excess Nonrecourse Liabilities.................... 7
5.3 Allocations in Event of Transfer, Admission of New Member, Etc . 7
6. Distributive Shares and Federal Income Tax Elections................. 7
6.1 Distributive Shares............................................. 7
6.2 Elections....................................................... 7
6.3 Partnership Tax Treatment....................................... 7
7. Distributions........................................................ 8
7.1 Net Cash Flow................................................... 8
7.2 Distributions of Net Cash Flow.................................. 8
7.3 Property Distributions.......................................... 8
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
<S> <C> <C>
7.4 Distributions on Sale of an Assisted Living Facility............. 8
8. Management............................................................ 9
8.1 Management Committee............................................. 9
8.2 Day to Day Management............................................ 12
8.3 Tax Matters Partner.............................................. 12
8.4 Standard of Care of Members; Indemnification..................... 13
8.5 Payments for Services Provided by Members........................ 13
8.6 Expenses Deductible.............................................. 14
8.7 Other Activities................................................. 14
8.8 Reimbursement of Expenses of Members............................. 15
9. Dissolution........................................................... 15
9.1 Dissolution...................................................... 15
9.2 Effective Date of Dissolution.................................... 15
9.3 Sale of Assets Upon Dissolution.................................. 15
9.4 Distributions Upon Dissolution................................... 15
9.5 No Contribution for Negative Capital Accounts.................... 16
9.6 Liquidation of a Member's Interest............................... 16
10. Withdrawal, Assignment and Addition of Members........................ 16
10.1 Assignment of a Member's Interest................................ 16
10.2 Voluntary Transfers.............................................. 16
10.3 Involuntary Transfers............................................ 16
10.4 Purchase Price and Terms......................................... 17
10.5 Substitute Member................................................ 18
10.6 Admission of New Member.......................................... 18
11. General............................................................... 18
11.1 Representations, Warranties and Covenants of Members............. 18
11.2 Power of Attorney................................................ 18
11.3 Notices.......................................................... 19
11.4 Amendment........................................................ 20
11.5 Captions; Section References..................................... 20
11.6 Number and Gender................................................ 20
11.7 Severability..................................................... 20
11.8 Arbitration...................................................... 21
11.9 Binding Agreement................................................ 21
11.10 Applicable Law.................................................. 21
11.11 Entire Agreement................................................ 21
11.12 Counterparts.................................................... 22
</TABLE>
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TABLE OF CONTENTS
<TABLE>
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Section Page
<S> <C>
11.13 No Right of Partition.......................................... 22
</TABLE>
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<PAGE>
EXHIBITS
Description Exhibit 79
Development Agreement................................... A
Management Agreement.................................... B
DEFINITIONS
Defined Term Section
AAA..................................................... 11.8(a)
Act..................................................... 1
Affiliates.............................................. 8.7(b)
Agreement............................................... Preamble
Assisted Care........................................... Preamble
Assisted Living Facilities.............................. 1.3(a)
Atria................................................... Preamble
Capital Account......................................... 3.5
Code.................................................... 3.5
Company................................................. 1
Company Interest........................................ 3.5
Computed Value.......................................... 12.7(a)
Contributed Assets...................................... 5.1(g)
Credit Facility......................................... 3.6
Development Agreement................................... 1.3(a)
Development Fee......................................... 8.5(a),8.5(a)
Effective Date.......................................... 10.4(a)
Facilities' Adjusted Cost............................... 8.5(a)
Fiscal Year............................................. 4.2
Involuntary Option...................................... 10.3(a)
Lender.................................................. 3.6(a)
Management Committee.................................... 8.1(a)
Members................................................. Preamble
Net Cash Flow........................................... 7.1
Partnership............................................. Recital
Percentage Interest..................................... 5.1(a)
Representatives......................................... 8.1(b)
Securities Act.......................................... 13.1(e)
TMP..................................................... 8.3(a)
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AMENDED AND RESTATED
OPERATING AGREEMENT
OF
ELDER HEALTHCARE DEVELOPERS, LLC
This Operating Agreement ("Agreement") is made as of the 1st day of April,
1997, by and between (i) Atria Communities, Inc., a Delaware corporation
("Atria"), and (ii) Assisted Care Developers, L.L.C., a Georgia limited
liability company ("Assisted Care"), and amended and restated by the parties
this 18th day of November, 1997. The foregoing parties are collectively
referred to herein as "Members" and individually as a "Member." For purposes of
this Agreement, the term "Members" includes all persons then acting in such
capacity in accordance with the terms of this Agreement.
1. Formation; Name and Organizational Matters
1.1 Formation and Name. On March 25 1997, the Members formed a limited
liability company ("Company") pursuant to the provisions of the Georgia Limited
Liability Company Act (Ga. Code Ann. (S)(S) 14-11-100, et. seq.) ("Act"). The
name of the Company shall be Elder Healthcare Developers, LLC.
1.2 Principal Office. The Company's principal office shall be at 1770
Indian Trail Road, Norcross, Georgia, 30093, or at such other place as
"Management Committee" (as defined in Section 8.1(a)) shall determine from time
to time. The Management Committee shall maintain the books of the Company at the
principal place of business of Atria or such other place that the Management
Committee deems appropriate. The Company shall designate an agent for service of
process in Georgia in accordance with the provisions of the Act. The Company
shall maintain, at its principal office, those items referred to in Ga. Code
Ann. (S) 14-11-313.
1.3 Purposes. The purposes of the Company are as follows:
(a) To purchase real property and design, construct and operate assisted
living facilities, homes for the aged, congregate care homes, personal care
homes or other similar facilities designed to provide assisted living to the
aged in accordance with the terms of this Agreement ("Assisted Living
Facilities") and the terms of the Development Agreement, a copy of which is
attached as Exhibit A (the "Development Agreement");
(b) To acquire, own, use, lease and sell such assets as are necessary
or appropriate for the foregoing; and
(c) To do all other things necessary or desirable in connection with
the foregoing, or otherwise described in this Agreement.
1.4 Company's Power. In furtherance of the purposes of the Company as
set forth in Section 1.3, the Company shall have the power to do any and all
things whatsoever necessary,
<PAGE>
appropriate or advisable in connection with such purposes, or as otherwise
described in this Agreement. The Company shall not engage in any business other
than as set forth in Section 1.3, nor take any action not described in this
Agreement.
1.5 Term. The term of the Company shall commence as of the date of the
filing of Articles of Organization with the Secretary of State's Office, and
shall continue until dissolved in accordance with Section 9.
2. Grant of Exclusive Development Rights. In connection with the
formation of the Company, Atria shall grant the Company the exclusive right to
develop assisted living facilities in accordance with the provisions of the
Development Agreement attached as Exhibit A.
3. Capital.
3.1 Initial Capital Contributions of Members. Upon the request of the
Management Committee, each of the Members shall make an initial capital
contribution to the Company in the amount set forth below opposite each of their
respective names:
<TABLE>
<CAPTION>
Member Contribution
------ ------------
<S> <C>
Atria $500.00
Assisted Care $4,500.00
</TABLE>
3.2 No Liability of Members. Except as otherwise specifically provided in
the Act, no Member shall have any personal liability for the obligations of the
Company. Except as provided in Sections 3.1 and 3.6, no Member shall be
obligated to contribute funds or loan money to the Company. The Members shall
pay their own costs, including attorneys' fees, associated with the formation of
the Company and the Company shall bear none of those expenses.
3.3 No Interest on Capital Contributions. No Member shall be entitled to
interest on any capital contributions made to the Company.
3.4 Withdrawal of Capital. No Member shall be entitled to withdraw any
part of such Member's capital contributions to the Company, except as provided
in Sections 7 and 9. No Member shall be entitled to demand or receive any
property from the Company other than cash, except as otherwise expressly
provided for herein.
3.5 Capital Account. The Company shall establish on its books a capital
account ("Capital Account") for each Member and shall maintain the Capital
Account in accordance with the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv).
This Agreement shall be so construed; and, accordingly, such Capital Account
shall initially be credited with the initial capital contribution of the Member
and thereafter shall be increased by (a) any cash or the fair market value of
any property contributed by such Member (net of any liabilities assumed by the
Company or to which the contributed property is subject) and (b) the amount of
all net income (whether or not exempt
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from tax) and gain allocated to such Member hereunder, and decreased by (a) the
amount of all net losses allocated to such Member hereunder (including
expenditures described in section 705(a)(2)(B) of the Internal Revenue Code of
1986, as amended ("Code"), or treated as such an expenditure by reason of Treas.
Reg. (S) 1.704-1(b)(2)(iv)(i)) and (b) the amount of cash, and the fair market
value of property (net of any liabilities assumed by such Member or to which the
distributed property is subject), distributed to such Member pursuant to
Sections 7 and 9. If a Member transfers all or any part of such Member's
interest in the Company ("Company Interest") in accordance with the terms of
this Agreement, the Capital Account of the transferor shall become the Capital
Account of the transferee to the extent of the Company Interest transferred.
3.6 Borrowing by the Company
(a) Unless the Members otherwise agree, the Company shall seek from
Empire Financial Services, Inc. or another financial institution not an
Affiliate of any Member (a "Lender") financing to pay for the (1) acquisition of
real estate, (2) earnest money advance relating to real estate purchase
contracts, (3) pre-development activities, and (4) development and construction
costs of each Assisted Living Facility, including anticipated startup operating
losses, of Assisted Living Facilities of the Company. The Members agree to
provide a guarantee or other collateral acceptable to Lender sufficient to
secure any portion of the indebtedness of the Company. The Members agree that
such obligation shall be joint and several as to a Lender but as between the
Members all liabilities to any Lender shall be allocated among Members (the
"Member's Proportionate Share") in accordance with their respective "Percentage
Interest" (as defined in Section 5.1(a)).
(b) If the Company is unable to obtain financing from a Lender to cover
any operating loss of an Assisted Living Facility managed by Atria, or if actual
losses exceed the anticipated losses, then Atria shall lend such funds to the
Company in accordance with the provisions of this Section 3.6(b), unless the
Members agree to contribute additional capital to the Company to fund such
working capital deficit. Assisted Care shall guarantee the repayment by the
Company of that percentage of funds lent to the Company by Atria that equals
Assisted Care's Percentage Interest, in a form of guarantee reasonably
acceptable to Atria. The source of payment under any such guarantee relating to
loans to cover losses that exceed anticipated losses of an Assisted Living
Facility shall be limited to the value of Assisted Care's interest in that
facility. Funds lent to the Company by Atria shall bear interest at a variable
rate equal to .25% in excess of Atria borrowing rate on it then current credit
facility, as such rate may change from time to time. Interest shall be due and
payable monthly and principal and all accrued but unpaid interest shall be due
in full on the earlier (1) the date such credit facility is due or (2) the date
that the Assisted Living Facility is sold. The Company may pre-pay the
indebtedness to Atria at any time without penalty.
(c) If any Member incurs a liability (a "Paying Member") arising out of or
resulting from any indebtedness of the Company that exceeds the Paying Member's
Proportionate Interest of such indebtedness, the other Member (the "Contributing
Member") shall be obligated to pay, subject to the limitations of Section 3.6(b)
above, to the Paying Member the amount by which the indebtedness of the Company
that was satisfied by the Paying Member exceeds the Paying Member's
Proportionate Share of the such indebtedness. The Contributing Member hereby
agrees
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to indemnify the Paying Member from all liabilities, losses, damages, claims
costs and expenses (including attorneys' fee) arising out of Contributing Member
failure to fulfill its obligations under the provisions of Section 3.6.
4. Accounting.
4.1 Books and Records. The Company shall maintain full and accurate books
of the Company at the Company's principal place of business, or such other place
as the Management Committee shall determine, showing all receipts and
expenditures, assets and liabilities, net income and loss, and all other records
necessary for recording the Company's business and affairs, including those
sufficient to record the allocations and distributions provided for in Sections
5, 7 and 9. Except as otherwise specifically provided herein, such books and
records shall be maintained, and the net income and net loss of the Company
shall be determined, in the same manner as the Company computes its income and
expenses for Federal income tax purposes. Such books and records shall be open
to the inspection and examination by all Members in person or by their duly
authorized representatives at all reasonable times.
4.2 Fiscal Year. The fiscal year of the Company shall be the calendar
year ("Fiscal Year").
4.3 Reports
(a) Within 90 days after the close of each Fiscal Year of the
Company, the Company shall furnish to each person who was a Member at any time
during such Fiscal Year all the information relating to the Company that is
necessary for each Member to prepare its Federal and state income or other tax
returns.
(b) Within 90 days after the close of each Fiscal Year of the
Company, the Company shall furnish to each Member a report of the business and
operations of the Company during such Fiscal Year. Such report shall, unless the
Management Committee determines otherwise, contain unaudited financial
statements, which shall include a balance sheet as of the end of such Fiscal
Year, an income or loss statement for such Fiscal Year and such other
information as in the judgment of the Management Committee is reasonably
necessary for the Members to be advised of the results of the Company's
operations.
(c) On or before the 20th day of each month, the Company shall
furnish to each of the Members a report of the Company's operations for the
preceding month. Such report shall contain, at a minimum, a balance sheet as of
the end of such month and an income statement for such month.
4.4 Tax Returns. The Company shall prepare, or cause to be prepared, and
timely filed, all Federal, state and local income tax returns and information
returns, if any, which the Company is required to file. All expenses incurred in
connection with such tax returns and information returns, as well as for the
reports referred to in Sections 4.3 and 4.5, shall be expenses of the Company.
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4.5 Member's Request for Additional Information. The Company shall also
furnish to any Member such other reports of the Company's operations and
condition as may reasonably be requested by any Member.
4.6 Revaluation of Company Property. If (a) an acquisition of a Company
Interest for more than a de minimis capital contribution occurs, or (b) a
distribution (other than a de minimis distribution) to a Member in consideration
for a Company Interest occurs, the Members may revalue the assets of the Company
at the then fair market value and adjust the Capital Accounts of the Members in
the same manner as provided in Section 7.3 in the case of a property
distribution. If there is a reallocation pursuant to this Section 4.6, then
Capital Accounts shall thereafter be adjusted for allocations of depreciation
(cost recovery) and gain or loss in accordance with the provisions of Treas.
Reg. (S) 1.704-1(b)(2)(iv)(f) and (g), and the Members' distributive shares of
depreciation (cost recovery) and gain or loss computed in accordance with the
principles of section 704(c) of the Code and the regulations promulgated
thereunder using the traditional method (within the meaning of Treas. Reg. (S)
1.704-3(b)).
4.7 Bank Accounts. The Company shall deposit all of its funds in its name
into such checking, savings or money market accounts or any combination thereof
or time certificates as designated by the Management Committee. Withdrawals
therefrom shall be made upon such signature or signatures as the Management
Committee may designate. The Company shall not commingle any of its funds with
those of any other person or entity.
5. Allocation of Net Income and Net Loss
5.1 Net Income and Net Loss
(a) Except as otherwise provided herein, the net income and net loss
of the Company for each Fiscal Year shall be allocated to the Members in
accordance with their respective Percentage Interests. For purposes of this
Agreement, the term "Percentage Interest" shall mean the percentage which the
Capital Account of a Member bears to the aggregate Capital Accounts of all of
the Members.
(b) Notwithstanding anything herein to the contrary, if a Member has
a deficit balance in such Member's Capital Account (excluding from such Member's
deficit Capital Account any amount which such Member is obligated to restore in
accordance with Treas. Reg. (S) 1.704-1(b)(2)(ii)(c), as well as any amount such
Member is treated as obligated to restore under Treas. Reg. (S)(S) 1.704-2(g)(1)
and 1.704-2(i)(5)) and unexpectedly receives an adjustment, allocation or
distribution described in Treas. Reg. (S) 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
then such Member will be allocated items of income and gain in an amount and
manner sufficient to eliminate the deficit balance in such Member's Capital
Account as quickly as possible. If there is an allocation to a Member pursuant
to this Section 5.1(b), then future allocations of net income pursuant to
Section 5.1(a) shall be adjusted so that those Members who were allocated less
income, or a greater amount of loss, by reason of the allocation made pursuant
to this Section 5.1(b), shall be allocated additional net income in an equal
amount. It is the intention of the parties that the
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provisions of this Section 5.1(b) constitute a "qualified income offset" within
the meaning of Treas. Reg. (S) 1.704-1(b)(2)(ii)(d), and such provisions shall
be so construed.
(c) If there is a net decrease in the Company's Minimum Gain (within
the meaning of Treas. Reg (S) 1.704-2(b)(2)) or Partner Nonrecourse Debt Minimum
Gain (within the meaning of Treas. Reg. (S) 1.704-2(i)(3)) during any Fiscal
Year, each Member shall be allocated, before any other allocations hereunder,
items of income and gain for such Fiscal Year (and subsequent Fiscal Years, if
necessary), in an amount equal to such Member's share (determined in accordance
with Treas. Reg. (S)(S) 1.704-2(g) and 1.704-2(i)(5), as applicable) of the net
decrease in the Company's Minimum Gain or Partner Nonrecourse Debt Minimum Gain,
as applicable, for such Fiscal Year; provided, however, that no such allocation
shall be required if any of the exceptions set forth in Treas Reg. (S) 1.704-
2(f) apply. It is the intention of the parties that this provision constitute a
"minimum gain chargeback" within the meaning of Treas. Reg. (S)(S) 1.704-2(f)
and 1.704-2(i)(4), and this provision shall be so construed.
(d) Notwithstanding anything herein to the contrary, the Company's
partner nonrecourse deductions (within the meaning of Treas. Reg. (S) 1.704-
2(i)(2)) shall be allocated solely to the Member who has the economic risk of
loss with respect to the partner nonrecourse liability related thereto in
accordance with the provisions of Treas. Reg. (S) 1.704-2(i)(1).
(e) Notwithstanding the provisions of Section 7.1, no net losses shall be
allocated to a Member if such allocation would result in such Member having a
deficit balance in such Member's Capital Account (excluding from such Member's
deficit Capital Account any amount such Member is obligated to restore in
accordance with Treas. Reg. (S) 1.704-1(b)(2)(ii)(c), as well as any amount such
Member is treated as obligated to restore under Treas. Reg. (S)(S) 1.704-2(g)(1)
and 1.704-2(i)(5)). In such case, the net loss that would have been allocated
to such Member shall be allocated to the other Members to whom such loss may be
allocated without violation of the provisions of this Section 5.1(e).
(f) Notwithstanding the provisions of Section 7.1, to the extent losses are
allocated to Members by virtue of Section 5.1(e), the net income of the Company
thereafter recognized shall be allocated to such Member until such time as the
net income of the Company allocated to such Member pursuant to this Section
5.1(f) equals the net losses allocated to such Member pursuant to Section
5.1(e).
(g) For Federal state and local income tax purposes only, with respect
to any assets contributed by a Member to the Company ("Contributed Assets")
which have an agreed fair market value on the date of their contribution which
differs from the Member's adjusted basis therefor as of the date of
contribution, the allocation of depreciation and gain or loss with respect to
such Contributed Assets shall be determined in accordance with the provisions of
section 704(c) of the Code and the regulations promulgated thereunder using the
traditional method within the meaning of Treas. Reg. (S) 1.704-3(b). For
purposes of this Agreement, an asset shall be deemed a Contributed Asset if it
has a basis determined, in whole or in part, by reference to the basis of a
Contributed Asset (including an asset previously deemed to be a Contributed
Asset pursuant to this sentence). Notwithstanding the foregoing, if the gain
from the sale of any Contributed Asset
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is being reported on the installment method for income tax purposes, then the
total amount of gain which is to be recognized by each of the Members in
accordance with the above provision in all taxable years shall be computed and
the amount of gain to be recognized by each of the Members in each year shall be
in proportion to the total gain to be recognized by each of the Members in all
taxable years.
5.2 Allocation of Excess Nonrecourse Liabilities. For purposes of section
752 of the Code and the regulations thereunder, the excess nonrecourse
liabilities of the Partnership (within the meaning of Treas. Reg. (S) 1.752-
3(a)(3)), if any, shall be allocated to the Members in accordance with their
respective Percentage Interests.
5.3 Allocations in Event of Transfer, Admission of New Member, Etc. In the
event of the transfer of all or any part of a Member's Company Interest (in
accordance with the provisions of this Agreement) at any time other than at the
end of a Fiscal Year, the admission of a new Member or disproportionate capital
contributions, the transferring Member's, new Member's and Members' shares of
the Company's income, gain, loss, deductions and credits allocable to such
Company Interest, as computed both for accounting purposes and for Federal
income tax purposes, shall be allocated between the transferor Member and the
transferee(s), the new Member and the other Members or among the Members, as the
case may be, in the same ratio as the number of days in such Fiscal Year before
and after the date of such transfer, admission or disproportionate capital
contributions; provided, however, that the Management Committee shall have the
option to treat the periods before and after the date of such transfer,
admission or disproportionate capital contributions as separate Fiscal Years and
allocate the Company's net income, gain, net loss, deductions and credits for
each of such deemed separate Fiscal Years in accordance with the Members'
respective interests in the Company for such deemed separate Fiscal Years.
6. Distributive Shares and Federal Income Tax Elections
6.1 Distributive Shares. For purposes of Subchapter K of the Code, the
distributive shares of the Members of each item of Company taxable income,
gains, losses, deductions or credits for any Fiscal Year shall be in the same
proportions as their respective shares of the net income or net loss of the
Company allocated to them pursuant to Section 5.1. Notwithstanding the
foregoing, to the extent not inconsistent with the allocation of gain provided
for in Section 5.1, gain recognized by the Company which represents ordinary
income by reason of recapture of depreciation or cost recovery deductions for
Federal income tax purposes shall be allocated to the Member (or the Member's
successor-in-interest) to whom such depreciation or cost recovery deduction to
which such recapture relates was allocated.
6.2 Elections. The election permitted to be made by section 754 of the
Code, and any other elections required or permitted to be made by the Company
under the Code, shall be made in such a manner as shall be determined by the
Management Committee.
6.3 Partnership Tax Treatment. It is the intention of the Members that the
Company be treated as a partnership for Federal, state and local income tax
purposes, and the Members shall
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not take any position or make any election, in a tax return or otherwise,
inconsistent with such treatment. The Members shall cause the Company to file
the appropriate forms with the Internal Revenue Service to elect partnership
status.
7. Distributions
7.1 Net Cash Flow. For purposes of this Agreement, the term "Net Cash
Flow" for any period shall mean the excess, if any, of (A) the sum of (i) all
gross receipts from any sources for such period, other than from capital
contributions, plus (ii) any funds released by the Management Committee from
previously established reserves (referred to in (B)(ii) below), over (B) the sum
of (i) all cash expenditures of the Company for such period not funded by
capital contributions or paid out of previously established reserves (referred
to in (B)(ii) below) plus (ii) a reasonable reserve for future expenditures as
determined by the Management Committee.
7.2 Distributions of Net Cash Flow. Except as otherwise required by
Section 7.4, the Net Cash Flow of the Company for each Fiscal Year (other than
Net Cash Flow arising in connection with the liquidation of the Company, which
Net Cash Flow shall be distributed as provided in Section 9.4) shall be
distributed at such time or times as shall be determined by the Management
Committee. All such distributions shall be made to the Members in accordance
with their respective Percentage Interests as of the close of the period with
respect to which the distribution is being made.
7.3 Property Distributions. If any property of the Company other than cash
is distributed by the Company to a Member (in connection with the liquidation of
the Company or otherwise), the fair market value of such property shall be used
for purposes of determining the amount of such distribution. The difference, if
any, of such fair market value over (or under) the value at which such property
is carried on the books of the Company shall be credited or charged to the
Capital Accounts of the Members in accordance with the ratio in which the
Members share in the gain and loss of the Company pursuant to Section 5.1. The
fair market value of the property distributed shall be agreed to by the
Management Committee and the distributee Member in good faith. If any such
property distribution is made other than in exchange for a Company Interest,
such distribution shall be made in the same manner as Net Cash Flow is
distributed.
7.4 Distributions on Sale of an Assisted Living Facility. Upon the sale of
any Assisted Living Facility by the Company, the proceeds from such sale shall
be distributed within 30 days of the date of such sale as follows:
(a) first, to the payment and discharge of all the Company's debts
and liabilities advanced by Atria or lenders pursuant to the Credit Facility as
such indebtedness relates to the Assisted Living Facility that was sold by the
Company; and
(b) second, to the Members in accordance with their respective
Capital Accounts.
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8. Management.
8.1 Management Committee.
(a) Except as otherwise expressly provided herein, the business of the
Company shall be managed by the Members by means of a management committee
composed of the persons designated pursuant to Section 8.1(b) ("Management
Committee"). Except as otherwise expressly provided herein, no act shall be
taken, sum expended, decision made or obligation incurred by the Company, unless
such matter has been approved by the Management Committee.
(b) The regular members of the Management Committee ("Representatives")
shall consist of one representative of each Member. Each Member shall designate
from time to time its one Representative by notice to the Company. By like
notice, each Member may designate alternative Representative to act in the
absence of its regular Representative. The Representative appointed by each
Member shall cast one vote on each matter brought before the Management
Committee. The Management Committee shall act only upon the unanimous vote of
its Representatives. Each Member shall have the power and authority to remove
the Representative or alternate Representative appointed by it by delivering
written notice of such removal to the Company and the other Member. Vacancies on
the Management Committee shall be filled by the Member which appointed the
Representative or alternate Representative previously holding the position which
is then vacant.
(c) The Management Committee shall meet quarterly, unless the Management
Committee decides otherwise. Meetings of the Management Committee shall also be
held upon call therefor by any Representative. Two Representatives shall
constitute a quorum of the Management Committee provided that a Representative
or alternate Representative of each Member shall be one of those present in
order to constitute a quorum. Unless waived by all of the Representatives, the
calling of a meeting of the Management Committee shall require a minimum of two
days' prior notice, except for a regular meeting date set by the Management
Committee, which shall not require any prior notice to the Representatives. The
Management Committee may meet by telephonic conference in which each
participating Representative can hear all other participating Representatives.
Unless the Management Committee decides otherwise, it shall meet at the
principal office of the Company. With advance notice to the Representative
representing the other Member, either Member may invite to any meeting of the
Management Committee any person having an equity interest in the Member or any
legal counsel, consultant or other agent of such Member, provided that no
persons other than the Representatives or alternate Representatives shall be
entitled to vote with respect to any proceedings of the Management Committee. In
addition to actions at formal meetings, the Representative or alternate
Representative representing a Member may rely on written consents and approvals
given by the Representative or alternate Representative representing the other
Member. Representatives and alternate Representatives shall not receive any
compensation or other remuneration from the Company for their services to the
Company as members of the Management Committee. Upon either Member's ceasing to
be a Member of the Company, such Member shall cause the Representative and
alternate Representative appointed by it to resign from the Management
Committee.
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(d) The Management Committee shall have all authority to govern and
direct the affairs of the Company, except as otherwise expressly set forth in
this Agreement. Any action taken by the Company in compliance with the
direction of the Management Committee shall be binding upon the Company and each
Member. The Management Committee is hereby authorized to adopt rules concerning
the conduct of the affairs of the Management Committee and the Company. The
Development Agreement and the Management Agreement, copies of which are attached
as Exhibits to this Agreement, are hereby expressly approved by all Members.
(e) The Management Committee shall have the exclusive power and
authority to do the following:
(1) To approve an annual business plan for the operation of the
Company, annual operating budgets and any material changes from the annual
operating budget or annual business plan, including the amount of any
reserves;
(2) To approve any acquisition of any real property;
(3) To authorize the Company to enter into any contract, agreement or
other arrangement involving the obligation to incur any expense, or the right
to receive any benefit, in excess of $10,000, where such contract, agreement
or arrangement is not directly related to (A) the acquisition of property, (B)
site work related to the due diligence review of any real property, or (C) the
design or construction of an Assisted Living Facility, where all of the
foregoing have been previously approved by the Management Committee;
(4) To determine whether to commence any legal action and to settle
or otherwise resolve any legal action or claim;
(5) To borrow funds, and to determine the terms of such borrowing and
whether liens, mortgages or other encumbrances can be placed upon the
Company's property in connection with such borrowing;
(6) To require additional capital contributions other than those
provided for in the approved annual business plan of the Company or in an
approved annual budget.
(7) To purchase or sell of any property having a cost or sales price
in any one transaction of more than $5,000 unless such property is purchased
in connection with the construction of facility pursuant to which construction
plan and designs have been previously approved by the Management Committee;
(8) To decide to provide any new services or to expand to additional
territory;
(9) To hire or terminate any management employee;
(10) To decide to make any capital improvement in the Company's
existing facilities;
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(11) To approve any and all general construction contracts and
architectural contracts or agreements and all plans and specifications and
drawings for any development or construction of each facility that the Company
undertakes to construct;
(12) To approve any contract or agreement, plan specifications or
drawing related to any restoration, renovation or remodeling of any existing
facility of the Company;
(13) To approve any additions, amendments or change orders to any
existing contract related to the construction of a facility where such change
or series of changes would result in an increase in expenditures for a
facility under construction in excess of $50,000;
(14) To approve any agreements or understandings with real estate
brokers, sales persons or agents not expressly set forth in the agreement for
the purchase of real property;
(15) To approve the type and amount of any insurance to be obtained by
the Company;
(16) To approve the execution of any management contracts and similar
agreements;
(17) To settle any claims for insurance proceeds if the loss
thereunder exceeds $5,000;
(18) To settle any claims for payment of awards or damages arising out
of the exercise of eminent domain by any utility or governmental authority;
(19) To obligate the Company, as a surety, guarantor or accommodation
party, to any obligation;
(20) To lend funds of the Company to a third person or extend to any
person credit on behalf of the Company other than to employees as an advance
of out-of-pocket expenses to be incurred in the ordinary course of business;
(21) To approve salary, raises, bonuses, awards, dinners, travel and
entertainment or other actions which are a direct benefit to the employees of
a Member or an affiliate of either of them, pertaining directly to the
business of the Company unless specifically set forth in an approved annual
budget;
(22) To commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Company under
the Federal Bankruptcy Code or under any similar bankruptcy, insolvency or
other law or to consent to any such relief;
(23) To hire any employee of the Company unless specifically set forth
in an annual or individual facility budget approved by the Management
Committee;
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(24) To make any other decision or to take any other action requiring
the approval of a Member under the express provisions of this Agreement;
and
(25) To enter into any agreement or incur any obligation on behalf of
the Company or to take any action with respect to the Company which would
be considered by reasonably prudent persons to be out of the normal day-to-
day management of the Company.
8.2 Day to Day Management.
(a) Assisted Care shall be responsible for locating sites for the
development of the Company's facilities, and shall provide oversight of
architectural design, design engineering, construction and such other services
relating to the design and construction of each Assisted Living Facility.
Assisted Care shall be responsible for obtaining all zoning changes, conditional
use permits and other authorizations necessary or required to operate the
Company's Assisted Living Facilities. After obtaining approval of the
development sites by the Management Committee, the Company shall have the
authority to enter into real estate purchase contracts, which contracts shall be
executed by Assisted Care on the Company's behalf.
(b) Atria shall be responsible for the operation of the Company of
each of the Assisted Living Facilities once such facility has been constructed
and a certificate of occupancy issued by the appropriate authorities. Atria
shall have the right to designate one or more persons who have the
responsibility and authority to direct the day-to-day control and management of
each Assisted Living Facility of the Company. The rights and responsibilities of
Atria as manager of each facility shall be as set forth in the Management
Agreement, a copy of which is attached as Exhibit B to this Agreement.
(c) Subject always to Section 8.1(e) hereof and the other limitations
of this Agreement, the Members, and those persons authorized to act on their
behalf regarding the business and affairs of the Company, shall have the right,
power and authority, on behalf of the Company, to execute any document or take
any action consistent with their respective responsibilities described in this
Section 8.2, including entering into such agreements with professionals such as
attorneys and other providers of services that the Company may need to
accomplish its objectives. Notwithstanding anything herein to the contrary,
neither of the Members, nor any of those persons authorized to act on their
behalf regarding the business and affairs of the Company, may take any act,
expend any sum, make any decision or incur any obligation on behalf of the
Company with respect to any of the matters set forth in Section 8.1(e) without
the prior approval of the Management Committee. Neither Member shall be deemed a
"Manager," as that term is defined in the Act.
8.3 Tax Matters Partner.
(a) The tax matters partner ("TMP") for the Company shall be Atria.
The TMP shall have such authority as is granted a TMP under the Code.
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(b) The TMP shall employ experienced tax counsel to represent the
Company in connection with any audit or investigation of the Company by the
Internal Revenue Service and in connection with all subsequent administrative
and judicial proceedings arising out of such audit. The reasonable fees and
expenses of such counsel, as well as all other reasonable and direct expenses
incurred by the TMP in serving as the TMP, shall be a Company expense and shall
be paid by the Company.
(c) The Company shall indemnify and hold harmless the TMP against
judgments, fines, amounts paid in settlement and expenses (including attorneys'
fees) reasonably incurred by the TMP in any civil, criminal or investigative
proceeding in which the TMP is involved or threatened to be involved by reason
of it being the TMP, provided that the TMP acted in good faith, within what the
TMP reasonably believed to be the scope of the TMP's authority and for a purpose
which the TMP reasonably believed to be in the best interests of the Company or
the Members. The TMP shall not be indemnified under this provision against any
liability to the Company or its Members to which the TMP would otherwise be
subject by reason of willful misconduct or gross negligence in his duties
involved in acting as TMP.
(d) Nothing herein shall constitute an election to be subject to the
partnership level audit procedures of section 6221 et seq. of the Code.
8.4 Standard of Care of Members; Indemnification.
(a) The Members, their Representatives, officers, directors,
shareholders and employees, shall not be liable, responsible or accountable in
damages to any Member or the Company for any act or omission on behalf of the
Company performed or omitted by them in good faith and in a manner reasonably
believed by them to be within the scope of the authority granted to the Member
or Representative by this Agreement and in the best interests of the Company,
unless they have been guilty of gross negligence or willful misconduct in taking
or omitting to take such acts.
(b) The Company shall indemnify the Members and their Representatives,
officers, directors, shareholders and employees for, and hold them harmless
from, any liability, loss, damage or expense (including attorneys' fees)
incurred by them by reason of any act or omission so performed or omitted by
them (and not involving gross negligence or willful misconduct).
8.5 Payments for Services Provided by Members.
(a) In connection with the services provided by Assisted Care pursuant
to Section 8.2(a), the Company shall pay Assisted Care a development fee (the
"Development Fee") equal to five percent of the "Facilities' Adjusted Cost" (as
defined herein). In no event will the Development Fee for any facility be less
than $175,000 nor more than $250,000. The Company shall pay the development fee
in three installments with the first installment being due at the closing of the
purchase of the land for such facility, the second installment being due at the
rough-in inspection approval for such a facility, and the final installment upon
the receipt of a Certificate of Occupancy for that facility. For the purposes
of this Agreement, the term "Facilities' Adjusted
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Cost" shall be the cost of all expenses incurred by the Company in connection
with the acquisition of the land, construction of the facility and all other
reasonable expenses incurred by the Company in completing the facility and
obtaining a Certificate of Occupancy.
(b) In connection with the Management Services provided by Atria,
pursuant to the terms of the Management Agreement, the Company shall pay Atria a
monthly fee equal to five percent of the collected revenues for that month. The
calculation of the fee and the method of payment shall be as set forth in the
Management Agreement.
8.6 Expenses Deductible. Members intend that all payments made to them in
accordance with the provisions of Section 8.5 be considered as occurring between
the Company and one who is not a partner within the meaning of section 707(a) of
the Code, deductible in arriving at the taxable income or loss of the Company
and in arriving at the net income or net loss of the Company for book purposes
(unless required to be capitalized).
8.7 Other Activities.
(a) Each of the Members shall devote such of its time to the affairs
of the Company's business as it shall deem necessary. The Members may engage in,
or possess an interest in, other business ventures of any nature and
description, independently or with others. Neither the Company, nor any Member,
shall have any rights by virtue of this Agreement in and to such independent
ventures, or to the income or profits derived therefrom. Except as required by
the Development Agreement, no Member shall be obligated to present any
particular business opportunity of a character which, if presented to the
Company, could be taken by the Company and each Member and their Affiliates
shall have the right to take for their own account, or to recommend to others,
any such particular business opportunity.
(b) Assisted Care acknowledges that Atria is engaged in its own
business and that it will not devote its full time or attention to the business
of the Company. Nothing herein shall prohibit Atria from continuing to conduct
or expand its existing business. For purposes of this Agreement, the term
"Affiliate" shall mean any person, corporation, partnership, limited liability
company, trust or other entity controlling (directly or indirectly), controlled
by, or under common control with, a Member.
(c) Merely because the Members or their Affiliates are directly or
indirectly interested in or connected with any person, firm or corporation
employed by the Company to render or perform a service, or to or from whom the
Company may purchase, sell or lease property, shall not prohibit the Company
from employing such person, firm or corporation or from otherwise dealing with
him or it, and neither the Company, nor any of the Members, shall have any
rights in or to any income or profits derived therefrom. All such dealings with
the Members or their Affiliates will be on terms which are competitive and
comparable with amounts charged by independent third parties and approved in
advance by the Management Committee.
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(d) No Member or Affiliate of a Member shall employ or attempt
to employ any employee of the other Member during the term of this Agreement,
unless such employee's term of employment with the other Member shall have been
terminated for one year.
8.8 Reimbursement of Expenses of Members. Except as otherwise
required by Section 8.5, the Company shall not reimburse a Member for any
expenses which a Member incurs in performing services on behalf of the Company.
9. Dissolution.
9.1 Dissolution. Notwithstanding anything in the Act to the contrary,
the Company shall dissolve upon, but not before, the first to occur of the
following:
(1) The unanimous decision of the Members to dissolve the
Company.
(2) The sale of all, or substantially all, of the Company's
assets and the collection and/or sale of any evidences of indebtedness
received in connection therewith.
9.2 Effective Date of Dissolution. Dissolution of the Company shall
be effective upon the date on which the event giving rise to the dissolution
occurs, but the Company shall not terminate until the assets of the Company
shall have been distributed as provided in Section 9.4. Notwithstanding
dissolution of the Company, prior to the liquidation and termination of the
Company, the business of the Company and the affairs of the Members, as such,
shall continue to be governed by this Agreement.
9.3 Sale of Assets Upon Dissolution. Following the dissolution of the
Company, the Company shall be wound up and the Management Committee shall
determine whether the assets of the Company are to be sold or whether some or
all of such assets are to be distributed to the Members in kind in liquidation
of the Company.
9.4 Distributions Upon Dissolution. Upon the dissolution of the
Company, the properties of the Company to be sold shall be liquidated in orderly
fashion and the proceeds thereof, and the property to be distributed in kind,
shall be distributed on or before the later to occur of (i) the close of the
Company's taxable year, or (ii) 90 days following the date of such dissolution,
as follows:
(a) First, to the payment and discharge of all of the Company's
debts and liabilities, to the necessary expenses of liquidation and to the
establishment of any cash reserves which the Management Committee determines to
create for unmatured and/or contingent liabilities or obligations of the
Company.
(b) Second, to the Members, in accordance with their respective
Capital Accounts; provided, however, that if the Management Committee
establishes any reserves in accordance with the provisions of Section 9.4, then
the distributions pursuant to this Section 9.4(b) (including
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distributions of such reserve) shall be pro rata in accordance with the balances
of the Members' Capital Accounts.
9.5 Contribution for Negative Capital Accounts. No Member shall be
required to contribute any property to the Company or any third party by reason
of having a negative Capital Account.
9.6 Liquidation of a Member's Interest. If a Member's Company
Interest is to be liquidated by agreement between the Company and such Member
(the Company being under no obligation to do so), the Member shall be entitled
to receive in liquidation an amount equal to the amount of such Member's Capital
Account at such time. For purposes of determining the Capital Account of such
Member, (i) the net income or net loss of the Company to the date of liquidation
shall be allocated to such Member and (ii) if the Management Committee
determines to revalue the assets of the Company in accordance with Section 4.6,
the Members' Capital Accounts shall be adjusted as provided in Section 4.6.
10. Withdrawal, Assignment and Addition of Members.
10.1 Assignment of a Member's Interest. The Members may not sell,
assign, transfer, pledge, hypothecate, encumber or otherwise dispose of their
Company Interest, nor withdraw from the Company, except as provided in this
Section 10. Any purported transfer which is not in compliance with the
provisions of this Section 10 shall be null and void ab initio and the Member
purporting to make such transfer shall for all purposes hereof remain a Member.
10.2 Voluntary Transfers. No Member shall be entitled to voluntarily
transfer all or any portion of such Member's Company Interest without the prior
written consent of all of the Members. Even if all of the Members consent to any
such transfer, the transferee of the Company Interest shall not become a
substitute Member unless the requirements of Section 10.5 are met, but the
transferee shall nevertheless be subject to the restrictive provisions of this
Agreement. For all purposes of this Agreement, a transferee who is not admitted
as a substitute Member shall only be entitled to receive the distributions to
which the assignor would have been entitled with respect to the Company Interest
assigned.
10.3 Involuntary Transfers.
(a) If any Member's Company Interest is sought to be transferred by
any involuntary means (other than death or adjudication of incompetency or
insanity), including, attachment, garnishment, execution, levy, bankruptcy,
seizure or transfer in connection with a divorce or marital property settlement,
then the other Members shall have the option ("Involuntary Option") to purchase
all or any portion of the Company Interest sought to be involuntarily
transferred at the price and upon the terms and conditions set forth in Section
10.4. If there is more than one other Member, then each of the other Members
shall have the right to purchase in accordance with their respective Percentage
Interests among themselves, or in such other percentages as they shall
unanimously agree. If not all of the other Members exercise their Involuntary
Options, those other Members exercising their Involuntary Options shall be
entitled to purchase the balance in
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accordance with their Percentage Interests among themselves, or in such other
percentages as they shall unanimously agree. If there is only one other Member,
such other Member may assign such Member's rights under the Involuntary Option
to a third party if the Member so desires.
(b) The Involuntary Option period shall commence upon receipt by the
other Members of actual notice of the attempted involuntary transfer and
terminate, unless exercised, 60 days thereafter, unless sooner terminated by
written refusal of the other Members. An election to exercise any Involuntary
Option shall be made in writing and transmitted to the Member whose Company
Interest is sought to be involuntarily transferred.
(c) Upon the failure or neglect of the other Members to purchase all
of the Company Interest sought to be involuntarily transferred in accordance
with this Section 10.3, the unpurchased Company Interest may be involuntarily
transferred, but such transferee may not become a substitute Member unless the
conditions of Section 10.5 have been satisfied.
(d) If, notwithstanding the provisions of this Section 10.3, any
Company Interest is effectively transferred by involuntary means without
compliance with the provisions of Section 10.3, then the Involuntary Option
shall be to purchase such Company Interest from the transferee(s).
10.4 Purchase Price and Terms.
(a) The purchase price for all of a Member's Company Interest to be
purchased pursuant to the exercise of the Involuntary Option shall be the
Capital Account of such Member as of the close of the month following the
exercise of the Involuntary Option ("Effective Date"), prorated if less than all
of a Member's Company Interest is to be purchased; provided, however, that if
the Member has a zero or negative Capital Account, the purchase price for the
Member's entire Company Interest shall be one dollar. Such Capital Account
shall be adjusted to reflect the profit or loss of the Company through the
Effective Date and contributions by, and distributions to, the Member since the
close of the Company's last Fiscal Year to the extent such adjustments have not
already been reflected in the Capital Account of the Member on the books of the
Company.
(b) The purchase price shall, at the option of the purchaser, be paid
either by cashier's or certified check on the closing date.
(c) The closing date shall occur within 30 days following the
exercise of the Involuntary Option. At the closing, the selling Member shall
execute such instruments of assignment as shall be requested by the purchaser
conveying the Member's interest in the Company Interest purchased free and clear
of all liens and encumbrances whatsoever. If the selling Member fails to execute
such document, the Management Committee may do so pursuant to the power of
attorney granted in Section 11.2.
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10.5 Substitute Member. Except as otherwise provided herein, no
assignee of a Member's Company Interest shall have the right to become a
substitute Member unless all of the following conditions are satisfied:
(a) except in the case of death or adjudication of incompetency
or insanity, the fully executed and acknowledged written instrument of
assignment has been filed with the Company setting forth the intention of the
assignor that the assignee become a substitute Member in place of the assignor
with respect to the Company Interest assigned;
(b) the assignor and assignee execute and acknowledge such other
instruments as the Management Committee deems necessary or desirable to effect
such admission, including, but not limited to, the written acceptance and
adoption by the assignee of the provisions of this Agreement; and
(c) the Management Committee has consented to the assignment and
substitution which shall be in the Management Committee's sole and absolute
discretion.
10.6 Admission of New Member. No new Member may be admitted to the
Company without the consent of a majority-in-interest of the Members (based upon
Percentage Interests). For purposes of this Section 10.6, a substitute Member
shall not be considered a new Member.
11. General.
11.1 Representations, Warranties and Covenants of Members. Each of the
Members hereby represents and warrants to, and agrees with, the Company that:
(a) The Member has the full right, power and authority to
execute, deliver and perform the terms of this Agreement.
(b) This Agreement has been duly executed and delivered on behalf
of the Member and constitutes the valid and binding obligation of the Member in
accordance with its terms.
(c) The Member is not subject to any restriction or agreement
which prohibits or would be violated by the execution hereof or the consummation
of the transactions contemplated herein or pursuant to which the consent of any
third person, firm or corporation is required in order to give effect to the
transactions contemplated herein.
11.2 Power of Attorney
(a) Each Member, as well as persons who subsequently become
Members, hereby irrevocably constitutes and appoints the Other Members, with
full power of substitution, as such Member's true and lawful attorneys-in-fact,
with full power and authority, in such Member's name, place and stead, to make,
execute, consent to, swear to, acknowledge, record and file with respect to the
Company, the following:
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(1) Any certificate or other instrument which may be required to be
filed by the Company or the Members under the laws of any state, or any
other jurisdiction in which the Company is conducting, or proposes to
conduct, business.
(2) Any and all amendments or modifications of the instruments
described in Section 11.2(a).
(3) All instruments of assignment as contemplated in Section 10.4(c)
if the seller Member fails to do so.
(4) All such other instruments as such attorney-in-fact may deem
necessary or desirable in order to carry out the provisions of this
Agreement in accordance with its terms.
(b) The powers of attorney hereby granted to the Members are a special
power of attorney coupled with an interest, is irrevocable and shall survive the
death, bankruptcy or adjudication of incompetency or insanity, of the Member
granting it. The Power of Attorney hereby granted may be exercised on behalf of
the Members by referencing all of the Members on whose behalf a document is
being executed, and with a single signature as attorney-in-fact for all of them.
(c) Each of the Members hereby agrees to execute and deliver to the
Management Committee within five days after receipt of the Management
Committee's written request therefor, such other and further powers of attorney
and other instruments which the Management Committee, in its sole discretion,
deems necessary or desirable to comply with any laws, rules or regulations
relating to the formation of the Company, or the conduct of business by the
Company.
11.3 Notices. All notices, requests, demands and other communications
required or permitted to be given or made under this Agreement shall be in
writing and shall be deemed delivered (a) on the date of personal delivery or
transmission by telegram or facsimile transmission, or (b) on the first business
day after the date of delivery to a nationally recognized overnight courier
service, or (c) on the third business day following the date of deposit in the
United States mail, postage prepaid, by registered or certified mail, return
receipt requested, in each case, addressed as follows, or to such other address,
person or entity as either party shall designate by notice to the other in
accordance herewith:
If to Atria: Atria Communities, Inc.
515 West Market Street, Suite 200
Louisville, Kentucky 40202
Attn: J. Timothy Wesley,
Chief Financial Officer
FAX: (502) 596-4160
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With copy to: Carmin D. Grandinetti
Greenebaum Doll & McDonald, pllc
3300 National City Tower
Louisville, Kentucky 40202-3197
FAX: (502) 587-3695
If to Assisted Care: George Schoepf
Assisted Care Developers, l.l.c.
1770 Indian Trail Road, Suite 400
Duluth, Georgia 30093
FAX: (770) 935-5830
With copy to: Michael Smith, Esq.
Gambrell & Stolz, L.L.P.
Suite 4300, One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308
FAX: (404) 221-6501
11.4 Amendment. Except as provided in Section 14.2(a), this Agreement
may be modified or amended from time to time only upon the written consent of
all Members.
11.5 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.
11.6 Number and Gender. Unless the context otherwise requires, when used
herein, the singular shall include the plural, the plural shall include the
singular, and all nouns, pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, as the identity of the person or
persons may require.
11.7 Severability. If any provision of this Agreement, or the application
thereof to any person, entity or circumstances, shall be invalid or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to other persons, entities or circumstances, shall
not be affected thereby and shall be enforced to the greatest extent permitted
by law.
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11.8 Arbitration.
(a) If the Members are unable to agree on any matter under this
Agreement, the unresolved matter shall be resolved by arbitration if a request
for arbitration, as provided herein, is given. Either Member may initiate
Arbitration by making a demand on the other Member and simultaneously filing
copies of the demand, together with the required fees, with the Nashville,
Tennessee, office of the American Arbitration Association ("AAA"). Within 15
days of meeting with the AAA, each Member shall designate one arbitrator. These
two arbitrators shall, within 15 days after their appointment, select a third
arbitrator. If the first two arbitrators are unable to agree upon the third
arbitrator, then the arbitrators shall apply to the AAA to designate and appoint
a person as the third arbitrator. If the Member upon whom the original
arbitration demand was served fails to designate its arbitrator within the 15-
day period, the arbitrator designated by the Member requesting arbitration shall
act as the sole arbitrator and shall be deemed to be the single, mutually
approved arbitrator to resolve the matter.
(b) The place of arbitration shall be in Nashville, Tennessee.
Arbitration shall be conducted under the auspices of the AAA. The AAA Rules
shall govern all proceedings unless otherwise provided herein. In case of
conflict between the AAA Rules and this Agreement, the provisions of this
Agreement shall govern.
(c) The Members shall have the right of discovery in accordance with
the Federal Rules of Civil Procedure except that discovery may commence
immediately upon the service of the demand for arbitration. A Member's
unreasonable refusal to cooperate in discovery shall be deemed to be refusal to
proceed with arbitration and, until the arbitration panel is complete, the
Members may enforce their rights (including the right of discovery) in the
courts. Such enforcement in the courts shall not constitute a waiver of a
Member's right to arbitration. Upon the completion of the appointment of the
arbitration panel, the arbitrators shall have the power to enforce the Members'
discovery rights.
(d) The Members expressly covenant and agree to be bound by the
decision of the arbitration panel and accept any such decision as the final
determination of the matter in dispute. A judgment of any court related to this
arbitration in the neutral location may be entered upon any award made pursuant
to this Section 11.8.
11.9 Binding Agreement. Except as otherwise provided herein, this
Agreement shall be binding upon, and inure to the benefit of, the Members
hereto, and their respective executors, administrators, heirs, successors and
assigns.
11.10 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Georgia without regard to its
conflict of laws rules.
11.11 Entire Agreement. This Agreement contains the entire agreement
between the Members hereto with respect to the subject matter hereof.
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11.12 Counterparts. This Agreement may be executed in any number of
counterparts and all such counterparts shall, for all purposes, constitute one
agreement, binding upon the Members, notwithstanding that all Members are not
signatory to the same counterpart.
11.13 No Right of Partition. The Members hereby agree that the Company's
properties are not, and will not be, suitable for partition. Accordingly, each
of the Members hereby irrevocably waives any and all rights which such Member
may have to maintain an action for partition of any of the Company's properties.
In Witness Whereof, the parties hereto have duly executed this Agreement as
of the date and year first above written.
Atria Communities, Inc.
By: /s/ J. Timothy Wesley
----------------------------------
Title: Chief Financial Officer and Vice
--------------------------------
President of Development
---------------------------------------
("Atria")
Assisted Care Developers, l.l.c.
By: /s/ George A. Schoepf
----------------------------------
Title: President
--------------------------------
("Assisted Care")
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