<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 1997
--------------------
ATRIA COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21159 61-1303738
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
515 West Market Street
Louisville, Kentucky
(Address of principal executive offices)
40202
(Zip Code)
Registrant's telephone number, including area code: (502) 596-7540
Not Applicable
(Former name or former address, if changed since last report.)
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<PAGE>
ITEM 1. NOT APPLICABLE.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 1, 1997, Atria Communities, Inc. (the "Company") completed
its previously announced acquisition of American ElderServe Corporation
("American ElderServe"), an Atlanta based operator of assisted living
communities in the southeast portion of the United States for a combination of
stock and cash plus debt assumption with a total value of approximately $30.5
million. Pursuant to the terms of the Agreement and Plan of Merger, dated as of
March 3, 1997, among the Company, Atria Communities Southeast, Inc. ("Atria
Southeast"), American ElderServe, Andy L. Schoepf, Elizabeth A. Schoepf and
Evely C. Schoepf (the "Merger Agreement"), American ElderServe merged (the
"Merger") with and into the Company's wholly-owned subsidiary, Atria Southeast.
Pursuant to the Merger Agreement, all outstanding shares of American ElderServe
common stock were converted into a total consideration of 636,487 shares of
common stock of the Company and approximately $7,421,000 in cash. The Company
financed the cash portion of the consideration from the proceeds received by the
Company from its initial public offering of common stock in August 1996.
Prior to the Merger, American ElderServe operated 12 assisted living
communities consisting of 503 units. The communities are located as follows:
ten in the greater Atlanta, Georgia area; one in Auburn, Alabama; and one in
Houston, Texas. American ElderServe also had six additional communities under
construction and scheduled to open in 1997. These communities will contain
approximately 345 additional units. The communities under construction are
located in the greater Atlanta, Georgia area; Charlotte, North Carolina;
Jacksonville, Florida; Augusta, Georgia; Houston, Texas; and Chattanooga,
Tennessee.
In connection with the Merger, Andy L. Schoepf became the Chief
Operating Officer of the Company. Mr. Schoepf was a shareholder in American
ElderServe and was serving as its President and Chief Executive Officer at the
time of the Merger. In connection with the Merger, Mr. Schoepf received 636,487
shares of common stock, including certain demand and piggyback registration
rights with respect to such common stock. In addition, the Company agreed to
nominate a person selected by Mr. Schoepf as a nominee for the Board of
Directors of the Company and obtain approval of Vencor, Inc. to vote its shares
of common stock in favor of such nominee until such time as Mr. Schoepf holds
less than 400,000 shares of common stock. The Company has nominated Mr. Schoepf
for election to its Board of Directors at the Company's upcoming Annual Meeting
of Shareholders.
Simultaneously with the closing of the Merger, the Company entered
into a joint venture development agreement. Under this agreement, the Company
owns ten percent and George A. Schoepf, former Executive Vice President of
America ElderServe and the brother of Andy L. Schoepf, owns 90% of a newly
formed development company, Elder Healthcare Developers, LLC (the "Development
Company"). The Development Company has an exclusive right to develop assisted
living communities for the Company in an 11 state region in the southeast United
States. The Company has agreed that the Development Company will develop at
least 15
2
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communities in the southeast region over the next three years. The Company will
have the first option to purchase any such developed community at the lesser of
its fair market value or the cost to develop and operate such community up to
the time of purchase plus the sum of $666,666. The Company may exercise its
option to purchase such a community only after the community's operations become
profitable as defined in the development agreement. In connection with the
development of such communities, the Company has agreed to fund all construction
costs of the Development Company through the use of its $200 million bank credit
facility (the "Credit Facility"). Such communities will secure the borrowings
under the Credit Facility. The Company will manage these communities from the
date they commence operations and has agreed to fund operating losses of these
communities through the use of its Credit Facility. George A. Schoepf will serve
as President and Chief Executive Officer of the Development Company.
ITEMS 3-6. NOT APPLICABLE.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable because below reporting thresholds.
(b) Pro forma financial information.
Not applicable because below reporting thresholds.
(c) Exhibits.
2.1 Agreement and Plan of Merger among Atria Communities, Inc., Atria
Communities Southeast, Inc., American ElderServe Corporation, Andy L.
Schoepf, Elizabeth A. Schoepf, and Evely C. Schoepf dated as of March
3, 1997.
99.1 Registration Rights Agreement between Atria Communities, Inc. and Andy
L. Schoepf dated as of April 1, 1997.
99.2 Development Agreement between Elder Healthcare Developers, LLC and
Atria Communities, Inc. dated as of April 1, 1997.
99.3 Operating Agreement of Elder Healthcare Developers, LLC dated as of
April 1, 1997.
ITEM 8. NOT APPLICABLE.
ITEM 9. NOT APPLICABLE.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATRIA COMMUNITIES, INC.
Dated: April 11, 1997 By: /s/ J. Timothy Wesley
------------------------
J. Timothy Wesley
Chief Financial Officer,
Vice President of Development and
Secretary
4
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
ATRIA COMMUNITIES, INC.,
ATRIA COMMUNITIES SOUTHEAST, INC.,
AMERICAN ELDERSERVE CORPORATION,
ANDY L. SCHOEPF
ELIZABETH A. SCHOEPF
AND
EVELY C. SCHOEPF
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March 3, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. The Merger................................................................ 1
1.1 Merger of The Company into Acquisition Subsidiary.................... 1
1.2 The Closing.......................................................... 2
1.3 Charter and Management of Surviving Corporation...................... 2
1.4 Conversion of Shares................................................. 3
1.5 Adjustment of Exchange Ratio......................................... 3
1.6 Exchange of Certificates Representing the Company Shares............. 4
1.7 Atria Shares and Value Defined....................................... 5
1.8 Unregistered Securities.............................................. 5
2. Atria's Right to Terminate this Agreement................................. 5
3. Representations and Warranties of the Company and the Shareholders........ 6
3.1 Authority; Title to the Company Shares............................... 6
3.2 Organization and Standing of the Company............................. 6
3.3 Capitalization; Stock Ownership and Rights........................... 6
3.4 Financial Statements................................................. 7
3.5 Absence of Certain Events............................................ 7
3.6 Authorization; No Violation; Compliance With Laws.................... 9
3.7 Accounts Receivable..................................................10
3.8 Books and Records....................................................10
3.9 Brokers..............................................................10
3.10 Completeness of Statements..........................................10
3.11 Condition and Sufficiency of Assets.................................10
3.12 Contracts, Arrangements and Commitments.............................11
3.13 Current Employees and Compensation; Officers and Directors..........12
3.14 Employee Benefits...................................................13
3.15 Environmental Matters...............................................15
3.16 Indebtedness to or from Employees...................................18
3.17 Insurance...........................................................19
3.18 Labor Matters.......................................................19
3.19 Liabilities Not Disclosed On Balance Sheet..........................19
3.20 Licenses, Permits and Franchises....................................20
3.21 Litigation..........................................................20
3.22 Medicare; Medicaid and Other Third-Party Payors.....................20
3.23 Minutes and Stock Books.............................................20
3.24 Proprietary Property................................................20
3.25 Securities Representations..........................................21
3.26 Shareholder's Residence.............................................21
3.27 Taxes...............................................................22
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
3.28 Taxpayer Identification Number...................................... 22
3.29 Title to Properties; Encumbrances................................... 23
4. Representations and Warranties of Atria................................... 24
4.1 Incorporation; Corporate Power...................................... 24
4.2 Authorization; No Violation......................................... 24
4.3 Securities Document................................................. 25
4.4 Validly Issued...................................................... 25
4.5 Absence of Certain Changes.......................................... 25
4.6 Litigation.......................................................... 25
4.7 Compliance with Laws................................................ 25
4.8 Brokers............................................................. 26
5. Covenants of the Parties.................................................. 26
5.1 Operation of the Company Pending Closing............................ 26
5.2 Negotiations With Others............................................ 27
5.3 Further Investigation of the Company and Atria...................... 28
5.4 Required Approvals.................................................. 28
5.5 Tax Treatment....................................................... 28
5.6 Non-Competition Agreement........................................... 29
5.7 Release and Resignation............................................. 29
5.8 Registration Rights Agreement....................................... 29
5.9 Repayment of Indebtedness from the Shareholders and
Management; Compensation Arrangements.............................. 29
5.10 Payment of the Company's Indebtedness or Release of
the Shareholders' Guaranties....................................... 29
5.11 Board Representation................................................ 29
5.12 Furniture........................................................... 29
5.13 Compliance with Conditions.......................................... 29
5.14 Further Actions..................................................... 30
6. Conditions to the Obligations of Atria.................................... 30
6.1 Representations and Warranties Correct.............................. 30
6.2 Compliance with Covenants........................................... 30
6.3 No Litigation....................................................... 30
6.4 Approval from the Lenders........................................... 30
6.5 Compliance with Laws; Governmental Approvals........................ 30
6.6 No Material Changes................................................. 30
7. Conditions to Obligations of the Shareholders and the Company............. 30
7.1 Representatives and Warranties Correct.............................. 31
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
7.2 Compliance with Covenants............................................31
7.3 No Litigation........................................................31
7.4 Due Diligence Review.................................................31
7.5 Approvals............................................................31
8. Termination...............................................................31
8.1 Termination Events...................................................31
8.2 Effect of Termination................................................32
9. Deliveries and Actions Taken at Closing...................................32
9.1 Deliveries by the Shareholders and the Company.......................32
9.2 Deliveries by Atria..................................................33
9.3 Deliveries by Atria and the Shareholders.............................33
10. Indemnification; Survival of Representations and Warranties...............33
10.1 Survival of Representations and Warranties..........................33
10.2 Indemnification by the Shareholders.................................34
10.3 Remedies............................................................34
10.4 Claims by Third Party...............................................34
10.5 Failure by the Shareholders to Defend...............................34
10.6 Obligations of the Shareholders in Defending Claims.................35
10.7 Limits on Indemnification by Shareholders...........................35
10.8 Indemnification by Atria............................................35
11. Miscellaneous Provisions..................................................35
11.1 Expenses............................................................35
11.2 Shareholders' and Company's Knowledge Defined.......................36
11.3 Notice..............................................................36
11.4 Exhibits; Entire Agreement..........................................37
11.5 Amendment; Waiver...................................................37
11.6 Binding Effect; Assignment..........................................37
11.7 Captions............................................................37
11.8 Severability of Provisions..........................................37
11.9 Further Assurances..................................................37
11.10 Confidentiality.....................................................38
11.11 Governing Law.......................................................38
11.12 Publicity; No Disclosure............................................38
11.13 Counterparts........................................................38
</TABLE>
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<PAGE>
EXHIBITS
--------
<TABLE>
<CAPTION>
DESCRIPTION EXHIBIT
<S> <C>
Non-Competition Agreement.................................................... A
Release and Resignation...................................................... B
Registration Rights Agreement................................................ C
SCHEDULES
DESCRIPTION SCHEDULE
States Where Each Acquired Company is Qualified............................ 3.2
Capital Outstanding Stock as of Closing Date............................... 3.3
Consolidated Financial Statements.......................................... 3.4
Events Since Last Fiscal Year End.......................................... 3.5
Shareholder's Required Authorizations...................................... 3.6
Broker Fees................................................................ 3.9
Condition and Sufficiency of Assets........................................3.11
Contracts, Arrangements and Commitment.....................................3.12
Current Employees, Directors and Officers..................................3.13
Employee Benefits..........................................................3.14
Environmental Matters......................................................2.15
Indebtedness from Management...............................................3.16
Insurance..................................................................3.17
Labor Matters..............................................................3.18
Liabilities Not Disclosed on Acquisition Balance Sheet.....................3.19
Licenses, Permits and Franchises...........................................3.20
Litigation.................................................................3.21
Proprietary Property.......................................................3.24
Taxes......................................................................3.27
Title to Property; Encumbrances............................................3.29
Buyer's Required Authorizations............................................ 4.2
List of Debt Guaranteed by the Shareholders................................5.10
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement And Plan Of Merger is entered into as of March 3, 1997, by
and among (i) Atria Communities, Inc., a Delaware corporation ("Atria"), (ii)
Atria Communities Southeast, Inc., a Delaware corporation ("Acquisition
Subsidiary"), (iii) American ElderServe Corporation, a Georgia corporation
("Company"), and (iv) Andy L. Schoepf, Elizabeth A. Schoepf and Evely C. Schoepf
, all of whom are Georgia residents (individually, a "Shareholder" and
collectively, the "Shareholders").
RECITALS:
A. The Company owns, operates and manages assisted-living facilities
located in the Southeastern United States. Shareholders own all of the issued
and outstanding capital stock of the Company in the following amounts:
<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDER COMMON SHARES PERCENTAGE
<S> <C> <C>
Andy L. Schoepf 500 50%
Elizabeth A. Schoepf 250 25%
Evely C. Schoepf 250 25%
</TABLE>
B. Atria has formed Acquisition Subsidiary as a wholly-owned subsidiary
corporation of Atria prior to the "Closing" (as defined herein) of the
transaction described in this Agreement. Atria desires to exchange its common
stock and cash for all of the issued and outstanding capital stock of the
Company, pursuant to the terms of a Certificate of Merger of the Company into
Acquisition Subsidiary, all pursuant to the terms of this Agreement.
C. For federal income tax purposes, the parties intend that the merger
for which this Agreement provides is a reorganization within the meaning of
section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code").
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. THE MERGER.
1.1 MERGER OF THE COMPANY INTO ACQUISITION SUBSIDIARY. Upon the
terms and subject to the conditions set forth in this "Agreement" (as defined in
Section 11.4), at the "Effective Time" (as defined in Section 1.2) the Company
shall be merged into Acquisition Subsidiary (the "Merger") and the separate
corporate existence of The Company shall thereupon cease. Acquisition Subsidiary
shall be the surviving corporation and its separate corporate existence shall
continue unaffected and unimpaired by the Merger. For purposes of reference to
Acquisition Subsidiary at and after Effective Time, Acquisition Subsidiary is
hereinafter sometimes referred
<PAGE>
to as the "Surviving Corporation". The Merger shall be pursuant to the
provisions of, and have the effect provided in, the applicable laws of the State
of Delaware and the State of Georgia.
1.2 THE CLOSING.
(A) The closing of the Merger ("Closing") shall take place at the
offices of GREENEBAUM DOLL & McDONALD, pllc, 3300 National City Tower,
Louisville, Kentucky 40202, at 10:00 a.m., local time, on the later of (1) the
third business day immediately following the day on which the last condition set
forth in Sections 6 and 7 is fulfilled or satisfied in accordance herewith or
(2) March 31, 1997, but in no event later than April 15, 1997. Each party shall
notify the others on the date that all the conditions precedent to such party's
obligation to close the transactions described in this Agreement have been
satisfied, fulfilled or waived.
(B) The date on which the Closing occurs is hereinafter referred to
as the "Effective Date". On the Effective Date, the parties shall cause a
Certificate of Merger necessary to effect the Merger and all other such
documents that may be required by applicable Delaware law to be filed with the
Delaware Secretary of State and Articles of Merger necessary to effect the
Merger and all other such documents that may be required by applicable Georgia
law to be filed with the Georgia Secretary of State. The Merger shall be
effective at the close of business ("Effective Time") on the date that all
required documents are filed with the Secretaries of State of the States of
Delaware and Georgia or on such later date as may be specified in the
Certificate and Articles of Merger.
1.3 CHARTER AND MANAGEMENT OF SURVIVING CORPORATION.
(A) From and after the Effective Time and until further amended in
accordance with applicable Delaware law, the Certificate of Incorporation of
Acquisition Subsidiary shall be the Certificate of Incorporation of Surviving
Corporation. The By-Laws of Acquisition Subsidiary, as in effect immediately
prior to the Effective Time, shall be the By-Laws of Surviving Corporation until
amended in accordance with applicable Delaware law.
(B) From and after the Effective Time, the Board of Directors of
Surviving Corporation shall consist of those persons who are the directors of
Acquisition Subsidiary immediately before the Effective Time, with each such
person continuing to serve as a director of Surviving Corporation in accordance
with the provisions of Surviving Corporation's Certificate of Incorporation and
By-Laws and applicable Delaware law. From and after the Effective Time, the
officers of Surviving Corporation shall consist of those persons who are the
officers of Acquisition Subsidiary immediately before the Effective Time, with
each such person continuing to serve as an officer of Surviving Corporation in
accordance with the provisions of the Surviving Corporation's Certificate of
Incorporation and By-Laws and applicable Delaware law.
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1.4 CONVERSION OF SHARES.
(A) At the Effective Time, all of the Company's common shares, having
a par value of $1.00 per share (the "Company Shares"), issued and outstanding
immediately prior to the Effective Time shall be converted into a number of
"Atria Shares" (as defined in Section 1.7) and cash equal to $14,250,000,
subject to an increase computed in accordance with Section 1.5 (the
"Consideration"). The Consideration shall be split evenly between the Atria
Shares (valued in accordance with Section 1.7) and (2) a cash payment (the "Cash
Payment"). The Company Shares held by each Shareholder shall be exchanged for
the percentage of Cash Payment and Atria Shares set forth below:
<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDER COMMON SHARES PERCENTAGE
<S> <C> <C>
Andy L. Schoepf 100% 0%
Elizabeth A. Schoepf 0 50%
Evely C. Schoepf 0 50%
</TABLE>
(B) The common stock, having a par value of $1.00 per share, of
Acquisition Subsidiary that is issued and outstanding immediately prior to the
Effective Time and owned by Atria shall remain issued and outstanding and shall
represent all of the issued and outstanding capital stock of Surviving
Corporation immediately following the Effective Time.
1.5 ADJUSTMENT OF EXCHANGE RATIO.
(A) The Company does not own all of the limited and general
partnerships interests in Plantation South on Cypresswood Limited Partnership
(Cypresswood"), and Plantation South of Auburn ("Auburn"), and a tenants in
common interest in Plantation South at Hartwell ("Hartwell") (Cypresswood,
Hartwell and Auburn are hereinafter referred to collectively as the
"Partnerships"). On or before the Closing Date, Company may enter into
agreements to acquire the Partnerships' interests not owned by the Company for
an aggregate purchase price (net of the debt in the case of Hartwell) for all
such Partnerships' interests in an amount not to exceed $1,750,000. To the
extent that the Company has obtained such agreements, in a form acceptable to
Atria, to acquire all of the Partnerships' interests not owned by the Company
and the Company or Acquisition Subsidiary consummates simultaneously or within
30 days following the Closing Date the acquisition all such Partnerships'
interests free and clear of any liens or encumbrances (but subject to the real
estate debt in the case of Hartwell), the Consideration shall be increased by
the amount by which $1,750,000 exceeds the purchase price for all such
Partnerships' interests expended by the Company and the Acquisition Subsidiary.
(B) If the Company or the Acquisition Subsidiary fails to acquire all
of the Partnerships' interests in the manner described in Section 1.5(a), the
Consideration shall be increased by an amount by which
(1) the product of (A) 2.55 multiplied by (i) product of (1)
total annualized net operating income (as set forth below in the following
table) associated with each of the
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Partnerships' interests that the Company or Acquisition Subsidiary acquires at
the Closing or within 30 days following the Closing Date free and clear of all
liens and encumbrances multiplied by (2) the percentage of the Partnerships'
interests that the Company or the Acquisition Subsidiary actually acquired
within such period from such third parties, exceeds
(2) the amount of the purchase price for the Partnerships' interests
acquired by the Company and Acquisition Subsidiary.
<TABLE>
<CAPTION>
TABLE ILLUSTRATING THE MAXIMUM PURCHASE PRICE
MAXIMUM PURCHASE
TOTAL THIRD PARTY NOI ATTRIBUTED PRICE FOR THIRD
ANNUALIZED PARTNERS' TO THIRD PARTY INTEREST
PARTNERSHIP NOI INTERESTS PARTY PARTNERS @ 2.55
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Auburn $ 438,792.00 49.00% $ 215,008.08 $ 548,270.60
Hartwell 357,060.00 50.00% 178,530.00 455,251.50
Cypresswood 886,188.00 33.00% 292,442.04 745,727.20
-------------- ------------------------------
Total $ 1,682,040.00 $ 685,980.12 $ 1,749,251.86
Rounded............................................ $ 1,750,000.00
==============
</TABLE>
(C) The amount of increase in the Consideration payable pursuant to
this Section 1.5 shall be divided equally between Cash Payment and Atria Shares,
valued in accordance with Section 1.7, and shall be delivered to the
Shareholders at the Closing for those Partnerships' interests acquired on the
Closing Date and within five days of the consummation of the acquisition of
Partnerships' interests by the Acquisition Subsidiary within the 30-day period
following the Closing Date.
1.6 EXCHANGE OF CERTIFICATES REPRESENTING THE COMPANY SHARES.
(A) As of the Effective Time, Atria shall deposit with National City
Bank ("Transfer Agent") for the benefit of the Shareholders certificates
representing that whole number of Atria Shares determined in accordance with
Section 1.4(a), and immediately available funds in lieu of any fraction of an
Atria Share determined in accordance with Section 1.4(a). The Cash Payment shall
be made to the Shareholders in immediately available funds at the Closing.
(B) Promptly after the Effective Time, Atria shall cause the Transfer
Agent to mail to each Shareholder receiving Atria Shares (1) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Company Shares shall pass, only upon delivery of the
certificates representing Company Shares (the "Certificates") to the Transfer
Agent and shall be in such form and have such other provisions as Atria may
reasonably specify, and (2) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Atria Shares and cash
in lieu of fractional shares. Upon surrender of a Certificate for cancellation
to the Transfer Agent by a Shareholder, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, that Shareholder shall be entitled to receive in exchange therefor (1)
certificates representing his proportionate share of that number of whole Atria
Shares determined in accordance with Section 1.4(a), (2) immediately
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<PAGE>
available funds in lieu of any fraction of an Atria Share, and (3) unpaid
dividends and distributions, if any, on, Atria Shares which such holder has the
right to receive in exchange for the Certificate surrendered pursuant to the
provisions of this Section 1, and the Certificate so surrendered shall forthwith
be canceled. No interest will be paid or accrued on the amounts due in lieu of
fractional shares, the Cash Payment, and unpaid dividends and distributions, if
any.
(C) Notwithstanding any other provisions of this Agreement, no
dividends on Atria Shares shall be paid to a Shareholder until that Shareholder
has surrendered his Certificate for cancellation as provided herein. Subject to
the effect of applicable laws, following surrender of any Certificate, there
shall be paid to the holder of the certificates representing whole Atria Shares
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time and a payment date before the date of surrender of the
Certificate, less the amount of any withholding taxes which may be required
thereon.
(D) No fractional Atria Shares shall be issued pursuant hereto. In
lieu of the issuance of any fractional Atria Share, cash adjustments will be
paid to holders for such fractional Atria Share that would otherwise be
issuable, and the amount of such cash adjustment shall be equal to such
fractional proportion of the Value of an Atria Share.
1.7 ATRIA SHARES AND VALUE DEFINED. For the purposes of this Agreement
the term "Atria Shares" means Atria's common stock, having a par value of $.10
per share, and any securities into which such common stock may be converted or
for which it may be exchanged as a result of or in connection with any merger,
consolidation or share exchange that may occur between the date hereof and the
Effective Date. For the purposes of this Agreement, the term "Value" shall be
the average per share closing price of Atria Shares quoted on the NASDAQ
National Market (as reported in the NASDAQ Composite Transactions reporting
system as published in The Wall Street Journal or, if not published therein, in
another authoritative source) for the ten consecutive trading days ending on the
date immediately prior to the Closing Date; provided, however that the Value,
for the purposes of calculating the number of Atria Shares to be issued to the
Shareholders, shall not be less than $10 nor more that $11.875
1.8 UNREGISTERED SECURITIES. The Atria Shares to be issued to
Shareholders in the Merger will not be registered under the Securities Act of
1933, as amended (the "Act"), or under the laws of any other jurisdiction. The
Shareholders may not sell, transfer, pledge or otherwise dispose of the Shares
except in compliance with the provisions of the Registration Rights Agreement, a
copy of which attached as Exhibit C.
2. ATRIA'S RIGHT TO TERMINATE THIS AGREEMENT. The Shareholders and the
Company have not yet completed the Schedules required to be delivered under this
Agreement. The Shareholders and the Company have 14 days following the date of
this Agreement to deliver to Atria completed Schedules, except that the
Shareholders and the Company shall have 28 days following the date of this
Agreement in which to deliver the Company's 1996 audited Financial Statements
described in Section 3.4. If Shareholders and the Company fail to deliver any
Schedule to Atria on or before the close of business of that 14th day (for each
schedule other than the
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<PAGE>
Company's 1996 audited Financial Statements), such Schedule shall be deemed to
state "None". For a period ending 24 days following the date of this Agreement,
Atria shall have the right to terminate this Agreement for any reason upon
notice to Shareholders, without incurring any liability or other obligation to
the Company or the Shareholders. For all references in Section 3 to the
Schedules, such disclosure and the representations and warranties corresponding
thereto shall be deemed to be made in Section 3 as of the date of such
Schedules.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS. The
Company and the Shareholders hereby represent and warrant to Atria as follows:
3.1 AUTHORITY; TITLE TO THE COMPANY SHARES. The Shareholders and the
Company have full right, power, authority and capacity to execute, deliver and
perform this Agreement in accordance with its terms. Shareholders are the record
and lawful owners of all of the issued and outstanding Company Shares and have
good and marketable title to such Company Shares free and clear of all liens,
pledges, encumbrances, proxies and charges of any nature whatsoever. None of the
Company Shares is subject to any proxy, voting trust, stock restriction, stock
purchase or stock redemption agreement or the like, other than restrictions of
transfer under applicable state and federal securities laws.
3.2 ORGANIZATION AND STANDING OF THE COMPANY.
(A) The Company is duly organized, validly existing and in good
standing under the laws of the State of Georgia. Set forth on Schedule 3.2 is a
listing of all corporations, partnerships, limited companies business trusts and
other business entities (collectively, the "Subsidiaries") in which the Company
has an investment of either debt or equity, and the type and amount of such
investment. Except as disclosed on Schedule 3.2, the Company owns, whether
directly or indirectly, no interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business trust or other business
entity. The Company and all of the Subsidiaries are hereinafter collectively
referred to as the "Acquired Companies" and individually as an "Acquired
Company".
(B) Each of the Acquired Companies has, and at all times has had,
full corporate power and authority to own and lease its properties as such
properties are now owned and leased and to conduct its business as and where its
business has and is now being conducted. Set forth on Schedule 3.2 is a list of
each jurisdiction in which each of the Acquired Companies is qualified to do
business under the laws of the states other than the state in which it is
incorporated and those jurisdictions are the only jurisdictions in which each of
the Acquired Companies is required by law to be qualified.
3.3 CAPITALIZATION; STOCK OWNERSHIP AND RIGHTS.
(A) The authorized capital stock of the Company, the number of shares
issued and outstanding as of the date hereof and the number that will be issued
and outstanding as of the Closing Date are set forth on Schedule 3.3. The
Company Shares constitutes all of the issued and outstanding capital stock of
the Company. All of the Company Shares are duly authorized, validly
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issued, fully-paid and non-assessable, and are held of record and beneficially
owned by the Shareholders as set forth on Schedule 3.3.
(B) Except as set forth in Schedule 3.3, all of the Company's interest
in each of the Subsidiaries is duly authorized, validly issued, fully-paid and
non-assessable, and are held of record and beneficially owned by the Company.
None of the interests held by the Company in any of its Subsidiaries has been
issued in violation of any federal, state or other law pertaining to the
issuance of securities, or in violation of any rights, preemptive or otherwise,
of any other investor in the Subsidiary.
(C) There are no, nor are there any arrangements not yet fully
performed which would result in any, outstanding options, warrants, agreements
or other rights entitling any person or entity to purchase or acquire any of the
Company Shares (whether unissued, treasury or issued and outstanding). There are
no outstanding securities of the Company other than the Company Shares.
(D) None of the Company Shares has been issued in violation of any
rights, preemptive or otherwise, of any present or past shareholder of the
Company or, to the knowledge of the Company and the Shareholders, in violation
of any federal, state or other law pertaining to the issuance of securities.
3.4 FINANCIAL STATEMENTS. Included as Schedule 3.4 are the consolidated
financial statements for the Company relating to the operations of the Company
for the fiscal years ended December 31, 1996, December 31, 1995, and December
31, 1994 (the "Financial Statements"). The Financial Statements for 1996 and
1995 have been audited by Bradshaw, Pope & Franklin, certified public
accountants, independent auditors of the Company ("Accountants") and the
Financial Statements for 1994 have been reviewed by the Accountants. The
balance sheet dated December 31, 1996, that is included in the Financial
Statements is referred to as the "Acquisition Balance Sheet." The Financial
Statements have been prepared from the books and records of the Company in
conformity with generally accepted accounting principles applied on a consistent
basis, and present fairly in all material respects the financial position of the
Company at the respective dates of the balance sheets included therein and the
results of operations and changes in financial position of the Company for the
respective periods covered thereby.
3.5 ABSENCE OF CERTAIN EVENTS. Since the date of the Acquisition Balance
Sheet, each of the Acquired Companies has not, except as set forth on Schedule
3.5:
(A) issued, sold, purchased or redeemed any stocks, bonds,
debentures, notes, or other securities of any of the Acquired Companies,
adjusted the number of shares of capital stock outstanding, or issued, sold or
granted any option, warrant or right to acquire any security of any of the
Acquired Companies
(B) waived or released any debts, claims, rights of value or suffered
any extraordinary loss or written down the value of any inventories or other
assets or written down or off any receivable in excess of $3,000;
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(C) declared, set aside or paid any dividend or distributions on any
Company Shares;
(D) made any commitment for capital expenditures regarding its
business in excess of $5,000 for any single item or in excess of $15,000 in the
aggregate, excluding those capital expenditures for projects under construction;
(E) made any change in its business or its operation, other than
changes in the lawful and ordinary course of business, none of which has, and
which in the aggregate have had, an adverse effect on its operations, its
financial condition, prospects or results of operations;
(F) suffered any casualty, damage, destruction or loss to any of the
Acquired Companies' assets in excess of $5,000 for any one event or in excess of
$15,000 in the aggregate;
(G) suffered any material adverse change in its assets or business;
(H) disposed of any of assets other than (1) inventory sold in the
ordinary course of business consistent with past practices and (2) worn out or
obsolete assets which have been replaced with assets of equal or greater value;
(I) terminated, placed on probation or received the resignation of,
any employee of any of the Acquired Companies who has or had managerial
responsibilities ("Management Employee");
(J) changed or amended its Articles of Incorporation;
(K) made any investment in any other corporation, limited liability
company, association, partnership, joint venture or other business organization;
(L) paid or obligated itself to pay any bonuses or extraordinary
compensation to, or made any increase (except increases in the ordinary course
of business) in the compensation payable (or to become payable by it) to, any
officer, director or Management Employee of any of the Acquired Companies, or
entered into any contract of employment not terminable by any of the Acquired
Companies upon not more than 90 days' prior notice;
(M) incurred or agreed to incur any indebtedness for borrowed money
or allowed any of its assets to be subjected to any security interest, claim,
equity, restriction, pledge, mortgage, lien, charge or encumbrance
("Encumbrances") whatsoever, other than restrictions which will not materially
interfere with any of the Acquired Companies' use and enjoyment of its assets
and property;
(N) terminated or amended or received notice of the termination or
amendment of (1) any lease, bids, contracts, commitments and other agreements,
or (2) any permits, licenses, concessions, authorizations, franchises and
similar rights granted to or held by it, which are necessary or related to its
operations;
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(O) subjected any of the assets of any of the Acquired Companies to
any Encumbrances or to any other similar charge of any nature whatsoever other
than those that may arise as a result of the existing security interests of the
Company;
(P) adopted, modified or amended any incentive bonus plan, or any
plan, contract or arrangement providing for employee insurance, bonuses,
pension, profit sharing, stock purchase, deferred compensation or other employee
benefits;
(Q) entered into any agreement or commitment (whether or not in
writing) to do any of the above;
and each of the Acquired Companies has:
(R) continued the operation of each of the Acquired Companies in the
ordinary course consistent with its past practices and maintained its
operations, assets, books of account, records and files in substantially the
same manner as heretofore; and
(S) used its best efforts to preserve its business.
3.6 AUTHORIZATION; NO VIOLATION; COMPLIANCE WITH LAWS.
(A) This Agreement has been duly executed and delivered by the
Company and the Shareholders and constitutes as to each of them, a legal, valid
and binding obligation enforceable in accordance with the terms of this
Agreement. The Company and the Shareholders have full power and authority to
enter into and deliver this Agreement and perform the transactions described
herein.
(B) Except as disclosed on Schedule 3.6 and except for any approvals
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law
(the "HSR Act"), to the Company's and Shareholders' knowledge, all consents,
approvals, resolutions, authorizations, actions or orders, including those which
must be obtained from all governmental agencies or authorities, required for the
authorization, execution and delivery of, and for the consummation of the
transactions described in, this Agreement have been obtained, except where the
failure to obtain such consents or authorizations would not have a material
adverse affect on the Company, its operations or on the ability of the parties
to consummate the transactions described in this Agreement.
(C) Except as disclosed on Schedule 3.6, the execution and delivery of
this Agreement, the consummation of the transactions described in this
Agreement, and the fulfillment of and compliance with its terms and provisions
do not (1) conflict with or violate (A) any judicial or administrative order,
award, judgment or decree applicable to any of the Acquired Companies or any of
the Shareholders, (B) any material term, condition, provision, instrument,
mortgage, agreement, contract or restriction to which either Shareholder or any
of the Acquired Companies is a party, or by which any of them is bound, or which
is applicable to the business or the assets and properties of any of the
Acquired Companies, (2) require the approval, consent or autho-
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rization of any federal, state or local court, or any creditor of the
Shareholders or any of the Acquired Companies, or any other person or entity, or
(3) give any party with rights under any instrument, agreement, contract,
mortgage, judgment, award, order or other restriction the right to terminate,
modify or otherwise change the rights or obligations of the Shareholders or any
of the Acquired Companies thereunder.
(D) To the knowledge of the Company and Shareholders, each of the
Acquired Companies has complied, and is in compliance, with all laws,
regulations, rules and orders applicable to it, its operations and the ownership
or use of its assets, except where the failure to comply would not have a
material adverse affect on any of the Acquired Companies, its financial
condition, business or operations. The Shareholders have no knowledge of any
facts or circumstances which may constitute or result in any noncompliance.
3.7 ACCOUNTS RECEIVABLE. Each of the accounts receivables reflected on
the Acquisition Balance Sheet and each of the accounts receivable acquired or
generated since the date of the Acquisition Balance Sheet (a) is valid and
accurately reflected as to amount, (b) arises from the furnishing of living
accommodations and services to assisted-living community residents or
facilities, (c) is legally enforceable according to their terms, (d) to the
Company's and Shareholder's knowledge is not subject to any right, counterclaim
or set-off by the other party, and (e) to the knowledge of the Company and the
Shareholders, is collectible net of reserve set forth in the Acquisition Balance
Sheet in full within 90 days after the date on which it first becomes due and
payable.
3.8 BOOKS AND RECORDS. To the knowledge of the Company and the
Shareholders, the books of account of each of the Acquired Companies are
properly maintained, and all monies due or to become due from or to or owing by,
and all liabilities (actual or accrued) of any of the Acquired Companies, by
reason of any transaction, matter or cause whatsoever have been duly, correctly
and completely entered therein in all material respects.
3.9 BROKERS. Except as disclosed in Schedule 3.9, all negotiations
relative to this Agreement and the transactions described in this Agreement have
been conducted by the Company and the Shareholders directly with Atria, without
the assistance or intervention of any other person, in such manner as to give
rise to any valid claim against Atria, the Company or the Shareholders for a
finder's fee, brokerage commission or other like payment.
3.10 COMPLETENESS OF STATEMENTS. The Shareholders and each of the Acquired
Companies have disclosed to Atria in writing all material facts known to them
relating to the representations and warranties made by them in this Agreement.
No representation, warranty or covenant of any of the Acquired Companies or the
Shareholders in this Agreement contains any untrue statement of a material fact,
any misstatement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
3.11 CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth in Schedule
3.11, to the knowledge of the Company and Shareholders, the buildings, plants,
structures, and equipment of each of the Acquired Companies are structurally
sound, are in good operating condition and
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repair, and are adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The building, plants, structures, and equipment of
each of the Acquired Companies are sufficient for the continued conduct of
each's business after the Closing in substantially the same manner as conducted
prior to the Closing.
3.12 CONTRACTS, ARRANGEMENTS AND COMMITMENTS.
(A) Except as set forth on Schedule 3.12, none of the Acquired
Companies is a party to, or subject to, any of the of following, whether written
or oral:
(1) any management or employment contract or any contract,
arrangement or commitment with any director, officer, employee, agent,
shareholder or representative of any of the Acquired Companies;
(2) any contract, arrangement or commitment with a labor union
or association or other employee group;
(3) any contract, arrangement or commitment containing covenants
by it not to compete in any line of business with any person or entity or
restricting the clients or customers from whom or the area in which it may
solicit or conduct its business;
(4) any licensing agreement or similar contract;
(5) any contracts, arrangements or commitments for capital
expenditures in excess of $5,000 as to any one or in excess or $15,000, in
the aggregate, excluding those capital expenditures for projects under
construction as of the date hereof;
(6) any contract, arrangement, commitment or pledge for civic or
charitable contributions;
(7) any agreement creating an Encumbrance against any of Assets
of any of the Acquired Companies;
(8) any contract, arrangement or commitment relating to borrowed
money or creating or providing for long-term debt or continuing credit or any
guaranty or suretyship obligation with respect thereto or any power of
attorney;
(9) any contract, arrangement or commitment continuing over a
period of more than one year from the Closing Date and which involves the
purchase of goods or services or otherwise creates any obligation on the part
of any Company in excess of $5,000;
(10) any agreement in which any of the Acquired Companies has
covenanted to keep any information confidential;
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(11) any material contract, arrangement or commitment not made in
the ordinary course of business; or
(12) any lease or option to lease any real or personal property
to or from any party.
(B) Each of the Acquired Companies has delivered to Atria a complete
copy of each agreement, contract or document listed on Schedule 3.12 (the
"Contracts"). Each of the Acquired Companies has materially performed in all
respects all obligations to be performed by it under the terms of the Contracts
through the date of this Agreement, and is not in default under any Contract.
Moreover, to the knowledge of the Company and the Shareholders, no event has
occurred which, with notice or the passage of time, or both, would constitute a
default under any Contract and (1) there is no basis for any of the other
parties to the Contracts to assert that any of the Acquired Companies is in
default thereunder and (2) the other parties to such Contracts are not in
default thereunder. Except for those Contracts whose terms require the prior
consent of the other party thereto for a change of control of the Company, the
consummation of the transactions described in this Agreement will not cause a
default under any Contract. Except as disclosed on Schedule 3.12, there are no
existing disputes between any of the Acquired Companies, on the one hand, and
any other party to any Contract, on the other hand.
3.13 CURRENT EMPLOYEES AND COMPENSATION; OFFICERS AND DIRECTORS.
(A) Set forth on Schedule 3.13 is a complete list of each of the
Acquired Companies' directors, officers and all non-temporary employees of each
of the Acquired Companies on the date hereof along with the amount of the
current annual salaries or hourly rate and the total compensation paid or due
for services to each director, officer or non-temporary employee for 1996, and a
full and complete description of any commitments to such non-temporary employees
and officers regarding compensation payable thereafter. There has been no change
in the salaries or compensation paid to the Management Employees or officers of
any of the Acquired Companies since the date of the Acquisition Balance Sheet,
except as set forth on Schedule 3.13. Except as disclosed on Schedule 3.13, each
of the Acquired Companies has not, because of past practices or previous
commitments with respect to its employees or officers, established any rights or
expectations on the part of such employees or officers to receive additional
compensation inconsistent with past practices with respect to any period after
the date hereof.
(B) Except as disclosed on Schedule 3.13, all of the personnel
provided by each of the Acquired Companies to its clients and customers are
treated for all purposes as employees of such Acquired Company and none of such
personnel is treated by that Acquired Company, either for tax or any other
purpose, as an independent contractor. All of the temporary employees are
compensated on an hourly basis for the work actually performed for the clients
and customers of each of the Acquired Companies and none of such employees has,
because of past practices or previous commitments with such temporary employees,
established any rights or expectations on the part of such employees to receive
additional compensation with respect to any period after the date hereof.
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(C) Except as set forth on Schedule 3.13, neither the execution and
delivery of this Agreement nor the consummation of the transactions described
herein will (a) result in any payment (whether severance pay, unemployment
compensation or otherwise) becoming due from any of the Acquired Companies to
any employee, director or officer or former employee, director or officer of any
of the Acquired Companies, (b) increase any benefits otherwise payable to any
employee, director or officer or former employee, director or officer of any of
the Acquired Companies, or (c) result in the acceleration of the time of payment
or vesting of any such benefits.
(D) Except as set forth on Schedule 3.13, no Management Employee or
officer of any of the Acquired Companies is a party to or subject to any
contract, arrangement or commitment containing covenants by such employee or
officer not to compete in any line of business with any person or entity or
restricting the customers from whom or the area in which the Management Employee
or officer may solicit or conduct business.
3.14 EMPLOYEE BENEFITS.
(A) Except as set forth on Schedule 3.14, the Company does not
maintain or contribute to any bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation, fringe benefit,
cafeteria, employment, consulting, severance or termination pay, hospitalization
or other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program, agreement or arrangement,
any other "employee benefit pension plan", "employee welfare benefit plan", or
"multi-employer plan" (within the meaning of Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder ("ERISA")), or any
other employee benefit plan, program, agreement or arrangement whatsoever,
whether written or unwritten, for the benefit of any employee, former employee,
officer, director, agent or representative of the Company (collectively, the
"Employee Benefit Plans").
(B) Except as provided on Schedule 3.14, with respect to each
Employee Benefit Plan, the Company has heretofore furnished to Buyer true and
complete copies of each of the following documents and Buyer acknowledges
receipt of each of the following documents:
(1) a copy of the Employee Benefit Plan (including all
amendments thereto), if any;
(2) a copy of the most recent annual report (Form 5500 series),
if required under ERISA or the Code, with respect to each such Employee
Benefit Plan;
(3) a copy of the most recent Summary Plan Description, if
required under ERISA, with respect to each such Employee Benefit Plan;
(4) if the Employee Benefit Plan is funded through a trust or
any third party funding vehicle, a copy of the trust or other funding
agreement (including all amendments thereto) and the latest financial
statements thereof; and
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(5) the most recent determination letter received from the
Internal Revenue Service with respect to each Employee Benefit Plan that is
intended to be qualified under Code Section 401(a).
(C) No representation has been made to participants or beneficiaries
with respect to benefits under any of the Employee Benefit Plans that would
entitle them to benefits greater than or in addition to the benefits provided by
the actual terms of such plans.
(D) Each of the Employee Benefit Plans is, and has been, operated and
administered in all material respects, including reporting and disclosure
requirements, in accordance with the requirements of all applicable law, and all
reports required by any governmental agency with respect to each such plan have
been timely filed, except as identified on Schedule 3.14. The Company has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Employee Benefit Plan subject to those standards and
with respect to each other plan maintained by the Company (to the extent such
obligations require contributions or other actions on or prior to the date
hereof) and no Employee Benefit Plan has incurred any "accumulated funding
deficiency" (whether or not waived) as defined in Section 412 of the Code nor
applied for a waiver of the minimum funding standards of ERISA or the Code. All
bonding required under ERISA with respect to each of the Employee Benefit Plans
has been obtained and is in full force and effect. The Company is not liable for
any contributions or excise taxes due and unpaid under any of the Employee
Benefit Plans as of the date hereof, except as identified in Schedule 3.14. The
Company has not been required to pay, or incurred, any withdrawal liability
within the meaning of Section 4021 of ERISA to any multi-employer plan. The
Company has not engaged in any transaction with a principal purpose of evading
liability under Title IV of ERISA or incurred any liability under Sections 4062,
4063 or 4064 of ERISA. The Company has performed all obligations required to be
performed by it under, and is not in material default under, or in material
violation of, and has no knowledge of any material default or material violation
by any party to, any Employee Benefit Plan.
(E) Except as disclosed on Schedule 3.14, each of the Employee
Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code, has received a favorable determination letter from the Internal
Revenue Service to that effect, which letter covers the requirements of the Tax
Reform Act of 1986 and the regulations thereunder, and no amendment to any such
plan, or failure to amend any such plan, since such determination adversely
affects its qualified status. No Employee Benefit Plan covers any individual
other than an employee or former employee, officer or director of the Company
and their beneficiaries and dependents, as applicable. The Company is not
obligated to provide benefits in respect of current or prior employment to any
individual other than pursuant to one or more of the Employee Benefit Plans. The
Company has not made, or intends to make, any commitments to establish any new
plan, program, agreement or arrangement that would, if in existence on the date
hereof, be an Employee Benefit Plan.
(F) Except as set forth on Schedule 3.14, no Employee Benefit Plan
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees, officers,
or directors of The Company for periods extending beyond
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their retirement or other termination of service (other than (1) coverage
mandated by applicable law, or (2) death benefits or retirement benefits under
any "employee benefit pension plan" as that term is defined in Section 3(2) of
ERISA).
(G) Except as set forth in Schedule 3.14, there has been no
prohibited transactions (within the meaning of Section 406 of ERISA or Section
4975 of the Code) and not otherwise exempt under ERISA or the Code with respect
to any Employee Benefit Plan; The Company has not incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code and, to the knowledge
of the Company after due inquiry, no fact or event exists, including the
transaction contemplated hereby, that could give rise to any such liability;
there are no pending, and to the knowledge of the Company after due inquiry,
threatened claims (other than routine claims for benefits) by, on behalf of, or
against any Employee Benefit Plan; and no litigation, investigation or
administrative or other proceeding has occurred or, to the knowledge of the
Company after due inquiry, is threatened involving any Employee Benefit Plan.
(H) Except as provided on Schedule 3.14, the consummation of the
transactions contemplated by this Agreement will not (1) except pursuant to the
Employee Benefit Plans set forth in Schedule 3.14, entitle any current or former
employee or officer of the Division to severance pay, unemployment compensation
or any other similar payments, except as expressly provided in this Agreement,
or (2) accelerate the time of payment or vesting or increase the amount of
compensation due any such employee or officer, except as expressly provided in
this Agreement.
(I) Each group health plan (as defined in Section 4980B(g)(2) of the
Code) maintained by the Company has been administered in compliance with the
continuation coverage and notice requirements of Title I, Subtitle B, Part 6 of
ERISA and Section 4980B of the Code (and the regulations thereunder).
(J) For purposes of this Section 3.14, any reference to the Company
shall be deemed to refer also to any entity which is under common control or
affiliated with the Company within the meaning of Section 4001(a)(14) of ERISA
and Section 414(b), (c), (m) and (o) of the Code.
3.15 ENVIRONMENTAL MATTERS.
(A) Except as disclosed on Schedule 3.15, each of the Acquired
Companies is, and at all times has been, in material compliance with, and has
not been and is not in violation of or liable under, any "Environmental Law" (as
defined in Section 3.15(i)). None of the Acquired Companies or the Shareholders
have any basis to expect, nor has any of them or any other person for whose
conduct any of the Acquired Companies is or may be held to be responsible
received, any actual or threatened order, notice, or other communication from
(1) any governmental body or private citizen acting in the public interest, or
(2) the current or prior owner or operator of any facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation to undertake or bear the cost of any
"Environmental, Health, and Safety Liabilities" (as defined in Section 3.15(h))
with respect to any of the facilities or any other properties or assets (whether
real, personal, or mixed) in which any of the Acquired
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Companies has had an interest. None of the Acquired Companies generated,
manufactured, refined, transferred, imported, used (except in normal course of
business of the Acquired Companies), or processed, any "Hazardous Materials" (as
defined in Section 3.15(k)) or transferred, disposed, recycled or received any
Hazardous Materials.
(B) There are no pending or, to the knowledge of the Shareholders and
the Company, threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, related to or affecting any
of the facilities or any other properties and assets (whether real, personal, or
mixed) in which any of the Acquired Companies has or had an interest.
(C) Neither the Shareholders or the Company has any reasonable basis
to expect, nor has any of them or any other person for whose conduct any of the
Acquired Companies is or may be held responsible, received, any citation,
directive, inquiry, notice, order, summons, warning, or other communication that
relates to "Hazardous Activity" (as defined in Section 3.15(j)), Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the facilities or any other properties or
assets (whether real, personal, or mixed) in which any of the Acquired Companies
had an interest.
(D) Neither the Shareholders nor any of the Acquired Companies, nor
any other person for whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities related to the facilities or to
any other properties and assets (whether real, personal, or mixed) in which any
of the Acquired Companies (or any predecessor), has or had an interest, or, to
the knowledge of the Company and the Shareholders, at any property geologically
or hydrologically adjoining the facilities or any such other property or assets.
(E) There are no Hazardous Materials present on or in the environment
at the facilities or, to the knowledge of the Company and the Shareholders, at
any geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither the Shareholders nor any of the
Acquired Companies, nor any other person for whose conduct any of the Acquired
Companies is or may be held responsible, has permitted or conducted, or is aware
of, any Hazardous Activity conducted with respect to the facilities or any other
properties or assets (whether real, personal, or mixed) in which any of the
Acquired Companies has or had an interest except in full compliance with all
applicable Environmental Laws.
(F) There has been no release or, to the knowledge of the
Shareholders and the Company, no threat of release, of any Hazardous Materials
at or from the facilities of any of the Acquired Companies or, to the knowledge
of the Company and the Shareholders, any geologically
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or hydrologically adjoining property, whether by the Shareholders, any of the
Acquired Companies, or any other person.
(G) The Company has delivered to Atria true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by the Shareholders or any of the Acquired Companies pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the facilities, or
concerning compliance by the Shareholders, any of the Acquired Companies, or any
other person for whose conduct they are or may be held responsible, with
Environmental Laws.
(H) For purposes of this Section 3.15, the term "Environmental,
Health, and Safety Liabilities" means any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Law or
Federal, state or local law or regulation related to occupational safety and
health and consisting of or relating to:
(1) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(2) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or any Federal, state or local law or regulation related to
occupational safety and health;
(3) financial responsibility under Environmental Law or any
Federal, state or local law or regulation related to occupational safety and
health for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or any Federal, state or
local law or regulation related to occupational safety and health (whether or
not such Cleanup has been required or requested by any governmental body or
any other person) and for any natural resource damages; or
(4) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or any Federal, state or local law
or regulation related to occupational safety and health.
(I) For purposes of this Section 3.15, the term "Environmental Law"
means any legal requirement that requires or relates to:
(1) advising appropriate authorities, employees, and the public
of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the environment;
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(2) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(3) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(4) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health or
the environment when used or disposed of;
(5) protecting resources, species, or ecological amenities;
(6) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(7) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention; or
(8) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
(J) For purposes of this Section 3.15, the term "Hazardous Activity"
means the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, release, storage, transfer,
transportation, treatment, or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on, under, about, or from the facilities
or any part thereof into the environment, and any other act, business,
operation, or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the facilities, or
that may affect the value of the facilities of any of the Acquired Companies.
(K) For purposes of this Section 3.15, the term "Hazardous Materials"
means any waste or other substance that is listed, defined, designated, or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic
or a pollutant or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes therefor and
asbestos or asbestos-containing materials.
3.16 INDEBTEDNESS TO OR FROM EMPLOYEES. Except as set forth on Schedule
3.16, neither the Shareholders nor any of the directors, officers, employees,
agents or representatives of any of the Acquired Companies, nor any family
member of any of them, is now indebted to any of the Acquired Companies, except
for normal travel expense advances, nor is any of the Acquired Companies
indebted or obligated to any employee for payment other than the payment of
salary and wages for services performed in the ordinary course.
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3.17 INSURANCE. Included as Schedule 3.17 is a complete listing of all
insurance policies, including all errors and omissions insurance policies,
insuring any of the Acquired Companies, and bonds issued concerning any of the
Acquired Companies, detailing the coverage insured against and the amount
thereof, the insurance carrier, the policy number and the premium payments.
Except as disclosed on Schedule 3.17, any of the Acquired Companies does not and
has not maintained any self-insurance programs. Schedule 3.17 further includes,
to the extent currently available to any of the Acquired Companies and to the
Shareholders' knowledge, a statement of all claims for insured losses filed by
any of the Acquired Companies within the three-year period prior to the date
hereof. Except as listed on Schedule 3.17, any of the Acquired Companies has not
received any oral or written notice from any insurance carrier that (a) any of
the Acquired Companies' coverage will be canceled in whole or in part or (b)
that the premiums or premium rates (where the premium is computed on a
fluctuating base) will be increased.
3.18 LABOR MATTERS. Any of the Acquired Companies has not been, nor is it
currently a party to, nor negotiating, any collective bargaining agreement.
Since January1, 1995, there has not been and there is not presently pending or
existing any union organizational or representation efforts underway or
threatened, nor are there any existing or threatened labor strikes, slow downs,
disputes, grievances or disturbances which might affect any of the Acquired
Companies' operations. To the knowledge of the Company and the Shareholders,
each of the Acquired Companies has complied with the National Labor Relations
Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the
Occupational Safety and Health Act, Executive Order 11246 and all other federal
or state laws relating to wages, hours and collective bargaining.
3.19 LIABILITIES NOT DISCLOSED ON BALANCE SHEET. As of the date of the
Acquisition Balance Sheet, any of the Acquired Companies had no debts,
obligations (including obligations as a guarantor) or liabilities of any nature,
whether fixed, absolute, accrued, or, to the knowledge of the Company and the
Shareholders, contingent except as shown on the Acquisition Balance Sheet or as
shown on Schedule 3.19. Except as shown on Schedule 3.19, since the date of the
Acquisition Balance Sheet, none of the Acquired Companies has incurred or become
subject to any debts, obligations (including obligations as a guarantor) or
liabilities of any nature, whether fixed, absolute, accrued or, to the knowledge
of the Company and the Shareholders, contingent, other than debts, obligations
and liabilities incurred in the ordinary course of business consistent with past
practices, or in connection with the Company's ongoing construction projects,
development and acquisitions plans, all of which have been paid in full in the
ordinary course of business or are reflected on any of the Acquired Companies'
regular books of account on the date hereof and will be reflected on such books
on the Closing Date and none of which (a) is inconsistent with the
representations, warranties and covenants of any of the Acquired Companies and
the Shareholders contained in this Agreement, (b) has or may be expected to have
a material adverse effect on the businesses, financial condition, or results of
operations of any of the Acquired Companies or (c) constitutes a guarantee of
any form or type.
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3.20 LICENSES, PERMITS AND FRANCHISES. Schedule 3.20 lists all permits,
concessions, franchises, certificates of compliance, certificates of need,
consents, licenses, orders, approvals, certificates and authorizations held by
the Acquired Companies (the "Permits"). To the knowledge of the Company and the
Shareholders, except as set forth on Schedule 3.20, each of the Acquired
Companies has all Permits for all applicable Federal, state and local
authorization necessary or required for any of the Acquired Companies'
operations. Each of the Acquired Companies has furnished Atria a complete copy
of each of the Permits. All of the Permits are in full force and effect, and to
the Company's and the Shareholders' knowledge, no suspension or cancellation of
any of them is threatened.
3.21 LITIGATION. Except as set forth on Schedule 3.21, there are no
investigations, actions, lawsuits, claims, arbitrations or proceedings, either
judicial, administrative or otherwise, pending or, to the knowledge of the
Company and the Shareholders, threatened or contemplated, against or affecting
any of the Acquired Companies, the Shareholders, the assets or properties of any
of the Acquired Companies, the business of any of the Acquired Companies, or any
employee, officer or director of any of the Acquired Companies, by or before any
court, governmental department, commission, board, bureau, agency, mediator,
arbitrator or other person or instrumentality. To the knowledge of the Company
and the Shareholders, none of the Acquired Companies is subject to, or in
default under, any court or administrative order, writ, injunction or decree
applicable to it, any of the Acquired Companies' business, the assets and
properties of none of the Acquired Companies, or to any of the Acquired
Companies' employees and none of the Acquired Companies is in violation of any
law, regulation, or rule applicable to any of them.
3.22 MEDICARE; MEDICAID AND OTHER THIRD-PARTY PAYORS. None of the
Acquired Companies is and has not been a participant in the Medicare and
Medicaid insurance programs.
3.23 MINUTES AND STOCK BOOKS. The minute and stock books of the Company
contain complete record of any and all proceedings and actions at all meetings
of any of the Acquired Companies' stockholders and board of directors required
to be set forth in such minutes or for which minutes were prepared.
3.24 PROPRIETARY PROPERTY. The Company owns no trade names, trademarks,
service marks, trade dress, copyrights or any other intangible assets and
goodwill. None of the Acquired Companies uses or otherwise needs any
intellectual property for the operation of the business of any of the Acquired
Companies. None of the Acquired Companies has agreed to indemnify any person in
connection with any claim for infringement of any Intellectual Property. None of
the Acquired Companies or the Shareholders have received notice of any claim
that it is in violation or infringement of any Intellectual Property and, to the
knowledge of the Company and the Shareholders, none of the Acquired Companies is
infringing any intellectual property of any third party.
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3.25 SECURITIES REPRESENTATIONS.
(A) Each Shareholder hereby acknowledges receipt of (1) Atria's
quarterly report on Form 10-Q for the quarter ending September 30, 1996, (2) the
Registration Statement of Atria, dated July 29, 1996, on Form S-1, and (3)
Atria's 8-K, dated September 10, 1996 (collectively, the "Securities
Documents").
(B) The Shareholder receiving Atria Shares represents that he (1) has
received all the information it deems necessary concerning Atria to evaluate the
transactions described in this Agreement, (2) is acquiring Atria's Shares for
his own account, and (3) has no present intention of dividing his interest in
Atria's Shares with others or disposing of Atria's Shares in the absence of an
opinion of counsel acceptable to Atria to the effect that Atria's Shares may be
transferred without registration or unless the transfer of Atria's Shares is
covered by an effective registration statement.
(C) The Shareholder receiving Atria Shares represents that he is
acquiring the Atria Shares for his own account for investment, and not with a
view to the distribution or sale of Atria Shares and he is an accredited
investor as defined in Rule 501 under the Securities Act. Such Shareholder has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment in Atria
Shares. Such Shareholder understands that, except as may otherwise be provided
in the "Registration Rights Agreement" (as defined in Section 5.8), such
Shareholder's ability to dispose of the Atria Shares in the public market for
such stock or otherwise is limited by the Securities Act, including Rule 144
promulgated thereunder, and, therefore, he may have to bear the risk of his
investment in such Atria Shares for an indefinite period of time.
(D) The Shareholder receiving Atria Shares hereby acknowledges that
each certificate representing Atria Shares that are issuable to such Stockholder
pursuant to this Agreement shall be stamped or otherwise imprinted with a legend
substantially to the following effect:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and are "restricted securities" as defined in Rule
144 promulgated under the Act. The securities may not be
sold or offered for sale or otherwise distributed except (i)
in conjunction with an effective registration statement for
the shares under the Act, (ii) in compliance with Rule 144,
or (iii) pursuant to an opinion of counsel satisfactory to
any of the Acquired Companies that such registration or
compliance is not required as to such sale, offer or
distribution.
3.26 SHAREHOLDER'S RESIDENCE. The residence or principal place of business
address set forth on the signature page is Shareholder's true and correct
residence or principal place of business, and is the only jurisdiction in which
an offer to sell Atria's Shares was made to Shareholder.
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3.27 TAXES.
(A) Each of the Acquired Companies has timely paid all ad valorem
property taxes and other assessments levied on its assets and properties which
have heretofore become due and payable. Each of the Acquired Companies has
withheld amounts from its employees in compliance with the tax withholding
provisions of the Code and other applicable federal, state or local laws, and
has filed proper and accurate federal, state and local returns and reports, as
appropriate, for all years and periods (and portions thereof) for which any such
returns and reports were due for employee income tax, withholding taxes, social
security taxes and unemployment taxes. Each of the Acquired Companies has paid
or remitted all taxes and other amounts from its employees' wages for periods
ended on or prior to the date hereof, and, for periods ended after the date
hereof, for which payment is not yet due, each of the Acquired Companies has
made adequate accruals on its regular books of accounts.
(B) Each of the Acquired Companies has prepared, signed and filed all
federal, state and other tax returns and reports required to be filed by law and
regulation on or before the date hereof, and has timely paid or accrued all
taxes or installments thereof, interest, penalties, assessments and deficiencies
of every kind and nature whatsoever which were shown due and owing on such tax
returns and reports or which were or are otherwise due and owing under all
applicable laws and regulations for any periods for which returns or reports
were due. The amounts recorded as payable for taxes in the Acquisition Balance
Sheet is sufficient for the payment of all federal, state, foreign and local
taxes attributable to all periods ended on or before December 31, 1996, and
adequate accruals have been made by any of the Acquired Companies for all
liabilities for taxes accruing since the date of the Acquisition Balance Sheet.
There are in effect no agreements, waivers or other arrangements providing for
an extension of time with regard to the assessment of any tax, or any deficiency
with respect thereto, against any of the Acquired Companies, other than routine
extensions in filing deadlines. Except as set forth on Schedule 3.27, there are
no actions, suits, proceedings, investigations or claims now pending, nor, to
the knowledge of the Company and the Shareholders proposed, against any of the
Acquired Companies, nor are there any matters under discussion with the Internal
Revenue Service, or other governmental authority, relating to any taxes or
assessments, or any claims or deficiencies with respect thereto. The federal
income tax returns for any of the Acquired Companies have not been audited by
the Internal Revenue Service.
(C) Complete copies of all federal and state income tax returns filed
by any of the Acquired Companies since December 31, 1993, are included as part
of Schedule 3.27.
3.28 TAXPAYER IDENTIFICATION NUMBER. The Shareholders certify that (a) the
number shown on the signature page opposite each Shareholder's name is that
Shareholder's correct taxpayer identification number, (b) that the Shareholders
are not subject to backup withholding because (1) the Shareholders have not been
notified that they are subject to backup withholding as a result of a failure to
report all interest or dividends or (2) the Internal Revenue Service has
notified the Shareholders that they are no longer subject to backup withholding,
and (c) the Shareholders are not foreign persons within the meaning of Sections
1445 and 1446 of the Code, and the regulations promulgated thereunder.
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3.29 TITLE TO PROPERTIES; ENCUMBRANCES.
(A) Schedule 3.29 of this Agreement contains a complete and accurate
list of all real property, leaseholds, or other interests therein owned by any
of the Acquired Companies. The Company has delivered or made available to Buyer
copies of the deeds and other instruments (as recorded) by which any of the
Acquired Companies acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
any of the Acquired Companies and relating to such property or interests.
(B) Each of the Acquired Companies owns good and marketable title to
the real property each of the Acquired Companies owns, subject only to the
matters permitted by this Section 3.29 and the exceptions set forth on the
related title insurance policies. All buildings, plants, and structures owned by
any of the Acquired Companies lies wholly within the boundaries of the real
property owned by any of the Acquired Companies and does not encroach upon the
property, or to the knowledge of the Company and Shareholders otherwise conflict
with the property rights, of any other Person.
(C) To the knowledge of the Company and the Shareholders, each of the
Acquired Companies owns, subject only to the matters permitted by this Section
3.29, all of personal properties and assets (whether tangible or intangible)
that they purport to own or located in the facilities owned or operated by each
of the Acquired Companies or reflected as owned in the books and records of any
of the Acquired Companies, including all of the properties and assets reflected
in the Acquisition Balance Sheet (except for assets held under capitalized
leases disclosed in Schedule 3.29 of this Agreement and personal property sold
since the date of the Acquisition Balance Sheet in the ordinary course of
business and consistent with past practice) and all of the properties and assets
purchased or otherwise acquired by any of the Acquired Companies since the date
of the Acquisition Balance Sheet (except for personal property acquired and sold
since the date of the Acquisition Balance Sheet in the ordinary course of
business and consistent with past practice).
(D) All material properties and assets reflected in the Acquisition
Balance Sheet are free and clear of all Encumbrances other than:
(1) In the case of real property, (A) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts
from the value or impairs the use of the property subject thereto, or impairs
the operations of any of the Acquired Companies, and (B) zoning laws and
other land use restrictions, rights of way, building use restrictions,
exceptions, variances, reservations, none of which have a material adverse
effect on the operations of any of the Acquired Companies at such real
property that do not impair the present or anticipated use of the property
subject thereto;
(2) Mortgages or security interests shown on the Acquisition
Balance Sheet as securing specified liabilities or obligations, with respect
to which no default (or event that, with notice or lapse of time or both,
would constitute a default) exists;
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(3) Mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Acquisition Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists;
(4) Liens for current taxes not yet due; and
(5) Liens or rights to liens with respect to construction
projects in progress.
(E) None of the Acquired Companies acquired any of the personal
property (whether tangible or intangible) in violation of any law.
4. REPRESENTATIONS AND WARRANTIES OF ATRIA. Atria represents and warrants to
the Company and the Shareholders as follows:
4.1 INCORPORATION; CORPORATE POWER. Atria and Acquisition Subsidiaries
each are duly organized validly existing and in good standing under the laws of
the State of Delaware. Atria has, and at all times has had, full power and
authority, corporate or otherwise, to own and lease its properties as such
properties are now owned and leased and to conduct its business as and where the
businesses have and are now being conducted.
4.2 AUTHORIZATION; NO VIOLATION.
(A) This Agreement has been duly executed and delivered by Atria and
constitutes its legal, valid and binding obligation, enforceable in accordance
with the terms of this Agreement. Atria has full power and authority, corporate
and otherwise, to enter into and to deliver this Agreement and perform the
transactions described herein.
(B) Except for the approval under the HSR Act, the approval of the
lenders under the Credit Agreement, dated August 15, 1996 ("Credit Agreement")
and as set forth in Schedule 4.2, all consents, approvals, resolutions,
authorizations, actions or orders, including those which must be obtained from
governmental agencies or authorities, required of Atria for the authorization,
execution and delivery of, and for the consummation of the transactions
described in, this Agreement have been obtained.
(C) Except for the Credit Agreement and as disclosed in Schedule 4.2,
the execution and delivery of this Agreement, the consummation of the
transactions described in this Agreement, and the fulfillment of and compliance
with its terms and provisions do not (1) conflict with or violate (A) any
judicial or administrative order, award, judgment or decree applicable to Atria
or Acquisition Subsidiary or (B) any term, condition or provision of Atria's
Certificate of Incorporation or By-Laws, Acquisition Subsidiary's Certificate of
Incorporation or By-Laws, or any agreement, instrument, mortgage, contract, or
restriction to which it is a party, or by which either is bound or which is
applicable to either of their respective properties, or (2) require the
approval, consent or authorization of any federal, state, or local court, or any
creditor of Atria or Acquisition Subsidiary, or any other person or entity.
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4.3 SECURITIES DOCUMENT. As of the date of each of the Securities
Documents, the Securities Documents (a) were prepared in all material respects
in accordance with the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, and (b) do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the combined
balance sheets included in or incorporated by reference into the Securities
Documents (including the related notes and schedules) fairly presents the
consolidated financial position of Atria as of the date of each such balance
sheet and each of the combined statements of income, retained earnings and cash
flows included in or incorporated by reference into the Securities Documents
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of Atria for
the period set forth therein (subject, in the case of unaudited financial
statements, to normal year-end audit adjustments which would not be material in
amount or effect), in each case in accordance with generally accepted accounting
principles, as they relate to public companies, consistently applied during the
periods involved, except as may be noted therein.
4.4 VALIDLY ISSUED. The Atria Shares issued in accordance with the terms
of this Agreement are duly authorized and, upon issuance, validly issued, fully
paid and non-assessable and, assuming all representations and warranties of the
Company and Shareholders in this Agreement to be true and compliance by the
Shareholders with all the covenants contained in this Agreement and the
Registration Rights Agreement, have been issued in compliance with all federal
and state securities laws. The Atria Shares are approved for listing on the
NASDAQ National Market and will be listed on NASDAQ National Market on the date
of issuance to the Shareholders in accordance with the terms of this Agreement.
4.5 ABSENCE OF CERTAIN CHANGES. Since the respective dates of each of the
Securities Documents, Atria has conducted its business only in the ordinary
course and there has not been any adverse change in the business, results of
operation, or financial condition of Atria or any material change in its
accounting principles, practices or methods.
4.6 LITIGATION. Except as disclosed in the Securities Documents, there
are no investigations, actions, lawsuits, claims, arbitrations or proceedings
either judicial, administrative or otherwise pending or, to the knowledge of
Atria, threatened or contemplated, against or affecting Atria or any of its
subsidiaries, their respective assets or properties or their business or any
employee, officer or director of Atria or any of its subsidiaries by or before
any court, governmental department, commission, board, bureau, agency, mediator,
arbitrator or other person or instrumentality, which, if adversely decided,
would have a material adverse affect against Atria, its business, or the assets
or properties of Atria, taken as a whole.
4.7 COMPLIANCE WITH LAWS. Atria has complied, and is in compliance, with
all laws, regulations, rules and orders applicable to it, its operations and
ownership and use of its assets, except for the failure to comply would not have
a material adverse affect upon Atria, its financial condition, business or
operations taken as a whole.
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4.8 BROKERS. All negotiations relative to this Agreement and the
transactions described in this Agreement have been conducted by Atria and
Acquisition Subsidiary directly with the Shareholders and the Company, without
assistance or intervention of any other person, in such manner as to give rise
to any valid claim against Atria, Acquisition Subsidiary, Shareholders or the
Company for a finder's fee, brokerage commission or other like payment.
5. COVENANTS OF THE PARTIES.
5.1 OPERATION OF THE COMPANY PENDING CLOSING. From the date hereof
through the Closing Date, the Company and the Shareholders shall, except as
otherwise provided herein and except as otherwise consented to by Atria:
(A) continue each of the Acquired Companies' business and operations
substantially in the same manner as heretofore, not undertake any transactions
or enter into any contracts, commitments or arrangements other than in the
ordinary course of business consistent with its past practices or for projects
under construction as of the date hereof, and use their best efforts to preserve
each of the Acquired Companies' present business and organization;
(B) refrain form disposing of or encumbering or agreeing to dispose
of or encumber any of the Acquired Companies' assets other than (1) inventory
sold in the ordinary course of business consistent with past practices, or (2)
worn out or obsolete assets which have been replaced with assets of equal or
greater value;
(C) maintain the Permits and not take any action, or refrain from
taking any action, which could cause any of the Permits to be revoked,
restricted or suspended;
(D) not make any commitment for capital expenditure in excess of
$5,000 other than those capital expenditures for projects under construction as
of the date hereof;
(E) maintain all of its assets in good working order and repair
(normal wear and tear excepted) and take all commercially reasonable efforts
necessary to maintain such assets for Atria's use and benefit after the
Effective Date;
(F) maintain its existing insurance coverage, subject to variations
in amounts required by ordinary operations;
(G) not terminate or amend, or suffer the termination or amendment
of, any Contract or Permit except in the ordinary course of business;
(H) not take or omit to take any action which would cause any of the
representations and warranties made by it herein to be untrue or incorrect;
(I) not declare or pay any dividend on, or make any distribution to
the holders of, any of the Company Shares;
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(J) not change its Articles of Incorporation or By-Laws;
(K) maintain each of the Acquired Companies' existence;
(L) not authorize for issue or issue any additional shares of capital
stock or change or otherwise adjust the number of shares of capital stock
outstanding;
(M) not make any investment in any other corporation, association,
partnership, joint venture or other business organization or enter into, modify,
terminate or waive any right under any material lease, license, contract or
other instrument;
(N) not increase the rate or change the nature of the compensation
payable to any of the Acquired Companies' Management Employees, officers or
directors, other than adjustment made under employment arrangements described in
Schedule 3.13; and
(O) not incur or agree to incur any indebtedness for borrowed money
or allow any of its assets to be subjected to any security interest, claim,
equity, restriction, pledge, mortgage, lien, charge or encumbrance whatsoever,
other than those restrictions which will not materially interfere with any of
the Acquired Companies' use and enjoyment of its assets and property or those
encumbrances incurred in connection with those projects under construction as of
the date hereof.
5.2 NEGOTIATIONS WITH OTHERS. During the period from the date hereof
through the Closing Date (the "Due Diligence Period"), neither the Shareholders,
nor the Companies, (a) negotiate, discuss or otherwise communicate with any
other potential purchaser of any of the Company Shares or purchaser or lessee of
assets or properties of any of the Acquired Companies, (b) solicit or encourage
the submission of any proposal or offer to acquire any of the Company Shares,
acquire or lease all or any portion of the assets or properties of any of the
Acquired Companies or to enter into a joint venture with the Shareholders or
with any of the Acquired Companies, (c) participate in discussions or
negotiations regarding any proposal or offer to sell any of the Company Shares,
to sell or lease all or any portion of the assets or properties of any of the
Acquired Companies or to enter into a joint venture agreement with the
Shareholders or with any of the Acquired Companies, (d) furnish to any person
other than Atria and its representatives any information regarding any of the
Acquired Companies other than creditors, partners or stockholders of the
Acquired Companies or (e) cooperate in any way with or assist or participate in
any proposal or offer from any person other than Atria to acquire any of the
Company Shares, to acquire or lease all or any portion of the assets or
properties of any of the Acquired Companies or to enter into a joint venture
with Shareholders or with any of the Acquired Companies. If during the Due
Diligence Period the Shareholders or any of the Acquired Companies receive any
unsolicited offer or proposal to acquire any of the Company Shares, to acquire
or lease all or any portion of the assets or properties of any of the Acquired
Companies or to enter into a joint venture with Shareholders or any of the
Acquired Companies, the Shareholders shall promptly notify Atria and provide it
with copies of any written materials any of the Acquired Companies or the
Shareholders receive from any third party that relates to such unsolicited
offers or proposals.
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5.3 FURTHER INVESTIGATION OF THE COMPANY AND ATRIA.
(A) During the Due Diligence Period, the Shareholders and the Company
will afford to Atria and the officers, employees and representatives of Atria
free access during reasonable business hours upon reasonable prior notice to the
premises of any of the Acquired Companies, and to all records and information of
the Acquired Companies relating to the Company Shares and the business assets
and operations of the Acquired Companies during normal business hours upon
reasonable prior notice so that Atria may have full opportunity to make such
investigation as it shall desire of the affairs of the Acquired Companies.
During the Due Diligence Period, the Shareholders and the Company shall furnish
or cause to be furnished to Atria and the officers, employees and
representatives of Atria, all data and information concerning the business,
finances, properties, assets and affairs the Acquired Companies as reasonably
requested by Atria, subject to the terms of Section 11.10. Atria shall conduct
its investigation in such a manner as to minimize disrupting the Acquired
Companies' operations.
(B) During the Due Diligence Period, Atria shall furnish or shall
cause to be furnished to the Shareholders and their representatives, such
information as may be reasonably requested by the Shareholders to verify the
accuracy of any representation made by Atria in this Agreement, to fulfill any
information requests by it to satisfy legal and regulatory requirements and to
determine Atria's ability to operate the Acquired Companies' facilities,
maintain the Acquired Companies' growth and to recruit and train a sufficient
number of quality employees on and after the Closing Date.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, Atria, the Shareholders and the Company will make all filings
required by legal requirements to be made by them in order to consummate the
transactions described herein (including all filings under the HSR Act). Between
the date of this Agreement and the Closing Date, the parties will (a) cooperate
with each other with respect to all filings that Atria elects to make or is
required by legal requirements to make in connection with the transactions
described in this Agreement, and (b) cooperate with each other in obtaining all
necessary consents.
5.5 TAX TREATMENT. Atria, Acquisition Subsidiary, the Company and the
Shareholders intend that the Merger shall be treated as a reorganization within
the meaning of section 368(a)(2)(D) of the Code. Each of the parties hereto
shall treat the Merger as a reorganization for all federal, state and local
income or franchise tax purposes and shall take no position on any return of
such income or franchise taxes as inconsistent with the reorganization
treatment. The parties acknowledge that the income or loss of the Company
through the Effective Date shall be included in the Company's separate return
and the Company's income or loss on and after the Effective Date shall be
included in Atria's consolidated return. The short period income tax return for
the Company shall be prepared by Atria and approved by the Shareholders prior to
filing with the Internal Revenue Service. If the Company and the Shareholders
are advised by their counsel that the Merger fails to qualify for treatment as
such a reorganization, the Company and the Shareholders shall have the right to
terminate this Agreement.
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5.6 NON-COMPETITION AGREEMENT. The Company, each Shareholder and George
Schoepf shall execute and deliver at the Closing a Non-Competition Agreement in
the form of Exhibit A attached hereto pursuant to which they agree not to
compete with Atria.
5.7 RELEASE AND RESIGNATION. Each Shareholder shall execute and deliver
at the Closing a letter in the form of Exhibit B attached hereto containing (1)
his resignation from all offices as an officer, director and employee with all
of the Acquired Companies effective as of the Closing Date, and (2) a general
release of claims releasing all of the Acquired Companies from all liabilities
and obligations that any of them may owe him for events arising on or before the
Closing Date as set forth in Exhibit B.
5.8 REGISTRATION RIGHTS AGREEMENT. Atria and the Shareholders shall
execute and deliver at the Closing, the Registration Rights Agreement in the
form of Exhibit C attached hereto.
5.9 REPAYMENT OF INDEBTEDNESS FROM THE SHAREHOLDERS AND MANAGEMENT;
COMPENSATION ARRANGEMENTS. The Company shall have the right to forgive up to an
aggregate of $150,000 of its note receivables from the Shareholders and
Management Employees. The Shareholders and all of the Management Employees shall
repay the balance of all indebtedness that any of them may owe to any of the
Acquired Companies in full prior to or at the Closing. The Company shall obtain
a release of all compensation arrangements described in Schedule 3.13 without
incurring any of the liabilities disclosed in such Schedule other than the
obligation owed to Michael Burkes.
5.10 PAYMENT OF THE COMPANY'S INDEBTEDNESS OR RELEASE OF THE SHAREHOLDERS'
GUARANTIES. Within 90 days following the Closing Date, Atria shall cause the
Company to either repay all accrued interest on and the outstanding principal
balance of the Company's indebtedness owed to entities not affiliated with
Company or the Shareholders that is personally guaranteed by the Shareholders,
or obtain the release of such guaranties from the lenders. Such debt is listed
on Schedule 5.10.
5.11 BOARD REPRESENTATION. Until such time that the Shareholders are the
beneficial owners of fewer than 400,000 Atria Shares, Atria shall cause a
nominee selected by the Shareholders to be included in the slate of directors
recommended by management of Atria to its stockholder for election at each
annual meeting of stockholders held after the Closing Date and shall obtain the
agreement of Vencor, Inc. to vote its Atria Shares in favor of such nominee.
5.12 FURNITURE. All furniture in the offices of George and Andy Schoepf
and furniture in the headquarters facility used by development and construction
personnel shall be the property of the Shareholders as evidenced by a Bill of
Sale to same to be delivered to Shareholders at the time of Closing.
5.13 COMPLIANCE WITH CONDITIONS. All parties hereto agree to cooperate
fully with each other in order to meet the conditions set forth in Sections 6
and 7. All parties further agree to use their respective best efforts, and to
act in good faith, and to consummate the transactions described in this
Agreement as promptly as possible.
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5.14 FURTHER ACTIONS. Each of the parties hereto agrees that it will, at
any time, and from time to time, after the date hereof, upon the reasonable
request of the appropriate party, do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be required to complete the transactions described in this Agreement.
6. CONDITIONS TO THE OBLIGATIONS OF ATRIA. The obligations of Atria to
consummate the transactions described in this Agreement are subject to the
fulfillment, prior to or at the Closing, of the conditions precedent that:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. All representations and
warranties of the Company and the Shareholders in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as though
made on such date.
6.2 COMPLIANCE WITH COVENANTS. The Company and the Shareholders shall
have performed and complied with all the covenants, agreements and conditions in
all material respects required by this Agreement to be performed or complied
with by them prior to or at the Closing.
6.3 NO LITIGATION. No action or proceeding before any court or any
governmental body will be pending or threatened pursuant to which an unfavorable
judgment, decree, injunction or order would (a) prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, (b) declare unlawful
the transactions described in this Agreement, (c) cause such transactions to be
rescinded or (d) adversely affect the right of Atria to own the Company Shares
or operate or control the business, operations or assets of the Company.
6.4 APPROVAL FROM THE LENDERS. Atria has received approval from the
lenders to the Credit Agreement and from Health Care Reit, Inc. to consummate
the transactions described in this Agreement.
6.5 COMPLIANCE WITH LAWS; GOVERNMENTAL APPROVALS. The Shareholders, to
the extent applicable, and the Company have complied in all material respects
with all laws and regulations relating to the operations of the Acquired
Companies through the Effective Date and Atria has received all state licenses,
if required, and certifications necessary for it to operate the Acquired
Companies' business on and after the Closing Date in substantially the same
manner as it was operated immediately prior to the Closing Date (including all
approvals under the HSR Act).
6.6 NO MATERIAL CHANGES. Atria is satisfied that no law, rule, order or
regulation is proposed, pending, published for comment, introduced or enacted
which, in the reasonable opinion of Atria, would have a material adverse affect
on the financial condition or operations of the Acquired Companies following the
Effective Date.
4. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS AND THE COMPANY. The
obligations of the Shareholders and the Company to consummate this Agreement and
the transactions herein described are subject to the fulfillment prior to or at
the Closing of the conditions precedent that:
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7.1 REPRESENTATIVES AND WARRANTIES CORRECT. All representations and
warranties of Atria and Acquisition Subsidiary in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as though
made on such date.
7.2 COMPLIANCE WITH COVENANTS. Atria shall have performed and complied
with all the covenants, agreements and conditions in all material respects
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
7.3 NO LITIGATION. No judgment, decree, injunction or order by any court
or any governmental body has been issued or is outstanding that would (a)
prevent the consummation of any of the transactions described in this Agreement,
(b) declare unlawful any of the transactions described in this Agreement, or (c)
cause this Agreement to be rescinded or voided.
7.4 DUE DILIGENCE REVIEW. The Shareholders are satisfied that nothing has
come to their attention during their due diligence review of Atria that would
indicate that Atria will be unable to operate the Acquired Companies'
facilities, maintain the Acquired Companies' growth and recruit and train a
sufficient number of quality employees.
7.5 APPROVALS. The Company has received approval from Health Care Reit,
Inc. to consummate the transactions described in this Agreement.
8. TERMINATION.
8.1 TERMINATION EVENTS.
(A) Atria may terminate this Agreement by delivery of notice of
termination to the Shareholders and the Company if at anytime prior to the
Closing Date:
(1) Any representation or warranty of Shareholders or the
Company in this Agreement or any other agreement or instrument delivered in
connection therewith becomes materially untrue;
(2) Shareholders or the Company fail or refuse to perform any
obligation or covenant required of them by this Agreement to be performed by
either of them prior to the Closing Date;
(3) Any of the conditions in Section 6 has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Atria to comply with its
obligations under this Agreement) and Atria has not waived such condition on
or before the Closing Date.
(B) Shareholders and the Company may terminate this Agreement by
delivery of notice of termination to Atria if at anytime prior to the Closing
Date:
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(1) Any representation or warranty of Atria in this Agreement or
any other agreement or instrument delivered in connection therewith becomes
materially untrue;
(2) Atria fails or refuses to perform any obligation or covenant
required of it by this Agreement to be performed by it prior to the Closing
Date; or
(3) Any of the conditions in Section 7 has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Shareholders or the Company to
comply with their respective obligations under this Agreement) and
Shareholders and the Company have not waived such condition on or before the
Closing Date;
(C) The parties may terminate this Agreement at any time prior to the
Closing Date by mutual consent.
(D) Any Party may terminate this Agreement by delivery of notice of
termination to the other parties if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before April 15, 1997, or
such later date as the parties may agree.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.10 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
9. DELIVERIES AND ACTIONS TAKEN AT CLOSING.
9.1 DELIVERIES BY THE SHAREHOLDERS AND THE COMPANY. At the Closing on the
Closing Date, the Shareholders and the Company shall deliver to Atria the
following (duly executed and notarized where appropriate):
(A) Copies of resolutions of the Board of Directors and the
Shareholders of the Company which shall be in full force and effect as of the
Effective Date authorizing the execution and delivery of this Agreement and the
consummation of the Merger, certified by the Secretary of the Company;
(B) The resignations of those officers and directors of the Company
designated by Atria;
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(C) Certificate of Existence from the Secretary of State of the State
of Georgia for the Company;
(D) A certificate signed by each Shareholder and an executive officer
of the Company certifying as to the fulfillment of the conditions set forth in
Sections 6.1 through 6.3; and
(E) Such other documents as may be reasonably requested by Atria,
that it deems reasonably necessary, to effect the Closing.
9.2 DELIVERIES BY ATRIA. At the Closing, Atria shall deliver to the
Shareholders the following (duly executed where appropriate):
(A) Copies of the resolutions of the Board of Directors of Atria or
the Executive Committee of Atria's Board of Directors, which shall be in full
force and effect as of the Effective Date, authorizing the execution of this
Agreement and the consummation of the Merger, certified by the Secretary of
Atria as of the Effective Date;
(B) Certificates of Good Standing for Atria from the Secretary of
State of Delaware;
(C) Certificates of Good Standing for Acquisition Subsidiary from the
Secretary of State of the States of Delaware and Georgia;
(D) A certificate signed by an officer of Atria certifying as to the
fulfillment of the conditions set forth in Section 7; and
(E) Such other documents as may be reasonably necessary to effect
the Closing.
9.3 DELIVERIES BY ATRIA AND THE SHAREHOLDERS. At the Closing on the
Closing Date, the Company, the Shareholders and Atria shall execute and deliver
the Non-Competition Agreement provided for in Section 4.6.
10. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements contained
in this Agreement shall be deemed representations and warranties of the party to
whom such statement is attributable. All of the representations and warranties
set forth in this Agreement, other than those representations and warranties set
forth in Section 3.15 ("Environmental Warranty") and Section 3.27 ("Tax
Warranty"), shall survive the date hereof and the consummation of all
transactions described herein and any investigation made by Atria or the
Shareholders for a period of 18 months following the Closing Date. The
Environmental Warranty shall survive the date hereof and the consummation of all
transactions described herein and any investigations made by Atria for a period
of six years following the Closing Date. The Tax Warranty shall survive the date
hereof and the consummation of all transactions described herein and any
investigations made by Atria for a period equal to the applicable statute of
limitations, without extensions. Notwithstanding anything in the foregoing to
the contrary, any claim shall survive the expiration of a survival
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period applicable to such claim if notice thereof was given prior to the
expiration of the applicable survival period. The Environmental Warranty only
relates to matters as they may exist on or prior to the Closing Date.
10.2 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to Section 10.7, the
Shareholders shall, jointly and severally, indemnify the Company, Atria, and
their respective officers and directors (collectively, "Atria's Affiliates")
against, and hold all of them harmless from, all debts, obligations, losses,
claims, damages, liabilities, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, writs, decrees, costs and other
expenses (including reasonable attorney's and accounting fees) of any nature and
of any kind whatsoever (collectively, "Damages") which may be made against or
incurred by any of them resulting from or arising out of or in any way connected
with:
(A) Any misrepresentation, breach or nonfulfillment of any
representation or warranty made by the Company or the Shareholders or the
nonfulfillment, breach or default in the performance of any covenant, agreement
or obligation of the Company or the Shareholders, whether contained in this
Agreement or in any document or certificate furnished pursuant hereto; or
(B) Tax liability of the Company for periods ending prior to or on
the Closing Date for any amount in excess of the amounts accrued on the
Acquisition Balance Sheet.
10.3 REMEDIES. Upon the occurrence of any event for which Atria or any of
Atria's Affiliates is entitled to indemnification under this Agreement, Atria
shall notify the Shareholders of the type of Damage and its amount. Within 20
business days of delivery of such notice, the Shareholders shall either pay to
Atria, by certified or official bank check, the full amount of such Damage or
provide a certificate from the Shareholders setting forth with reasonable detail
the reasons why the Shareholders do not believe that the claim constitutes
Damages under this Agreement. Atria shall have all of the rights and remedies
available to it at law, in equity, in bankruptcy or otherwise.
10.4 CLAIMS BY THIRD PARTY. Atria shall give reasonable notice to the
Shareholders after Atria has knowledge of any third-party claim, tax adjustment
or deficiency proposed by the Internal Revenue Service or the commencement of
any third-party legal proceedings ("Third-Party Claim") arising after the date
hereof against Atria or any of Atria's Affiliates for which any of them is
entitled to indemnification by the Shareholders hereunder. Except as set forth
in the immediately following sentence, the Shareholders shall have the right to
assume and control, at its expense, the defense of any Third-Party Claim and any
settlement thereof, provided it promptly assumes such defense and acknowledges
in writing its obligation to indemnify Atria and Atria's Affiliates in
accordance with the terms of this Agreement. Notwithstanding the foregoing,
Atria, at its expense, may assume or participate in the defense of any Third-
Party Claim which Atria, in its discretion, believes may have a material impact
on the business of Atria in continuing the operations and business of the
Acquired Companies after the Closing.
10.5 FAILURE BY THE SHAREHOLDERS TO DEFEND. If the Shareholders fail to
assume promptly the defense of any Third-Party Claim at their expense and
acknowledge their obligation to indem-
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nify Atria and Atria's Affiliates as provided herein, the Shareholders shall
nonetheless reasonably cooperate with Atria at the Shareholders' expense, but
such claim may be defended, paid, settled or otherwise disposed of in such
manner as Atria shall in its sole discretion determine without in any manner
impairing the indemnification obligations of the Shareholders arising under this
Agreement.
10.6 OBLIGATIONS OF THE SHAREHOLDERS IN DEFENDING CLAIMS. If the
Shareholders assume the defense of any such Third-Party Claim, the Shareholders
shall take all reasonable steps necessary in the defense or settlement of such
Third-Party Claim, and shall furnish to Atria a copy of all written
communications concerning such Third-Party Claim, including a copy of all
pleadings, motions, judgments and other documents filed in court. Atria agrees
to cooperate reasonably with the Shareholders in such defense, at the
Shareholders' expense. The Shareholders shall not, in the defense of such Third-
Party Claim, consent to entry of any judgment (except with the prior consent of
Atria) or enter into any settlement (except with the prior consent of Atria)
which does not include as an unconditional term thereof the giving by any
claimant a release from all liability in respect of such Third-Party Claim to
Atria.
10.7 LIMITS ON INDEMNIFICATION BY SHAREHOLDERS. Notwithstanding anything
to the contrary contained in this Agreement, Shareholders shall have no
obligation to indemnify Atria or any of Atria's Affiliates unless the aggregate
amount of Damages exceed $200,000, in which case the Shareholders shall be
liable for the full amount of the Damages. In no event shall Shareholders be
required to indemnify Atria and Atria Affiliates for Damages in an amount in
excess of $7,000,000.
10.8 INDEMNIFICATION BY ATRIA. Atria shall indemnify the Shareholders
against, and hold the Shareholders harmless from, all Damages incurred by them
resulting from any misrepresentation, breach or nonfulfillment of any of the
representation or warranty made by Atria or Acquisition Subsidiary or the
nonfulfillment, breach or default in the performance of any covenant, agreement
or obligation of Atria or Acquisition Subsidiary, whether contained in this
Agreement or in any document or certificate furnished pursuant hereto. Upon an
occurrence of any event for which the Shareholders may be entitled to
indemnification under this Agreement, the Shareholders shall have all the rights
and remedies available to them as Atria and Atria's Affiliates have against the
Shareholders, subject to the same limitations and procedures imposed upon Atria
under the terms of this Section 10.
11. MISCELLANEOUS PROVISIONS.
11.1 EXPENSES. Except as otherwise expressly provided in this Agreement:
(A) the Shareholders shall bear all expenses (including attorneys'
and accountants' fees) incurred in connection with the preparation, execution,
and performance of this Agreement;
(B) the Acquired Companies shall bear only those expenses (including
attorneys' and accountants' fees) reasonably related to normal day-to-day
operations; and
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(C) Atria shall bear all expenses (including attorneys' and
accountants' fees) incurred by it in connection with the preparation, execution,
and performance of this Agreement and the HSR Act filing fee.
11.2 SHAREHOLDERS' AND COMPANY'S KNOWLEDGE DEFINED. For the purposes of
this Agreement, the term "to the knowledge of the Company and the Shareholders"
or, "to the Company's and Shareholders' knowledge," and similar phrases shall
mean the knowledge of each of the Shareholders and all officers and directors of
each of the Company's facilities (collectively the "Managers') of the Acquired
Companies. In determining Shareholders' and Managers' knowledge, such persons
shall be deemed to have exercised reasonable care in the performance of their
duties for the Acquired Companies and in the disclosure of information to Atria
in connection with the negotiation, execution and delivery of this Agreement and
the consummation of the transaction as described in this Agreement.
11.3 NOTICE. 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 on (a) the date of personal delivery or
transmission by telegram or facsimile transmission, (b) the first business day
after the date of delivery to a nationally recognized overnight courier service,
or (c) the third business day after 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
With copy to: Carmin D. Grandinetti
Greenebaum Doll & McDonald, PLLC
3300 National City Tower
Louisville, Kentucky 40202-3197
FAX: (502) 587-3695
If to the Shareholders: Andy Schoepf
5907 Basswood Cove
Buford, Georgia 30518
Voice: (770) 932-2462
-------------------------------------------------------------------
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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 EXHIBITS; ENTIRE AGREEMENT. All Exhibits and Schedules to this
Agreement shall be deemed to be incorporated herein by reference and made a part
hereof as if set out in full at the place where first mentioned. As used herein
the term "Agreement" shall mean this Agreement for Purchase and Sale of Stock
and the Exhibits and Schedules hereto. This Agreement embodies the entire
agreement and understanding of the parties hereto regarding its subject matter
and supersedes all prior agreements, correspondence, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any party which
has not been embodied in this Agreement.
11.5 AMENDMENT; WAIVER. This Agreement may be amended, modified,
superseded, or canceled only by a written instrument signed by all of the
parties hereto, and any of the terms, provisions, and conditions hereof may be
waived, only by a written instrument signed by the waiving party. Failure of any
party at any time or times to require performance of any provision hereof shall
not be considered to be a waiver of any succeeding breach of such provision by
any party.
11.6 BINDING EFFECT; ASSIGNMENT. All the terms, provisions and conditions
of this Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns, provided, however, that this Agreement
shall not be assigned by Atria without the prior written consent of the
Shareholders.
11.7 CAPTIONS. The captions in this Agreement are included for purposes of
convenience only and shall not be considered a part of the Agreement in
construing or interpreting any provision hereof.
11.8 SEVERABILITY OF PROVISIONS. If any provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be held in
any proceeding to be invalid or unenforceable, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it was held to be invalid or unenforceable, shall not be affected
thereby, and shall be valid and be enforceable to the fullest extent permitted
by law, but only if and to the extent such enforcement would not materially and
adversely frustrate the parties' essential objectives as expressed herein.
11.9 FURTHER ASSURANCES. The Shareholders and Atria each hereby agree to
execute and deliver all agreements, documents and instruments required to be
executed and delivered by them in this Agreement, and to execute and deliver
such additional instruments and documents and to
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take such additional actions as may reasonably be required from time to time in
order to effectuate the transactions described in this Agreement, whether prior
to, at, or after the Closing.
11.10 CONFIDENTIALITY.
(A) The parties and their respective agents and employees shall hold
and keep confidential all information which is proprietary in nature and non-
public or confidential, in whole or in part (the "Information") which any of
them may receive from the other party concerning the other party, including, but
not limited to, (1) any and all marketing techniques and arrangements, mailing
lists, purchasing information, pricing policies, quoting procedures, financial
information, customer and prospect names and requirements, employee, customer,
supplier and distributor data, and (2) any and all concepts and ideas including,
without limitation, techniques and "know-how" (whether patentable or protected
by copyright laws of the United States).
(B) Failure to mark any of the Information as non-public, proprietary
or confidential information shall not affect its status as part of the
Information under the terms of this Agreement.
(C) None of the parties nor their respective agents or employees
shall, without the prior consent of the other party, disclose or use any such
Information, in whole or in part, except in connection with the performance of
the transactions described in this Agreement.
(D) Unless otherwise required by law, each of the parties agrees that
neither of them shall disclose any Information acquired as a result of this
Agreement, to any person or entity, other than its respective counsel and other
representatives, and such other third parties, such as bankers and lessors, with
whom it must communicate to consummate the transactions described by this
Agreement.
(E) Atria's obligation of confidence with respect to any Information
relating to the Company shall cease upon consummation by Atria of the
transactions described herein. If Atria and the Shareholders do not consummate
the transactions described herein, each party shall promptly upon termination of
this Agreement redeliver to each other all copies, notes, compilations, extracts
and other records or written material relating to the Information.
11.11 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Kentucky.
11.12 PUBLICITY; NO DISCLOSURE. Before the Closing, no party to this
Agreement shall make any press release or make any other public announcement
regarding the existence of this Agreement or the transactions described in this
Agreement, without prior consultation with and consent of the other parties to
this Agreement.
11.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
ATRIA COMMUNITIES, INC. /s/ ANDY L. SCHOEPF
--------------------------
ANDY L. SCHOEPF
By: /s/ J. Timothy Wesley Address:
----------------------------- 5907 Basswood Cove
Title: CFO --------------------------
-------------------------- Buford, Ga. 30518
--------------------------
("Atria")
Taxpayer Identification Number:
ATRIA COMMUNITIES SOUTHEAST, INC. ###-##-####
--------------------------
By: /s/ J. Timothy Wesley /s/ Elizabeth A. Schoepf
----------------------------- --------------------------
Title: CFO ELIZABETH A. SCHOEPF
--------------------------
("Acquisition Subsidiary") Taxpayer Identification Number:
###-##-####
--------------------------
AMERICAN ELDERSERVE CORPORATION
/s/ Evely C. Schoepf
By: /s/ Andy L. Schoepf --------------------------
----------------------------- EVELY C. SCHOEPF
Title: President
--------------------------
Taxpayer Identification Number:
("Company") ###-##-####
--------------------------
(collectively, the "Shareholders")
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EXHIBIT A
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") entered into and effective as
of the ____ day of March, 1997, by and between ATRIA COMMUNITIES, INC., a
Delaware corporation ("Atria"), and _________________, a Georgia resident
("Schoepf").
RECITALS:
A. Contemporaneously with the execution and delivery of this Agreement, a
wholly owned subsidiary of Atria merged into American ElderServe Corporation, a
Georgia corporation ("Company"), pursuant to the terms of an Agreement and Plan
of Merger dated as of March 3, 1997 ("Merger Agreement"). Schoepf was a major
shareholder and executive officer of the Company prior to the closing of the
Merger Agreement.
B. As a further inducement for the Atria to consummate the Merger
Agreement, Schoepf agreed in the Merger Agreement to execute and deliver this
Agreement.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. NON-COMPETITION COVENANTS.
1.1 FIRST RESTRICTIVE COVENANT. During the "Initial Term" (as defined
in Section 1.4) of this Agreement, neither Schoepf nor any of his "Affiliates"
(as defined in Section 2.1) shall engage in any of the following activities
("Competitive Activity") anywhere in the United States:
(A) directly or indirectly enter into a contract, arrangement or
other agreement to manage, consult with, render any services to or for, loan
money or provide other financial assistance to, act in concert with, or in any
manner become engaged by, any person, partnership, corporation, proprietorship,
association or other entity engaged in the design, construction, and operation
of an assisted living facility, home for the aged, congregate care home,
personal care home or other similar facility ("Assisted Living Facility")
designed to provide both residential services and assistance in daily living
activities to the aged ("Competitive Business");
(B) engage directly or indirectly in any Competitive Business on
Schoepf's own account; or
(C) become interested, directly or indirectly, in any Competitive
Business, as a partner, shareholder, consultant, manager or in any similar
relationship or capacity.
1.2 SECOND RESTRICTIVE COVENANT. For a period ("Second Term") beginning as
of the end of the Initial Term and ending on the later of (a) the fifth
anniversary of the date of this
<PAGE>
Agreement or (b) one year after Schoepf's nominee or representative ceases to be
a director of Atria, neither Schoepf nor any of his Affiliates shall engage in a
Competitive Activity anywhere within a five mile radius from an Assisted Living
Facility owned, operated or managed by Atria.
1.3 PERMITTED ACTIVITIES.
(A) During both the Initial Term and the Second Term, Schoepf may
engage in the following activities without violating the terms of covenants set
forth in Section 1:
(1) design, contract and operate Assisted Living Facilities and
acquire, own, use, lease and sell such assets in connection with the terms of
the Development Agreement between Devco, LLC and Atria, dated the date of this
Agreement (the "Development Agreement"); and
(2) purchase up to one percent of the outstanding securities of
publicly traded companies engaged in a Competitive Business.
(B) During both the Initial Term and Second Term, Delta Construction
Company ("Delta"), an affiliate of Schoepf, without violating terms of this
Agreement, may engage in the business of designing and constructing facilities
from which a Competitive Business will be operated; provided, however, that (1)
no portion of the price Delta or any of its Affiliates receive as compensation
for designing and constructing such facility is contingent on the performance
thereof, whether based on attaining certain occupancy rates, gross receipts,
net profits or otherwise, (2) Delta, or any of its Affiliates, does not receive
any equity or financial interest in the owner or operator of any such facility,
and (3) all loans or other arrangements are made by Delta or any of its
Affiliates to finance the construction and development of any such facility are
paid in full prior to the date that the facility admits its first resident.
1.4 INITIAL TERM. The "Initial Term" shall commence on the date of this
Agreement and shall end on the earlier of (a) the third anniversary of the date
of this Agreement or (b) the date that the Development Agreement terminates
pursuant to Section 1.3 of the Development Agreement.
1.5 CUMULATIVE REMEDIES. Schoepf acknowledges and understands that Atria
consummated the Merger Agreement and all transactions described therein in
reliance upon the fulfillment by Schoepf of the obligations imposed by this
Agreement. Schoepf agrees that covenants contained in this Agreement are special
unique and of an extraordinary character and that Atria would be irreparably
harmed and would not be compensated adequately by damages for a breach by
Schoepf of any of the covenants contained in Section 1 of this Agreement.
Accordingly, Schoepf agrees that Atria shall be entitled, in addition to all
other remedies, to specifically enforce and enjoin any violation of the
covenants contained in Section 1 of this Agreement.
1.6 REFORMATION OF COVENANTS. If any court with jurisdiction over the
parties holds, in a nonappealable final decision, any of the covenants of this
Agreement to be equitably unenforceable because it is too broad in scope as to
area, activity or time covered, the court may reduce the scope of such covenant
to whatever extent it deems reasonable and appropriate to protect the
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<PAGE>
interest of all the parties hereto. The parties further agrees that they
shall be bound by the terms of such lesser covenant held by the court to be
enforceable. Furthermore, if Schoepf violates any of the covenants of Section 1
of this Agreement and Atria brings a legal action for injunctive relief, Atria
shall not, as a result of the time involved in obtaining such relief, be
deprived of the benefits of the full period of such covenant. Accordingly, the
term of the covenants of Section 1 shall be deemed to have a duration specified
in such covenant computed from the date such relief is granted, reduced by any
time between when the period of restriction began to run and the date of first
violation by schoepf.
2. MISCELLANEOUS.
2.1 AFFILIATE DEFINED. As used herein, the term "Affiliate" shall have
the same meaning as that ascribed to such term in Rule 405, promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
as such Rule exists as of the date of this Agreement.
2.2 WAIVER OF BREACH. The waiver by any party of a breach of any provision
of this Agreement by another party shall not operate or be construed as a
waiver of any subsequent breach of such provision by such other party.
2.3 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon, and
inure to and be enforceable by, the parties and their respective successors and
assigns.
2.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties hereto regarding its subject matter and supersedes
all prior agreements, correspondence, arrangements and understandings relating
to the subject matter hereof.
2.5 AMENDMENT OR MODIFICATION. This Agreement may be amended, modified,
superseded, or canceled only by a written instrument signed by the parties
hereto, and any of the terms, provisions and conditions hereof may be waived,
only by a written instrument signed by the waiving party. Failure of any party
at any time or times to require performance of any provision hereof shall not be
considered to be a waiver of any succeeding breach of such provision by any
party.
2.6 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky, without regard to its
principles of conflicts of law.
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<PAGE>
2.7 HEADINGS. The headings contained in this Agreement are for convenience
only and shall not be deemed a part of this Agreement in construing or
interpreting the provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
ATRIA COMMUNITIES, INC.
By: __________________________
Title: _______________________
("Atria")
______________________________
___________________
("Schoepf")
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<PAGE>
EXHIBIT B
RELEASE AND RESIGNATION
_______________ __, 1997
Board of Directors
American ElderServe Corporation
1770 Indian Trail Road, Suite 400
Duluth, Georgia 30093
Dear Gentlemen:
Effective as of the date hereof, I hereby resign from all positions that I
hold as an officer, director or employee of American ElderServe Corporation (the
"Corporation"), a Georgia corporation. Furthermore, I hereby resign from all
positions that I hold as an officer, director or employee of the entities listed
in Schedule 3.2 (the "Affiliates") to that certain Agreement and Plan of Merger
between Atria Communities, Inc., Atria Communities Southeast, Inc., American
ElderServe Corporation, Andy L. Schoepf, Elizabeth A. Schoepf and Evely C.
Schoepf, dated as of March 3, 1997 (the "Merger Agreement").
Pursuant to terms of the Merger Agreement, I hereby release and discharge
the Corporation and its Affiliates, from any and all claims, rights, demands,
accounts, proceedings, liabilities, causes of actions, agreements, promises,
losses, costs, expenses, recoveries, damages, monies, and penalties of every
kind and description, whether in law or equity and whether matured and
unmatured, liquidated and unliquidated, known or unknown, contingent, or
otherwise, which I may now have, have had or may have, against the Corporation
and its Affiliates for any events that occurred on or prior to, or any
circumstance existing as of, the date of this letter.
Respectfully submitted,
<PAGE>
EXHIBIT 99.1
REGISTRATION RIGHTS AGREEMENT
__________________________________________
REGISTRATION RIGHTS AGREEMENT
BETWEEN
ATRIA COMMUNITIES, INC.
AND
ANDY L. SCHOEPF
__________________________________________
April 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. Certain Definitions.................................................... 1
1.1 Affiliates........................................................ 1
1.2 Commission........................................................ 1
1.3 Common Shares..................................................... 1
1.4 Common Shares..................................................... 1
1.5 Exchange Act...................................................... 1
1.6 Person............................................................ 2
1.7 Register; Registered; Registration................................ 2
1.8 Registrable Shares................................................ 2
1.9 Registration Expenses............................................. 2
1.10 Securities Act.................................................... 2
1.11 Selling Expenses.................................................. 2
2. Restrictions on Transferability........................................ 2
2.1 Restrictions on Transferability................................... 2
2.2 Restrictive Legend................................................ 2
2.3 Notice of Proposed Transfers...................................... 3
2.4 Limited Right to Transfer......................................... 3
3. Registration Rights.................................................... 3
3.1 Requested Registration............................................ 3
3.2 Company Registrations............................................. 5
3.3 Holdback Agreement................................................ 7
3.4 Expenses of Registration.......................................... 7
3.5 Registration Procedures........................................... 7
3.6 Atria's Right to Abandon Registration............................. 8
3.7 Amendments to Registration Statements............................. 8
4. Indemnification........................................................ 9
4.1 Atria's Indemnity................................................. 9
4.2 Limitation on Indemnification Obligation.......................... 9
4.3 Indemnity by Shareholder.......................................... 9
4.4 Procedure for Indemnification..................................... 10
4.5 Conflicts with Underwriting Agreement............................. 11
5. Termination of Atria's Obligations..................................... 11
6. Miscellaneous Provisions............................................... 11
6.1 Information From Shareholder...................................... 11
6.2 No Transfer of Registration Rights................................ 11
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
6.2 Governing Law.................................................... 11
6.4 Counsel.......................................................... 11
6.5 Delays or Omissions.............................................. 11
6.6 Entire Agreement................................................. 12
6.7 Binding Effect................................................... 12
6.8 Notices.......................................................... 12
6.9 Headings......................................................... 13
6.10 Counterparts.................................................... 13
6.11 Severability of Provisions...................................... 13
6.12 Exhibits........................................................ 13
6.13 Number; Gender.................................................. 13
6.14 Amendment....................................................... 13
</TABLE>
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made this 1st day of April, 1997,
by and between ATRIA COMMUNITIES, INC., a Delaware corporation ("Atria"), and
ANDY L. SCHOEPF, a resident in Georgia ("Shareholder").
RECITALS:
A. On the date hereof, Atria issued 636,487 shares of its Common Stock to
Shareholder pursuant to the terms of that certain Agreement and Plan of Merger
dated as of March 3, 1997 (the "Merger Agreement"). The shares of Common Stock
were issued privately pursuant to an exemption from registration under Section
4(2) of the Securities Act and under exemptions from applicable state securities
laws.
B. Atria and Shareholder desire to set forth the registration rights to
be granted to Shareholder incident to his acquiring shares of Atria's Common
Stock.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the terms set forth
below shall have the following respective meanings:
1.1 AFFILIATES. "Affiliate" shall mean any person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, any party specified in this Agreement.
1.2 COMMISSION. "Commission" shall mean the United States Securities
Exchange Commission or any other federal agency at the time administering the
Securities Act.
1.3 COMMON SHARES. "Common Shares" shall mean the shares of Atria's
Common Stock issued to Shareholder pursuant to the Merger Agreement.
1.4 COMMON STOCK. "Common Stock" shall mean the common stock, having
a par value of $0.10 per share, of Atria.
1.5 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.6 PERSON. "Person" shall mean any individual, partnership, limited
liability company, corporation, trust or other entity.
<PAGE>
1.7 REGISTER; REGISTERED; REGISTRATION. "Register," "registered" and
"registration" shall refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement by
the Commission.
1.8 REGISTRABLE SHARES. "Registrable Shares" shall mean (a) the Common
Shares, and (b) all shares of Atria's Common Stock issued as a dividend on, or
other distribution with respect to, or in exchange or in replacement of, the
Common Shares, but shall not include any Common Shares that were sold, conveyed,
transferred by gift or otherwise transferred by Shareholder to any other Person,
including sales under a Registration Statement, Section 4(1) or Rule 144 under
the Securities Act.
1.9 REGISTRATION EXPENSES. "Registration Expenses" shall mean all expenses
incurred by Atria in complying with Section 3, including all registration and
filing fees, exchange listing fees, printing expenses, fees and disbursements of
counsel for Atria, state securities' law fees and expenses, and the expense of
any special consents, advice or similar audit services of independent auditors
incident to or required by any such registration (but excluding the Selling
Expenses).
1.10 SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar Federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time.
1.11 SELLING EXPENSES. "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of shares of Atria's
Common Stock, including Registrable Shares, in any sale pursuant to a
registration by Atria pursuant to this Agreement, and the fees and expenses of
counsel selected by Shareholder to represent them in the registration.
2. RESTRICTIONS ON TRANSFERABILITY.
2.1 RESTRICTIONS ON TRANSFERABILITY. Shareholder shall not transfer
any of the Common Shares unless such transfer is in compliance with the terms of
this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act.
2.2 RESTRICTIVE LEGEND. Each certificate representing the Common
Shares or securities issued in respect of the Common Shares, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or any applicable state securities laws. These
securities are "Restricted Securities" as defined in the
Rule 144 promulgated under the Act and may not be sold or
offered for sale or otherwise distributed except (a) in
conjunction with an effective registration statement for the
shares under the Act and applicable state securities laws,
(b) in compliance with Rule 144 and an exemption under
applicable state securities laws, or (c) pursuant
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<PAGE>
to an opinion of counsel satisfactory to the Issuer that such
registration or compliance is not required as to such sale, offer
or distribution.
2.3 NOTICE OF PROPOSED TRANSFERS. Unless there is an effective registration
statement under the Securities Act covering a proposed transfer, Shareholder
shall notify Atria of his intention to effect a transfer of any of his Common
Shares. Such notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall be accompanied (except that the
requirements set forth in the balance of this sentence need not be complied with
where the proposed transaction complies with Rule 144 as long as Atria is
furnished with evidence of compliance with such rule) be either:
(A) an unqualified written opinion of legal counsel which is
reasonably satisfactory to Atria addressed to Atria's counsel, to the effect
that the proposed transfer of the Common Shares may be effected without
registration of the Securities Act;
(B) a "no action" letter from the Commission to the effect that the
distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto; or
(C) such other showing that may be reasonably satisfactory to legal
counsel to Atria.
2.4 LIMITED RIGHT TO TRANSFER. If Atria fails to object as to adequacy of
the notice within three days of its delivery to Atria, Shareholder shall be
entitled to transfer such Common Shares in accordance with the terms of the
notice delivered to Atria. Each certificate evidencing the Common Shares
transferred as above provided shall bear the appropriate restrictive legend set
forth in Section 2.2, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for Atria such legend is not
required in order to establish compliance with any provisions of the Securities
Act or applicable state securities laws.
3.REGISTRATION RIGHTS.
3.1 REQUESTED REGISTRATION.
(A) At such time as when Atria can register its Common Stock on Form
S-3 or any successor form or registration statement, Shareholder may make one
request to Atria to register all or any portion of Shareholder's Registrable
Shares under the Securities Act in accordance with this Section 3.1. Atria
shall use its reasonable best efforts to cause the prompt registration of all
Registrable Shares requested to be registered, and in connection therewith shall
prepare and file on such appropriate form as Atria, in its reasonable
discretion, shall determine, a registration statement under the Securities Act
to effect such registration (including the execution of an under-taking to file
post-effective amendments, appropriate qualification under applicable Blue Sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act).
(b) Notwithstanding anything in Section 3.1 to the contrary, Atria
shall not be obligated to effect any such registration, or take other specified
actions with respect to, or coope-
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<PAGE>
rate in any offering of, Registrable Shares upon the request of Shareholder
pursuant to Section 3.1:
(1) in any particular jurisdiction in which Atria would be required
to execute a general consent to service of process in effecting such
registration, qualification or compliance unless Atria is already subject to
service in such jurisdiction and except as may be required by the Securities
Act;
(2) within 180 days immediately following the effective date of any
registration of Atria's Common Stock;
(3) after Atria has effected one registration pursuant to this
Section 3.1 that have been declared or ordered effective; or
(4) unless the number of Registrable Shares included in Shareholder's
request is for at least 300,000 Registrable Shares or has an aggregate "Value"
(as defined herein) of the Registrable Shares of at least $3,600,000.
(c) For purposes hereof, the term "value" shall mean, as applicable, (a)
the average of the closing prices for the Common Stock of Atria as listed on the
NASDAQ system or such other system on which the Common Stock of Atria is traded
for the five trading days immediately preceding the date of Shareholders's
request.
(d) The request by Shareholder for registration of Registrable Shares
pursuant to Section 3.1 shall (1) specify the number of Registrable Shares which
Shareholder intends to offer and sell, (2) express the intention of Shareholder
to offer or cause the offering of such Registrable Shares, (3) describe the
nature or method of the proposed offer and sale thereof, (4) contain the
undertaking of Shareholder to provide all such information regarding his
holdings and the proposed manner of distribution thereof as may be required (A)
to permit Atria to comply with all applicable laws and regulations, all
requirements of the Commission and any other regulatory or self-regulatory body,
any other body having jurisdiction, and any securities exchange on which the
Registrable Shares are to be listed, and (B) to obtain acceleration of the
effective date of any registration statement filed in connection therewith, and
(5) in the case of an underwritten public offering, specify the managing
underwriter or underwriters of such Registrable Shares, which shall be selected
by Atria.
(e) If at the time of the request to register the Registrable Shares Atria
notifies Shareholder, within five days of Shareholder's request, that Atria is
engaged or has fixed plans to engage within 30 days of the time of the request
in an underwritten public offering of securities for Atria's own account and
Atria determines in good faith that such offering would be materially adversely
affected by the registration so requested, Atria may delay filing a registration
statement and may withhold efforts to cause the registration statement to become
effective; provided, however, that Atria shall only be entitled to postpone for
a reasonable period of time, not to exceed 90 days, the filing of any
registration statement otherwise required to be prepared and filed by Atria
pursuant to Section 3.1. In addition, notwithstanding anything herein to the
contrary, Atria may delay filing a registration statement and may withhold
efforts to cause the registration statement
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<PAGE>
to become effective, if Atria determines in good faith that such registration
might (1) interfere with or affect the negotiation or completion of any
transaction that is being contemplated by Atria at the time the right to delay
is exercised, or (2) involve initial or continuing disclosure obligations that
might not be in the best interests of Atria stockholders.
(F) If, after a registration statement becomes effective, Atria
advises Shareholder that Atria considers it appropriate for the registration
statement to be amended, Shareholder shall suspend any further sales of his
registered shares until Atria advises it that the registration statement has
been amended. Atria shall keep the Registration Statement issued pursuant to
this Section 3.1 effective until the earlier of (1) two years from the date of
issuance of the Registrable Shares to Shareholder or (2) the date on which the
Shareholder no longer owns any of the Registrable Shares he requested to be
registered pursuant to this Section 3.1. Shareholder shall have no obligation to
sell any of the Registrable Shares he requested to be registered pursuant to
this Section 3.1.
(G) If Shareholder intends to distribute the Registrable Shares, which
are covered by his request for registration pursuant to Section 3.1, by means of
an underwriting, Shareholder shall so advise Atria as a part of his request.
Atria shall, together with Shareholder, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by Atria. Notwithstanding any other provision of this Section
3.1(g), if the managing underwriter or underwriters determine that the
underwriting would be materially adversely affected by inclusion in such
underwriting of all of the Registrable Shares requested by Shareholder and so
advises Shareholder in writing, then Shareholder shall reduce accordingly the
number of Registrable Shares that will be included in the registration and
underwriting. No Registrable Shares excluded from the underwriting by reason of
the managing underwriter's or underwriters' marketing or other limitations shall
be included in such registration. Should Shareholder disapprove of the terms of
the underwriting, Shareholder may elect to withdraw therefrom by written notice
to Atria and the managing underwriter or underwriters.
(H) If the managing underwriter or underwriters have not limited the
number of Registrable Shares to be underwritten, Atria may include securities
for its own account in such registration if the managing underwriter or
underwriters so agree and if the number of Registrable Shares which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
3.2 COMPANY REGISTRATIONS.
(A) If, at any time, and from time to time, Atria proposes to register
any of its Common Stock for its own account, in connection with an underwritten
public offering of Common Stock solely for cash (other than a registration
statement filed on Form S-4 or any other form filed in connection with any
acquisition, merger, consolidation or stock exchange, or a registration
statement filed solely in connection with director or employee benefit plans of
Atria) Atria shall:
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<PAGE>
(1) promptly notify Shareholder of the proposed registration
(which shall include a list of the jurisdictions in which Atria intends to
attempt to qualify such Common Stock under the applicable state securities
laws); and
(2) include in such registration (and any related qualification
under state securities laws or other compliance), and in any underwriting
involved therein, all of the Registrable Shares specified in a request or
requests by Shareholder, made within 10 days after delivery of the notice from
Atria.
(B) If the registration to be effected under to this Section 3.2 is
for a registered public offering involving an underwriting, Atria shall so
advise Shareholder as a part of the notice given pursuant to Section 3.2(a)(1).
In such a case the right of Shareholder to register his Registrable Shares
pursuant to Section 3.2(a)(2) shall be conditioned upon Shareholder's
participation in such underwriting and the inclusion of his Registrable Shares
in the underwriting to the extent provided herein. Shareholder (together with
Atria and any other stockholders proposing to offer and sell their shares of
Common Stock through such underwriting (hereinafter, the "Additional Selling
Stockholders")), shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by Atria and
perform his obligations under such an agreement.
(C) Notwithstanding any other provision of Section 3.2(b) to the
contrary, if the managing underwriter or underwriters determine that such
offering would be materially adversely affected by inclusion in such
underwriting of all of the Registrable Shares requested by Shareholder, the
managing underwriter or underwriters may exclude a portion of such Registrable
Shares from such registration and underwriting. In such a case, Atria shall
advise Shareholder of the managing underwriter's determination to exclude a
portion of the Registrable Shares from such registration and underwriting. The
number of shares of Common Stock of Shareholder and the Additional Selling
Stockholders that may be included in the registration and underwriting shall be
allocated among Shareholder and the Additional Selling Stockholders in
proportion, as nearly as practicable, to the respective amounts of shares of
Common Stock owned by Shareholder and each of the Additional Selling
Stockholders at the time of filing the registration statement. No Registrable
Shares excluded from the underwriting by reason of the managing underwriter's -
determination shall be included in such registration.
(D) If Shareholder disapproves of the terms of any such underwriting,
Shareholder may elect to withdraw therefrom all of the Registrable Shares
included in his request for registration by notice to Atria and the managing
underwriter or underwriters, and the Registrable Shares so withdrawn from the
underwriting shall also be withdraw from such registration. If one or more
Additional Selling Stockholders withdrawn shares of Common Stock from the
underwriting and registration, and by virtue of such withdrawal, a greater
number of shares of Common Stock of Shareholder and Additional Selling
Shareholders who have not withdrawn may be included in such registration (up to
the maximum of any limitation imposed by the managing underwriter), then Atria
shall offer to Shareholder and the Additional Selling Stockholders who have
elected to participate in the registration the right to include (additional)
shares of Common Stock, as applicable, in the registration in the same
proportions as were used above in determining the underwriter limitation.
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<PAGE>
3.3 HOLDBACK AGREEMENT. Upon request of Atria or the managing underwriter
in any underwritten offering, of Registrable Securities, Shareholder shall not
make or cause any offering, sale or other disposition, directly or indirectly,
of any Common Shares (or any other securities of Atria) without the prior
approval of the underwriter for such period of time (not to exceed 180 days)
from the effective date of such registration as may be requested by Atria or the
managing underwriter. In addition, Shareholder agrees, that upon request of
Atria or the managing underwriter in any underwritten offering and registration
of Shares of Common Stock (or other securities of Atria) in which Shareholder
(having been given notice and the opportunity as required by Section 3.2(a)(1)
declines to participate, not to make or cause any offering, sale or other
disposition, directly or indirectly, of any Common Shares (or other securities
of Atria) held by him (other than any such Common Shares sold or otherwise
disposed of pursuant to a previously registered and underwritten offering)
without the prior approval of the managing underwriter (but not to exceed a
period of time from the effective date of such registration as the managing
underwriter shall have requested of all officers and directions of Atria and all
other persons with registration rights holding no fewer than the number of
shares of Common Stock held by Shareholder). Atria, in enforcing the provisions
of this Section 3.3, may impose stop-transfer instructions with respect to the
Registrable Shares of Shareholder until the end of such period.
3.4 EXPENSES OF REGISTRATION. Atria shall pay all Registration Expenses
incurred in connection with all registrations under this Agreement. If
Shareholder participates in a registration, Shareholder shall pay the Selling
Expenses incurred in connection with each registration under this Agreement, pro
rata in the same proportion as the number of shares of Registrable Share
registered and sold by Shareholder bears to the total number of shares of Common
Stock being registered and sold under such registration statement.
3.5 REGISTRATION PROCEDURES. In each registration affected by Atria
pursuant to this Section 3, Atria will keep Shareholder advised as to the
initiation of each such registration and as to the completion thereof. At its
expense, Atria shall:
(A) prepare and file with the Commission a registration statement for
the Registrable Shares and shall use its commercially reasonable efforts to
cause the registration statement to become effective;
(B) upon the request of the holders of a majority of the shares of
Common Stock registered thereunder, keep such registration statement effective
for a period ending at the earlier of 120 days following the effective date of
the Registration Statement or the date that the distribution contemplated in the
registration statement has been completed;
(C) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act regarding the disposition of all securities
covered by such registration statement;
(D) furnish to Shareholder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the Securities Act, and
such other documents (in-
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<PAGE>
cluding any exhibits thereto or documents referred to therein) as Shareholder
may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by him;
(E) use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities laws of such jurisdictions as shall be reasonably requested by
Shareholder, provided, that Atria shall not be required in connection therewith
or as a condition thereto to qualify to do business, subject itself to taxation,
or to file a general consent to service of process in any such states or
jurisdictions;
(F) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering, provided, that the form of
underwriting agreement must be reasonably acceptable to Atria and Shareholder
with respect to secondary distributions;
(G) notify Shareholder, if he has Registrable Shares covered by the
registration statement, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, or any
other offering document, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and prepare and furnish to Shareholder as many copies of a supplement
to or an amendment of such offering document which shall correct such untrue
statement or eliminate such omission, as Shareholder shall request;
(H) cause all such Registrable Shares registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
Atria are then listed; and
(I) provide a transfer agent and registrar for all Registrable Shares
registered pursuant hereunder and a CUSIP number for all such Registrable
Shares, in each case not later than the effective date of such registration.
3.6 ATRIA'S RIGHT TO ABANDON REGISTRATION. Notwithstanding anything
herein to the contrary, Atria may at any time prior to the effectiveness of any
such registration statement, in its sole discretion and without the consent of
or other obligation to Shareholder, abandon or postpone the proposed
registration in which Shareholder had requested to participate.
3.7 AMENDMENTS TO REGISTRATION STATEMENTS. If Atria has delivered copies
of the preliminary or final prospectus to Shareholder and after having done so
the prospectus is amended to comply with requirements of the Securities Act,
Atria shall promptly notify Shareholder and, if requested, Shareholder shall
immediately cease making offers of Registrable Shares and return all copies of
the prospectus to Atria. Atria shall promptly provide Shareholder with copies of
the revised prospectus and, following receipt of the revised prospectus,
Shareholder shall be free to resume making offers of the Registrable Shares.
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<PAGE>
4. INDEMNIFICATION.
4.1 ATRIA'S INDEMNIFY. In the case of each registration of Registrable
Securities of Shareholder, Atria will indemnify Shareholder and his Affiliates,
against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to which any of them may become subject
under the Securities Act or other federal or state law, arising out of or based
on the following:
(A) any untrue statement or alleged untrue statement of a material
fact contained in any such registration statement, prospectus, offering circular
or other similar document (including any related registration statement,
notification or the like) incident to any such registration, or based on any
omission or alleged omission to state therein a material fact required to be
stated herein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(B) any violation by Atria of any federal, state or common law rule
or regulation applicable to Atria in connection with any such registration,
qualification or compliance; and
(C) any legal and any other expenses reasonably incurred in
connection with investigation or defending any such claim, loss, damage,
liability or action, as incurred related to the foregoing.
4.2 LIMITATION ON INDEMNIFICATION OBLIGATION. Atria shall not be liable,
and shall have no indemnification obligation hereunder, for any amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Atria (which consent shall not be
unreasonably withheld), nor shall Atria be liable in any such case for any such
claim, loss, damage, liability or expense to the extent it arises out of or is
based on any untrue statement or omission, made in reliance on and in conformity
with written information furnished to Atria by an instrument duly executed by
Shareholder, underwriter or controlling person and stated to be specifically for
use therein.
4.3 INDEMNIFY BY SHAREHOLDER. If Registrable Securities held by
Shareholder are included in the securities as to which registration is being
effected, Shareholder shall indemnify Atria, each of its officers and directors,
each underwriter and each person who controls any underwriter, and each person,
if any, who controls Atria or any such underwriter within the meaning of Section
15 of the Securities Act, and each person affiliated with or retained by Atria
and who may be subject to liability under any applicable securities laws,
against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to which they may become subject under the
Securities Act or other federal or state law, arising out of or based on:
(A) any untrue statement or alleged untrue statement of a material
fact contained in any such registration statement, prospectus, offering circular
or other similar document, or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, in each case to the extent, but only to the extent, that such
untrue statement or
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<PAGE>
alleged untrue statement or omission or alleged omission is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to Atria by
an instrument duly executed by Shareholder and stated to be specifically for use
therein; and
(B) any legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, as incurred.
4.4 PROCEDURE FOR INDEMNIFICATION.
(A) The party seeking indemnification ("Indemnitee") shall promptly
(within 10 days if a third party has commenced actual litigation against the
Indemnitee) notify the party from which indemnification is sought ("Indemnitor")
promptly after the Indemnitee has actual knowledge of any claim for which
recovery may be sought against the Indemnitor pursuant to this Section 4.
Indemnitee shall permit the Indemnitor, at its cost, to assume the defense of
any such claim or any litigation resulting from such claim; provided, Indemnitee
shall have the right to consent to the counsel selected by Indemnitor to defend
any such claim (which consent shall not be unreasonably withheld). The notice
shall specify in reasonable detail the facts known to the Indemnitee giving rise
to such indemnification rights and, if possible, an estimate of the amount of
liability which could result therefrom. Indemnitor shall be bound to indemnify
Indemnitee unless, within ten days after the delivery of such notice, Indemnitor
shall notify Indemnitee that Indemnitor disputes the right to indemnification as
set forth in such notice.
(B) The failure of the Indemnitee to give notice as provided herein
shall relieve the Indemnitor of its obligations under this Section 4 only to the
extent that such failure to give notice materially adversely prejudices the
Indemnitor in the defense of any such claim or any such litigation, but in no
event shall such failure relieve the Indemnitor from any other liability which
the Indemnitor may then have or may subsequently have to the Indemnitee. The
Indemnitor shall not in the defense of such claim or any litigation resulting
therefrom, except with the consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnitee of a
release from all liability in respect of such claim or litigation.
(C) If the Indemnitor does not assume the defense of any such claim
or litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as the Indemnitee may deem appropriate. The
Indemnitee may settle such claim or litigation on such terms as it may deem
appropriate and the Indemnitor shall promptly reimburse the Indemnitee for the
amount of such settlement, and all expenses, legal or otherwise, incurred by the
Indemnitee in connection with the defense against, or settlement of, such claim
or litigation. If no settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for the amount of any
judgment rendered for such claim or in such litigation, and of all expenses,
legal or otherwise, incurred by the Indemnitee in the defense against such claim
or litigation. Notwithstanding anything in the foregoing to the contrary, if the
Indemnitor has disputed the Indemnitee's right to indemnification in accordance
with the provisions of Section 4.4(a), the Indemnitor shall not be obligated to
pay the Indemnitee the amounts provided
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<PAGE>
for in this Section 4.4(c) until such dispute has been resolved and it has been
determined by a court of competent jurisdiction that the Indemnitor is required
to make such indemnification.
4.5 CONFLICTS WITH UNDERWRITING AGREEMENT. Notwithstanding anything in
this Section 4 to the contrary, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
5. TERMINATION OF ATRIA'S OBLIGATIONS. The obligation of Atria to register any
of Shareholder's Registrable Shares pursuant to this Agreement shall expire on
the earlier of (a) the date when Shareholder ceases beneficially to own any
Registrable Shares, (b) the date when the Registrable Shares held by Shareholder
may be sold under Rule 144, or (c) the date which is the second anniversary of
the date of this Agreement.
6. MISCELLANEOUS PROVISIONS.
6.1 INFORMATION FROM SHAREHOLDER. Shareholder shall furnish to Atria such
information regarding Shareholder as Atria may request in writing and as shall
be required in connection with any registration, qualification or compliance
referred to in this Agreement.
6.2 NO TRANSFER OF REGISTRATION RIGHTS. The registration rights granted
under of this Agreement may not be assigned or otherwise conveyed by
Shareholder.
6.3 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Kentucky, without
giving effect to conflict of laws or any other rules or principles which may
require the application of the laws of any other jurisdiction.
6.4 COUNSEL. Atria shall select and employ legal counsel to represent the
parties in the registration of shares of Common Stock under this Agreement. If,
in the judgment of Shareholder, it would be appropriate to do so, Shareholder
may select counsel to represent him in connection with the registration;
provided, that Shareholder shall be solely responsible for the fees and expenses
of any separate counsel so selected, and Atria shall have no responsibility or
liability whatsoever with respect thereto.
6.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to Shareholder, upon any breach or default by Atria under
this Agreement, shall impair any such right, power or remedy of Shareholder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
Shareholder or any breach or default under this Agreement, or any waiver on the
part of Shareholder of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth in
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<PAGE>
such writing. All remedies, either under this Agreement, or by law or otherwise
afforded to Shareholder, shall be cumulative and not alternative.
6.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersedes all prior agreements, correspondence, arrangements and
understandings relating to the subject matter hereof.
6.7 BINDING EFFECT. All of the terms, provisions and conditions hereof
shall be binding upon and shall inure to the benefit of and be enforceable by
the parties hereto, and their respective heirs, personal representatives,
successors and assigns. Nothing in this Agreement shall entitle any person to
any claim, cause of action, remedy or right of any kind.
6.8 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 date after the
date of (1) deposit in the United States mail, postage prepaid, by registered or
certified mail, return receipt requested, or (2) delivery to a nationally
recognized overnight courier service, 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
With copy to: Carmin D. Grandinetti
Greenebaum Doll & McDonald, PLLC
3300 National City Tower
Louisville, Kentucky 40202-3197
FAX: (502) 587-3695
If to the Shareholders: Andrew Schoepf
5907 Basswood Cove
-------------------------
Buford, Georgia 30518
-------------------------
FAX:(___) ____-____
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<PAGE>
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
6.9 HEADINGS. The headings in this Agreement are included for purposes of
convenience only and shall not be considered a part of the Agreement in
construing or interpreting any provision hereof.
6.10 COUNTERPARTS. This Agreement may be executed in counterparts and each
such executed counterpart shall be deemed an original instrument. It shall not
be necessary in making proof of this Agreement or the terms of this Agreement to
produce or account for more than one of such counterparts.
6.11 SEVERABILITY OF PROVISIONS. If any provision of this Agreement or the
application thereof to any person or entity or circumstance shall to any extent
be held in any proceeding to be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or entities or
circumstances other than those to which it was held to be invalid or
unenforceable, shall not be affected thereby, and shall be valid and enforceable
to the fullest extent permitted by law, but only if and to the extent such
enforcement would not materially and adversely frustrate the parties' essential
objectives as expressed herein.
6.12 EXHIBITS. All Exhibits to this Agreement shall be deemed to be
incorporated herein by reference and made a part hereof as if set out in full
herein.
6.13 NUMBER; GENDER. Unless the context clearly states otherwise, the use
of the singular or plural in this Agreement shall include the other and the use
of any gender shall include all others.
6.14 AMENDMENT. This Agreement may be amended, modified, superseded, or
canceled only by a written instrument signed by all of the parties hereto and
any of the terms, provisions and conditions hereof may be waived, only by a
written instrument signed by the waiving party.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
ATRIA COMMUNITIES, INC.
By: /s/ W. Patrick Mulloy, II /s/ Andy L.Schoepf
------------------------- ------------------
Title: President and CEO ANDY L. SCHOEPF
---------------------- ("Shareholder")
("Atria")
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<PAGE>
EXHIBIT 99.2
________________________________________________________________________________
DEVELOPMENT AGREEMENT
BETWEEN
ELDER HEALTHCARE DEVELOPERS, LLC
AND
ATRIA COMMUNITIES, INC.
________________________________________________________________________________
April 1, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
1. Grant of Development Rights.............................................. 1
1.1 Grant............................................................... 1
1.2 Development Schedule................................................ 1
1.3 Continuation of Development......................................... 2
1.4 Atria's Right To Develop in the Southeast Region.................... 2
2. General Duties of the Parties............................................ 3
2.1 Site Selection.......................................................3
2.2 Development Obligations............................................. 3
2.3 Transfer of Existing Properties......................................4
2.4 Use of Affiliates................................................... 4
3. Option to Purchase Facilities............................................ 4
3.1 Grant of Atria Option............................................... 4
3.2 Purchase Price...................................................... 4
3.3 Fair Market Value................................................... 5
3.4 Cumulative Operating Loss or Income................................. 5
3.5 Stabilized Operations Defined....................................... 5
3.6 Acquired Facility Assets............................................ 5
3.7 No Assumption of Liabilities........................................ 6
3.8 Conditions to the Purchase of the Acquired Facility................. 6
3.9 Developer's Right to Correct Title Deficiencies..................... 7
3.10 Deliveries at the Closing of the Purchase at the Closing............ 7
3.11 Risk of Loss........................................................ 8
3.12 Allocation of Expenses Associated with Sale......................... 8
3.13 Remedies for Breach of the Purchase Option or First Refusal Right... 8
3.14 Recordation of Atria Option......................................... 8
3.15 Developer's Right to Sell the Facility.............................. 9
4. Miscellaneous Provisions................................................. 9
4.1 Notice.............................................................. 9
4.2 Force Majeure.......................................................10
4.3 Exhibits; Entire Agreement..........................................10
4.4 Arbitration.........................................................10
4.5 Amendment; Waiver...................................................11
4.6 Binding Effect; Assignment..........................................11
4.7 Captions............................................................11
4.8 Severability of Provisions..........................................11
4.9 Further Assurances..................................................11
4.10 Governing Law.......................................................11
4.11 Publicity; No Disclosure............................................12
4.12 Counterparts........................................................12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
DESCRIPTION EXHIBIT
<S> <C>
Development Schedule........................................................ A
Current Projects............................................................ B
Environmental Indemnity..................................................... C
Survey Requirements......................................................... D
</TABLE>
-ii-
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT is made as of April 1, 1997, by and between
ELDER HEALTHCARE DEVELOPERS, LLC, a Kentucky limited liability company
("Developer"), and ATRIA COMMUNITIES, INC., a Delaware corporation ("Atria").
RECITALS:
A. Atria is a national provider of assisted living facilities, homes for
the aged, congregate care homes, personal care homes or other similar facilities
designed to provide residential services and assisted living to the aged
("Assisted Living Facilities"). Developer desires to obtain the exclusive right
Assisted Living Facilities in the states of North Carolina, South Carolina,
Georgia, Florida, Alabama, Mississippi, Louisiana, Texas and Virginia (the
"Southeast Region"), and the non-exclusive right to acquire and develop real
estate, and construct and operate Assisted Living Facilities in Tennessee.
B. Atria desires to grant Developer such exclusive rights to develop
Assisted Living Facilities in the Southeast Region and such non-exclusive right
to develop sites in Tennessee, and obtain a right and option to purchase all
such Assisted Living Facilities developed by Developer, pursuant to the terms of
this Agreement.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. GRANT OF DEVELOPMENT RIGHTS.
1.1 GRANT. On the terms set forth in this Agreement, Atria hereby
grants to Developer the right to acquire and develop real estate, and design,
build and operate all, but not fewer than 15, Assisted Living Facilities within
the Southeast Region for three years (subject to extension in the manner
described in Section 3.1) following the date of this Agreement ("Development
Term"). During the Development Term and subject to Section 1.4, Atria shall
neither acquire or develop real estate, nor design and construct Assisted Living
Facilities within the Southeast Region, nor license another to do the same,
provided that Developer is and remains in substantial compliance with the terms
of this Agreement. During the Development Term, Atria shall approve a minimum of
15 sites for development by Developer.
1.2 DEVELOPMENT SCHEDULE. Developer shall have under development,
construction or in operation the number of Assisted Living Facilities as of the
end of each year of the Development Term set forth on the Development Schedule,
a copy of which is attached as Exhibit A. If Developer fails to develop the
Assisted Living Facilities in accordance with the scheduled dates set forth on
the Development Schedule as a result of a material breach by Developer or due to
matters within the control of Developer, Atria shall have the right either to
develop by itself or
<PAGE>
to contract with others to develop Assisted Living Facilities within the
Southeast Region during the Development Term.
1.3 CONTINUATION OF DEVELOPMENT.
(A) If Developer has obtained 15 sites that have been approved for
development by Atria prior to the end of the Development Term, Developer may
continue to locate sites (the "Additional Sites") during the balance of the
Development Term for development in the Southeast Region which, if approved by
Atria, shall become subject to the terms of this Agreement. If after 15 sites
have been approved Atria refuses to approve three Additional Sites that
Developer submitted to Atria, and Atria fails to provide an alternate site
acceptable in each of four "Metropolitan Areas" (as defined by the Office of
Management and Budget), then either party may terminate this Agreement solely
with respect to future development. Notwithstanding termination of this
Agreement pursuant to this Section 1.3(a), if Atria desires to develop a site
located within the Southeast Region at anytime prior to the third anniversary of
this Agreement, then Atria shall permit Developer to develop the site located
therein on the same terms and conditions set forth in this Agreement as though
the termination had not occurred.
(B) If during the Development Term and following approval of at
least 15 sites, Atria refuses to approve three Additional Sites in any
Metropolitan Area and fails to provide an alternative site located within such
Metropolitan Area acceptable to Developer within 90 days of the date that Atria
rejects the third Additional Site, then Developer may terminate this Agreement
as to that Metropolitan Area; provided, however, that if Atria decides to enter
into such Metropolitan Area within 12 months following the date that Developer
terminated this Agreement as to that Metropolitan Area, then Atria shall permit
Developer to develop the site located therein on the same terms and conditions
set forth in this Agreement as though the termination had not occurred. Any
termination under this Section 1.3(b) may be made on behalf of Developer solely
by Assisted Care Developers, l.l.c., a Georgia limited liability company
("Assisted Care") and a member of Developer, without the consent of Atria.
(C) All of the parties' rights and obligations regarding existing
sites that have been approved by Atria and existing Assisted Living Facilities
under construction or operation prior to the termination of this Agreement
pursuant to this Section 1.3 shall remain in full force and effect.
1.4 ATRIA'S RIGHT TO DEVELOP IN THE SOUTHEAST REGION. Notwithstanding
anything contained in Section 1.1 to the contrary, Atria shall have a right to
do the following within the Southeast Region:
(A) continue the development programs with the Southeast Region
with
(1) Arbor Company, and its affiliates, with respect to those
sites currently in development as of the date of this Agreement;
(2) Carl Raff, Carra Company, and their affiliates, with
respect to four sites; and
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(3) Southern Retirement Services L.L.C., and their affiliates
with respect to all sites in Metro Atlanta which have been evaluated and
personally inspected by Atria personnel prior to the date of this Agreement;
(B) to develop an Assisted Living Facility with any third party
who may bring a proposal for the development of an Assisted Living Facility
located in the Southeast Region to Atria if Developer declines to develop such
site after receiving notice from Atria;
(C) to continue to operate all of the Assisted Living Facilities
owned by Atria or its affiliates that are located in the Southeast Region and to
expand any existing Assisted Living Facility located within the Southeast
Region;
(D) to develop, build and construct Assisted Living Facilities
within the Southeast Region where such projects are either currently underway or
where Atria or any of its affiliates are currently party to an agreement under
which it is obligated to build or operate an Assisted Living Facility, as set
forth on Exhibit B; and
(E) to acquire from third parties existing Assisted Living
Facilities or Assisted Living Facilities currently under construction which are
located in the Southeast Region.
2. GENERAL DUTIES OF THE PARTIES.
2.1 SITE SELECTION. Developer shall be responsible for locating each
site within the Southeast Region in approved market areas on which it proposes
to construct an Assisted Living Facility. Any development sites located in the
Southeast Region identified by Atria or third parties, or brought to Atria by
third parties, shall be referred to Developer for inclusion among the properties
to be considered for development under this Agreement.
2.2 DEVELOPMENT OBLIGATIONS. In connection with its development
obligations Developer shall do the following:
(A) acquire fee simple title to the real property or create a
wholly-owned subsidiary corporation or limited liability company to obtain fee
simple title to the real property upon which the Assisted Living Facility will
be constructed;
(B) contract with general building contractors and/or construction
managers to construct the facilities and site improvements;
(C) obtain all zoning approvals and special use permits that may
be necessary or appropriate to operate an Assisted Living Facility at the site;
(D) obtain appropriate licenses from all federal, state and local
authorities for the operation of an Assisted Living Facility at the site, and
once obtained, shall maintain the licenses and permits in accordance with their
terms; and
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<PAGE>
(E) prior to any acquisition, obtain a Phase I Environmental Report
from an environmental engineering firm acceptable to Atria which states that
there are no material environmental infractions associated with the real
property and that there are no materials stored on or in the real property that
contain any substances which are deemed hazardous or toxic under any federal,
state or local environmental law, where such storage or presence, as the case
may be, violates any federal, state or local environmental law.
2.3 TRANSFER OF EXISTING PROPERTIES. Atria shall assign to Developer
within 10 days following the date of this Agreement, Atria's subsidiary's right
to the contracts to purchase one parcel of land in Jacksonville, Florida, and
two parcels of land in Orlando, Florida, and parcels of land located in
Montgomery, Alabama, and Cobb County, Georgia, and any contract for the purchase
of land in existence as of the date of this Agreement. Atria hereby approves
those contracts and the properties to which they relate as well as any existing
site plans and architectural plans prepared for the properties.
2.4 USE OF AFFILIATES. Developer may retain Delta Construction Company
("Delta"), an affiliate of Developer, as construction manager or general
contractor, to be paid a fee for each such project based on costs plus six
percent and on such other terms and conditions relating to the construction
thereof as may be set forth in a separate agreement between Developer and Delta.
3. OPTION TO PURCHASE FACILITIES.
3.1 GRANT OF ATRIA OPTION. In accordance with the terms of this
Section 3, Developer hereby grants Atria the right and option ("Atria Option")
to purchase each of the Assisted Living Facilities developed and operated by
Developer at any time during the 60 days (the "Option Period") following the end
of the month in which such facility attains "Stabilized Operations" (as defined
in Section 3.5). The rights of Atria under the Atria Option and the rights of
Developer to continue to develop all sites owned, under contract to acquire or
approved by Atria as of the third anniversary of the date of this Agreement
shall continue until such projects have been completed through the 60th day
following the date the last facility has reached Stabilized Operations. Each
facility for which Atria has exercised its option to acquire is hereinafter
referred to as the "Acquired Facility." If Atria wishes to exercise the Atria
Option, it shall notify Developer that Atria intends to exercise the Atria
Option (the "Exercise Notice"), stating Atria's calculation of the purchase
price for the Acquired Facility in accordance with the terms of Section 3.2. The
closing of a purchase under this Section 3 shall occur within 60 days following
the date of the Exercise Notice.
3.2 PURCHASE PRICE. The purchase price ("Purchase Price") for each
Acquired Facility shall be the lesser of (a) the "fair value" (as determined in
accordance to Section 3.3) of such Acquired Facility as of the date of the
Exercise Notice, or (b) the "Adjusted Cost" (as defined herein) of the Acquired
Facility as of the date of Exercise Notice. For the purposes of this Agreement,
the term "Adjusted Cost" shall mean the sum of the (a) net book value of all of
the assets of the Acquired Facility as of the date of the Exercise Notice, as
determined from the books of Developer maintained in accordance with generally
accepted accounting principles applied on a consistent basis, plus (b) the
amount of any "Cumulative Operating Loss" (as defined in Section
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<PAGE>
3.4), if any, plus (c) $666,666. To the extent that the Acquired Facility has
"Cumulative Net Operating Income" (as defined in Section 3.4) between the date
of the issuance of the certificate of occupancy and of the Exercise Notice, the
amount of the net operating income shall be subtracted from the net book value
of all of the assets of the Acquired Facility in determining the Purchase Price.
Between the date of the Exercise Notice and the Closing Date, the net operating
income of the Acquired Facility shall remain with Developer.
3.3 FAIR MARKET VALUE. If Atria determines that the Fair Value of an
Acquired Facility is less than the Adjusted Cost, Atria shall retain, at its
expense, Capital Valuation Group of Atlanta ("Appraiser") to determine the fair
market value of the Acquired Facility. The determination of the Appraiser shall
be final and binding on the parties as to the fair market value of an Acquired
Facility. The "Fair Value" of an Acquired Facility shall be the greater of the
fair market value (as determined by the Appraiser) or the sum of the debt
secured by the Acquired Facility plus the Cumulative Operating Loss, to the
extent that the Cumulative Operating Loss is not included in any of the debt
secured by the Acquired Facility.
3.4 CUMULATIVE OPERATING LOSS OR INCOME. "Cumulative Operating Loss"
means the amount by which (a) the sum of (i) all operating expenses (including
any management fees paid by Developer) between the date that the certificate of
occupancy for the Acquired Facility was issued and the date of the Exercise
Notice (the "Calculation Period"), plus (ii) depreciation of the Acquired
Facility Assets during the Calculation Period, (iii) interest on all
indebtedness secured by the Facility Assets accrued during the Calculation
Period (collectively, "Acquired Facility Expenses"), exceeds (b) the sum of all
operating revenue generated by the Acquired Facility during the Calculation
Period (the "Acquired Facility Revenue"). "Cumulative Net Operating Income"
means the amount by which the Acquired Facility Revenue exceeds the Acquired
Facility Expenses.
3.5 STABILIZED OPERATIONS DEFINED. The term "Stabilized Operations"
shall be attained when the annualized monthly revenue from the operations of a
facility equals or exceeds the facility's annualized operating expenses
(including one-half of management fees paid by Developer in connection with its
operation of the facility), annual depreciation expenses, and the annual
interest charges (calculated at Atria's current borrowing rate) on the sum of
the principal amount of the indebtedness secured by the facility's assets plus
$666,666.
3.6 ACQUIRED FACILITY ASSETS. At the closing of the purchase of an
Acquired Facility, Developer shall sell, transfer, convey, assign and deliver to
Atria, free and clear of all liens, mortgages, security interests, claims,
restrictions, pledges, charges and encumbrances of any nature whatsoever (other
than the "Permitted Encumbrances" as defined in Section 3.8(a)(2)), and Atria
shall purchase and acquire from Developer, the Acquired Facility and all of the
assets and properties owned or used by Developer in connection with the
operation of the Acquired Facility, tangible and intangible, real and personal,
wherever situated (collectively the "Acquired Facility Assets"), including the
following:
(A) all equipment, tools, accessories, maintenance equipment,
furnishings and fixtures located on or about the Acquired Facility;
-5-
<PAGE>
(B) the real property upon which the Acquired Facility is situated,
together with all buildings, structures, improvements and fixtures located
thereon and all easements and rights appurtenant thereto (the "Acquired Facility
Real Property");
(C) all of Developer's right, title and interest under, in and to
all permits, licenses, concessions, authorizations, franchises and similar
rights granted to or held by it, which are necessary or related to the operation
of the Acquired Facility, to the extent such Permits are transferable to Atria
(the "Acquired Facility Permits");
(D) all medical supplies, inventory or drugs and other medical
inventory and all other inventory and all other inventories and supplies located
in and about the Acquired Facility;
(E) the rent deposits of the Acquired Facility and resident
financial and medical records for all residents in the Acquired Facility on the
Closing Date; and
(F) all other assets and properties of any nature whatsoever (other
than the cash and cash equivalents whether or not used by such Acquired Facility
in connection with its operation), regardless of where located, held or used by
Developer in connection with the operation of the Acquired Facility, including
all records of every kind and type related to the Acquired Facility Assets.
3.7 NO ASSUMPTION OF LIABILITIES. Atria shall not assume, and shall
not in any manner become responsible or liable for, and Developer shall retain,
pay, discharge and perform in full, all other debts, obligations or liabilities
of Developer, whether known or unknown, fixed, contingent or otherwise.
3.8 CONDITIONS TO THE PURCHASE OF THE ACQUIRED FACILITY.
(A) Atria's obligation to purchase an Acquired Facility shall be
subject to the satisfaction at or prior to the closing of all of the following
conditions:
(1) Developer has performed to Atria's reasonable satisfaction
all of the actions and covenants required of Developer under Section 3.10;
(2) a title company reasonably acceptable to Atria ("Title
Company") irrevocably commits to issue to Atria an ALTA Form B title insurance
policy in the amount of the purchase price for the Acquired Facility (the "Title
Commitment"), insuring merchantable and marketable fee simple title to the
Acquired Facility Real Property in Atria, subject only to (a) the lien of ad
valorem property taxes and assessments due and payable for the current year not
yet due and payable, (b) those matters expressly accepted by Atria when the site
was submitted to Atria for approval as a development site, and (c) such other
matters that Atria, in it sole discretion, may accept (collectively, the
"Permitted Encumbrances");
-6-
<PAGE>
(3) Atria shall also be reasonably satisfied that no statute,
regulation, interpretation thereof, order or decision will have a material
adverse affect on its operation of the Acquired Facility by Atria following the
Closing Date;
(4) Developer delivers an "as built" survey from a surveyor
reasonably acceptable to Atria and the Title Company which satisfies the
provisions of Exhibit D to this Agreement.
(5) To the extent that the Acquired Facility's Permits are
transferable to Atria, Developer effects the transfer of the Permits to Atria,
or to the extent that the Acquired Facility's Permits are not transferable,
Atria has obtained all Acquired Facility Permits;
(6) Atria has obtained an environmental report on the Acquired
Facility that discloses that there are no current violations of any laws related
to the environment.
(B) Developer's obligation to sell an Acquired Facility to Atria
shall be subject to the satisfaction at or prior to the Closing that Atria has
performed to Developer's reasonable satisfaction all of the actions and
covenants required of Atria under Section 3.10.
3.9 DEVELOPER'S RIGHT TO CORRECT TITLE DEFICIENCIES. Developer shall
have 30 days following delivery of the Title Commitment to Atria to correct or
otherwise remove any liens, encumbrances, easements, restrictions or other
exceptions contained in the Title Commitment that is not one of the Permitted
Encumbrances. If Developer fails to correct such exception to the satisfaction
of Atria and the Title Company, so that such exception shall be removed from the
policy of title insurance to be issued by the Title Company at the Closing, or
are insured against by the Title Company, Atria may, in its sole discretion, do
any one or more of the following:
(A) waive the objection and proceed to purchase the Acquired
Facility under the Atria Option;
(B) elect not to purchase the Acquired Facility under the Atria
Option and allow the Management Agreement to remain in full force and effect; or
(C) cause any monetary exceptions to be removed and deduct from the
Purchase Price all expenses incurred by Atria in connection therewith.
3.10 DELIVERIES AT THE CLOSING OF THE PURCHASE AT THE CLOSING.
Developer and Atria shall take the following actions:
(A) Developer shall deliver to Atria:
(1) a limited warranty deed conveying good and marketable fee
simple title to the Acquired Facility Real Property free and clear of all
liens, encumbrances, claims and other exceptions other than the Permitted
Encumbrances; and
-7-
<PAGE>
(2) a bill of sale conveying good and marketable title to the
balance of the Facility Assets free and clear of all liens, encumbrances,
claims and other exceptions of whatsoever kind or nature;
(3) an environmental indemnity in the form of EXHIBIT C;
(4) all available warranties, handbooks, manuals and other
records and materials relating to any of the Acquired Facility and all
available blueprints, plans and specifications, permits, certificates of
occupancy and other like items relating to the Acquired Facility.
(5) possession of the Acquired Facility Assets;
(6) all consents required for assignment and transfer by
Developer to Atria of the Acquired Facility Assets; and
(7) such other documents as may be reasonably requested by
Atria, that it deems reasonably necessary, to effect the closing of the
purchase and sale of an Acquired Facility, including an owner's affidavit
in form sufficient to enable the Title Company to delete all standard title
exceptions from the Title Commitment and a certificate duly executed by
Developer certifying that Developer is not a foreign person for purposes of
the Foreign Investment in Real Property Tax Act ("FIRPTA"), as amended.
(B) Atria shall deliver to Developer a certified or cashier's
check in the full amount of the Purchase Price, adjusted to reflect the
prorations and any amount owed by Atria and Developer to the other with respect
to that Acquired Facility and the allocation of other transactional fees between
Developer and Atria in accordance with the terms of this Agreement.
3.11 RISK OF LOSS. Developer shall assume and have all risk of damage,
destruction or loss for the Facility Assets, until the Closing has occurred.
3.12 ALLOCATION OF EXPENSES ASSOCIATED WITH SALE. Atria shall pay, (a)
all documentary transfer taxes, intangible taxes and similar cost and all sales,
use transfer and similar taxes, relating to the transfer of the Facility Assets
from Developer, (b) the cost of the survey, if any, and the premium for an ALTA
Form B owner's policy of title insurance insuring title to the Acquired Facility
Real Property in Atria in the amount of the Purchase Price, (c) the costs
associated with the transfer of the Permits, and (d) all recording charges and
filing fees.
3.13 REMEDIES FOR BREACH OF THE PURCHASE OPTION OR FIRST REFUSAL RIGHT.
If Developer fails or refuses to perform each and every one of its obligations
under this Section 3, Atria may pursue a suit for specific performance.
3.14 RECORDATION OF ATRIA OPTION. Developer shall execute such
documents, in recordable form, that Atria may reasonably request for the purpose
of putting the Atria Option of record with the appropriate authorities.
-8-
<PAGE>
3.15 DEVELOPER'S RIGHT TO SELL THE FACILITY. If Atria fails to exercise
the Atria Option within the Option Period to acquire any Assisted Living
Facility, or fails to close the purchase of an Acquired Facility within 60 days
following the date of the Exercise Notice, and such failure is not the result of
any fault or failure by Developer to perform its obligations hereunder, then
Atria's right and option to purchase such facility shall cease and Developer may
continue to operate such Assisted Living Facility or sell such facility to any
third party.
4. MISCELLANEOUS PROVISIONS.
4.1 NOTICE. 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
With copy to: Carmin D. Grandinetti, Esq.
Greenebaum Doll & McDonald, PllC
3300 National City Tower
101 South Fifth Street
Louisville, Kentucky 40202-3197
FAX:(502) 587-3695
If to Developer: George Schoepf
Elder Healthcare Developers, LLC
1770 Indian Trail Road, Suite 400
Duluth, Georgia 30193
FAX:(770) 735-5830
-9-
<PAGE>
With copy to: Michael M. Smith , Esq.
Gambrell & Stolz, L.L.P.
4300 One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308
FAX:(404) 221-6501
4.2 FORCE MAJEURE. The parties understand and acknowledge that neither
party shall be liable to the other for any loss, damage, detention, delay or
failure to perform such party's obligations hereunder, in whole or in part,
resulting from causes beyond such party's control, including fires, strikes,
insurrections, riots, embargoes, shortages of motor vehicles, delays in
transportation, inability to supply component parts or raw materials or
requirements or regulations of the United States government or any other foreign
or domestic civil or military authority.
4.3 EXHIBITS; ENTIRE AGREEMENT. All Exhibits to this Agreement shall
be deemed to be incorporated herein by reference and made a part hereof as if
set out in full at the place where first mentioned. As used herein the term
"Agreement" shall mean this Development Agreement and the Exhibits hereto. This
Agreement embodies the entire agreement and understanding of the parties hereto
regarding its subject matter and supersedes all prior agreements,
correspondence, arrangements and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intention has
been made by any party which has not been embodied in this Agreement.
4.4 ARBITRATION.
(A) If the Parties 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 Party may initiate
Arbitration by making a demand on the other Party 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 Party 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 Party upon whom the original
arbitration demand was served fails to designate its arbitrator within the 15-
day period, the arbitrator designated by the Party 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 Parties 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
-10-
<PAGE>
demand for arbitration. A Party'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 Parties may enforce their rights (including
the right of discovery) in the courts. Such enforcement in the courts shall not
constitute a waiver of a Party's right to arbitration. Upon the completion of
the appointment of the arbitration panel, the arbitrators shall have the power
to enforce the Parties' discovery rights.
(D) The Parties 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 4.4.
4.5 AMENDMENT; WAIVER. This Agreement may be amended, modified,
superseded, or canceled only by a written instrument signed by all of the
parties hereto, and any of the terms, provisions, and conditions hereof may be
waived, only by a written instrument signed by the waiving party. Failure of any
party at any time or times to require performance of any provision hereof shall
not be considered to be a waiver of any succeeding breach of such provision by
any party.
4.6 BINDING EFFECT; ASSIGNMENT. All the terms, provisions and
conditions of this Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the parties hereto and their respective heirs,
legal representatives, successors and assigns, provided, however, that this
Agreement shall not be assigned by either party without the prior consent of the
other.
4.7 CAPTIONS. The captions in this Agreement are included for purposes
of convenience only and shall not be considered a part of the Agreement in
construing or interpreting any provision hereof.
4.8 SEVERABILITY OF PROVISIONS. If any provision of this Agreement or
the application thereof to any person or circumstance shall to any extent be
held in any proceeding to be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those to which it was held to be invalid or unenforceable, shall not
be affected thereby, and shall be valid and be enforceable to the fullest extent
permitted by law, but only if and to the extent such enforcement would not
materially and adversely frustrate the parties' essential objectives as
expressed herein.
4.9 FURTHER ASSURANCES. The Shareholders and Atria each hereby agree
to execute and deliver all agreements, documents and instruments required to be
executed and delivered by them in this Agreement, and to execute and deliver
such additional instruments and documents and to take such additional actions as
may reasonably be required from time to time in order to effectuate the
transactions described in this Agreement, whether prior to, at, or after the
Closing.
4.10 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Kentucky.
-11-
<PAGE>
4.11 PUBLICITY; NO DISCLOSURE. Before the Closing, no party to this
Agreement shall make any press release or make any other public announcement
regarding the existence of this Agreement or the transactions described in this
Agreement, without prior consultation with and consent of the other parties to
this Agreement.
4.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first written above.
ELDER HEALTHCARE DEVELOPERS, LLC
By: /s/ G.A Schoepf
-----------------------------------------------
Title: On behalf of Assisted Care Developer, Member
---------------------------------------------
("Developer")
ATRIA COMMUNITIES, INC.
By: /s/ J. Timothy Wesley
------------------------------------------------
Title: CFO
---------------------------------------------
("Atria")
-12-
<PAGE>
EXHIBIT A
---------
DEVELOPMENT SCHEDULE
<TABLE>
<CAPTION>
TOTAL NUMBER OF FACILITIES UNDER
YEAR DEVELOPMENT, CONSTRUCTION OR OPERATING
---------------------------------------------------------------
<S> <C>
1 5
2 10
3 15
</TABLE>
<PAGE>
EXHIBIT B
---------
CURRENT PROJECTS
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
PROPERTY OWNED OR UNDER CONTRACT UNITS
----------------------------------------------------
<S> <C>
Memphis, Tennessee (Primacy) 48
Dallas, Texas 64
Jackson, Tennessee 51
Huntsville, Alabama 50
Atlanta, Georgia 74
Lantana, Florida 48
Virginia Beach, Virginia 110
Carrollton, Texas 90
Grapevine, Texas TBD
Richardson, Texas TBD
</TABLE>
<PAGE>
EXHIBIT C
ENVIRONMENTAL CERTIFICATION
THIS ENVIRONMENTAL CERTIFICATION is made this ___ day of ________________,
19__, by ELDER HEALTHCARE DEVELOPERS, LLC, a Georgia limited liability company
("Seller"), to ATRIUM COMMUNITIES, INC., a Delaware corporation ("Purchaser").
Seller hereby certifies to Purchaser the following:
1. The term "Hazardous Materials" for the purposes hereof shall mean any
and all hazardous or toxic substances, pollutants, contaminants, petroleum and
gas products including (without limitation) solid, semi-solid, liquid or gaseous
substances which are toxic, ignitable, corrosive, carcinogenic, or otherwise
dangerous to human, plant or animal health and well being, and including
(without limitation) petroleum products, gasoline, crude oil or any fraction
thereof, natural gas, natural gas liquids, liquefied natural gas or hazardous
wastes or substances under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.(S) 9601 et seq., and all other
-- ---
federal, state and local laws, rules and regulations pertaining to environmental
protection or conservation (the "Acts").
2. To the best of Seller's knowledge, the real property described in
Exhibit "A", attached hereto and incorporated herein and made a part hereof by
this reference (the "Property") does not contain any Hazardous Materials in
violation of any applicable environmental laws, and the Property does not
constitute an environmental hazard of any type under any requirement of any
governmental authority in violation of any applicable environmental laws.
3. To the best of Seller's knowledge, there are no surface impoundments,
lagoons, piles, landfills, injection wells, underground storage areas or other
man-made facilities on the Property which have accommodated Hazardous Materials
in violation of any applicable environmental laws, and neither Seller nor any
third party has dumped, discharged, buried or otherwise placed Hazardous
Materials on the Property in violation of any applicable environmental laws,
including the soil, surface water and groundwater thereof.
4. To the best of Seller's knowledge, there are no buried, partially
buried or above ground tanks, storage vessels, drums or containers located on
the Property.
5. Seller has not received, and is not aware of, any warning notice,
notice of violation, administrative complaint, judicial complaint, either formal
or informal notice alleging that conditions on the Property are in violation of
any applicable environmental laws.
6. Seller has not received, and is not aware of, and to the best of
Seller's knowledge, no previous owner of the Property has received, any summons,
citation, notice, letter or other communication, written or oral, from any
federal or state environmental agency or other public agency concerning
intentional or unintentional actions or omissions on the part of the Seller or
any previous owner of the Property which resulted in the release of Hazardous
Materials onto or into
<PAGE>
the soil, surface water or groundwater of the Property in violation of any
applicable environmental laws.
7. To the best of Seller's knowledge there has been no treatment,
storage, disposal, discharge or other type of release of Hazardous Materials on
land adjacent to or near to the Property which has contaminated the Property or
the surface or groundwater flowing to the Property in violation of any
applicable environmental laws.
8. To the best of Seller's knowledged, the operation or existence of the
improvements on the Property does not violate any federal, state or local laws,
rules or ordinances relating to environmental protection.
ELDER HEALTHCARE DEVELOPERS, LLC,
a Georgia limited liability company
By:______________________________
Title:___________________________
STATE OF _____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me this _________ by _____
______, the ________________________________ of ELDER HEALTHCARE DEVELOPERS,
LLC, a Georgia limited liability company, on behalf of the limited liability
company.
My commission expires: _____________
___________________________________
[SEAL] Notary Public
-2-
<PAGE>
EXHIBIT D
SURVEY REQUIREMENTS
1. An urban ALTA/ACSM Land Title Survey is required, in accordance with the
Minimum Standard Detail Requirements and Classifications for such surveys
as established and jointly adopted in 1992 by the American Land Title
Association (the "ALTA") and the American Congress on Surveying & Mapping
("ACSM"), meeting the then-current accuracy standards jointly established
by ALTA and ACSM.
2. The items checked on the attached Table A to the Minimum Standard Detail
Requirements and Classifications for such surveys as established and
jointly adopted in 1992 by the ALTA and the ACSM shall also be indicated or
shown on the survey.
3. The survey shall have a registered land surveyor's seal affixed thereto and
shall reflect a date not more than 60 days prior to the Closing Date. Older
surveys are acceptable if updated and re-certified within 60 days prior to
the Closing Date.
4. The survey shall have the following certification:
--------------------------------------------------------------------
To Atria Communities Southeast, Inc. and [Insert Name of Title
Company]:
This is to certify that this map or plat and the survey on which
it is based were made (a) in accordance with "Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys," jointly
established and adopted by ALTA and ACSM in 1992, and includes
Items ___________________________ [Insert numbers of items
checked] of Table A thereof, and (b) pursuant to the Accuracy
Standards (as adopted by ALTA and ACSM and in effect on the date
of this certification) of an Urban Survey.
Signed:______________________________
Date:________________________________
Registration No._____________________
(seal)
--------------------------------------------------------------------
<PAGE>
TABLE A
OPTIONAL SURVEY RESPONSIBILITIES AND SPECIFICATIONS
If checked, the following optional items are to be included in the ALTA/ACSM
LAND TITLE SURVEY:
- --------------------------------------------------------------------------------
1. [X] Monuments placed (or a reference monument or witness to the corner) at
all major corners of the boundary of the property, unless already
marked or referenced by an existing monument or witness to the corner.
2. [X] Vicinity map showing the property surveyed in reference to nearby
highway(s) or major street intersection(s).
3. [X] Flood zone designation (with proper annotation based on Federal Flood
Insurance Rate Maps or the state or local equivalent, by scaled map
location and graphic plotting only).
4. [X] Land area as specified by client. -- Total area of parcel in square
feet or acres.
5. [_] Contours and the datum of the elevations.
6. [X] Identify, and show if possible, setback, height and bulk restrictions
of record or disclosed by applicable zoning and building codes (in
addition to those recorded in subdivision maps). If none, so state.
7. [X] (a) Exterior dimensions of all buildings at ground level
(b) Square footage of:
[X] (1) exterior footprint of all buildings, or gross floor area of
all buildings, at ground level
[_] (2) other areas to be defined by the client
[X] (c) Height of all buildings above grade at a defined location.
8. [X] Substantial, visible improvements (in addition to buildings) such as
signs, parking areas or structures, swimming pools, etc.
9. [X] Parking areas and, if striped, the striping and the type (e.g.,
handicapped, motorcycle, regular, etc.) and number of parking spaces.
10. [X] Indication of access to a public way such as curb cuts, driveways
marked.
11. [X] Location of utilities serving or existing on the property as evidenced
by on-site observation or as determined by records provided by client,
utility companies and other appropriate sources (with reference as to
the source of information) (for example):
(a) railroad tracks and sidings;
(b) manholes, catch basins, valve vaults or other surface
indications of subterranean uses;
(c) wires and cables (including their function) crossing the surveyed
premises, all poles on or within ten feet of the surveyed
premises, and the dimensions of all cross wires or overhangs
affecting the surveyed premises; and
(d) utility company installations on the surveyed premises.
12. [_] Governmental Agency survey-related requirements as specified by the
client.
13. [X] Significant observations not otherwise disclosed. -- Including, but
not limited to, rubbish fills, sloughs, springs, filled in water wells
or cisterns, seep holes, existing or plugged oil or gas wells.
14. [_] Other items as specified by client. -- Boundary description must be
identical to that contained in title commitment or discrepancies
satisfactorily explained.
<PAGE>
EXHIBIT 99.3
----------------------------------------------------------------
OPERATING AGREEMENT
OF
ELDER HEALTHCARE DEVELOPERS, LLC
----------------------------------------------------------------
April 1, 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......................................................................3
4.1 Books and Records..........................................................3
4.2 Fiscal Year................................................................3
4.3 Reports....................................................................4
4.4 Tax Returns................................................................4
4.5 Member's Request for Additional Information................................4
4.6 Revaluation of Company Property............................................4
4.7 Bank Accounts..............................................................4
5. Allocation of Net Income and Net Loss...........................................5
5.1 Net Income and Net Loss....................................................5
5.2 Allocation of Excess Nonrecourse Liabilities...............................6
5.3 Allocations in Event of Transfer, Admission of New Member, Etc.............6
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...................................................................7
7.1 Net Cash Flow..............................................................7
7.2 Distributions of Net Cash Flow.............................................7
7.3 Property Distributions.....................................................8
7.4 Distributions on Sale of an Assisted Living Facility.......................8
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
8. Management......................................................................8
8.1 Management Committee.......................................................8
8.2 Day to Day Management.....................................................11
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.......................................................13
8.7 Other Activities..........................................................13
8.8 Reimbursement of Expenses of Members......................................14
9. Dissolution....................................................................14
9.1 Dissolution...............................................................14
9.2 Effective Date of Dissolution.............................................14
9.3 Sale of Assets Upon Dissolution...........................................15
9.4 Distributions Upon Dissolution............................................15
9.5 No Contribution for Negative Capital Accounts.............................15
9.6 Liquidation of a Member's Interest........................................15
10. Withdrawal, Assignment and Addition of Members.................................15
10.1 Assignment of a Member's Interest........................................15
10.2 Voluntary Transfers......................................................16
10.3 Involuntary Transfers....................................................16
10.4 Purchase Price and Terms.................................................17
10.5 Substitute Member........................................................17
10.6 Admission of New Member..................................................17
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..............................................................20
11.9 Binding Agreement........................................................21
11.10 Applicable Law..........................................................21
11.11 Entire Agreement........................................................21
11.12 Counterparts............................................................21
11.13 No Right of Partition...................................................21
</TABLE>
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<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
DESCRIPTION EXHIBIT
<S> <C>
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)
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)
</TABLE>
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<PAGE>
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."). 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'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, 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.
<PAGE>
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 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
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<PAGE>
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. Atria shall provide the Company's financing
to pay for the (i) acquisition of real estate, (ii) earnest money advance
relating to real estate purchase contracts, (iii) pre-development activities,
and (iv) development and construction costs of each Assisted Living Facility and
to fund any loss from the operation of Assisted Living Facilities of the
Company. All of the Company's debt to Atria shall be secured by a first security
interest in favor of Atria and its lenders on all properties of the Company and
shall bear interest at a variable rate equal to .25% in excess of borrowing rate
on Atria's Credit Agreement, dated August 15, 1996, among Atria and certain
lenders (the "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 date that the entire principal
balance and all accrued but unpaid interest under the Credit Facility is due,
whether principal and interest is due as a result of maturity or default,
provided that the maturity date thereof shall be extended to the extent the
Credit Facility is renewed or replaced or the due date thereof is extended. The
maturity date under the Credit Facility is August 15, 2000. The Company may pre-
pay the indebtedness to Atria at any time without penalty. Atria hereby
represents and warrants to Assisted Care that as of the date of this Agreement,
Atria has available $75,000,000 that it can use for the long-term financing
described in this Section 3.6. All such loans to the Company shall be cross-
defaulted with the Credit Agreement.
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").
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<PAGE>
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.
4.5 MEMBER'S REQUEST FOR ADDITIONAL INFORMATION'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
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<PAGE>
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 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).
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<PAGE>
(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 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
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
(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.
(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
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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;
(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;
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(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;
(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
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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.
(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.
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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 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
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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.
(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
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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 distributions of
such reserve) shall be pro rata in accordance with the balances of the Members'
Capital Accounts.
9.5 NO 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.
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<PAGE>
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 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).
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<PAGE>
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.
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.
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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:
(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.
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<PAGE>
(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
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
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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.
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
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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.
11.9 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.
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/ W. Patrick Mulloy, II
--------------------------------
Title: President/CEO
-----------------------------
("Atria")
ASSISTED CARE DEVELOPERS, L.L.C.
By: /s/ G.A Schoepf
--------------------------------
Title: Managing Member
-----------------------------
("Assisted Care")
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