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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): February 1, 1998
Atria Communities, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-211589 61-1303738
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
515 West Market Street
Louisville, Kentucky 40202
(Address of Principal Executive Offices) (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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Item 2. Acquisition or Disposition of Assets
On February 1, 1998, Atria Communities, Inc. (the "Company") completed the
acquisition of five healthcare facilities in Texas for $31,700,000 in cash with
no debt assumed. The Company financed the acquisitions with a synthetic lease
entered into with Asset XVIII Holdings Company, L.L.C. Under the terms of the
Agreement for Purchase and Sale of Assets by and among the Company, Briarcliff
Health Center of Texas, a Texas general partnership, Briarcliff Health Center,
Inc., a Texas corporation, Larry S. Parker, Randy Parker, and Don Steele, the
Company acquired a 72-unit assisted living facility in Tyler, Texas for
$5,200,000.
Under terms of the Agreement for Purchase and Sale of Assets by and between
the Company and Larry S. Parker, the Company acquired a 62-unit assisted living
facility and a 100-unit independent living facility in Tyler, Texas for
$11,500,000. In connection with this acquisition, the Company entered into a
Development Agreement with Mr. Parker. Under this agreement, Mr. Parker will
develop and construct up to two assisted and independent living facilities in
the greater Shreveport, Louisiana area. In consideration of Mr. Parker's
services under this agreement, the Company will pay Mr. Parker a development fee
equal to the sum of (a) $2,860 per unit for the first 140 units developed, plus
(b) $10,000 for each unit in excess of 140 units, provided that in no event will
the development fee be less than $400,000.
Pursuant to the terms of the Agreement for Purchase and Sale of Assets (the
"Briarcliff Purchase Agreement") by and among the Company, Briarcliff Village
Health Center, a Texas general partnership, Briarcliff Village Health Center,
Inc. and Larry S. Parker, Randy Parker, Mary G. Tedford, Laura A. Tedford, David
Tedford, and Don Steele (collectively, the "Shareholders"), the Company acquired
a 242-bed nursing center (the "Tyler Nursing Center") in Tyler, Texas for
$10,350,000. Under terms of the Agreement for Purchase and Sale of Assets (the
"Chandler Purchase Agreement") by and among the Company, Nursing Care Four, a
Texas general partnership, Chandler Nursing Center, Inc., a Texas corporation,
and the Shareholders, the Company acquired a 90-bed nursing center (the
"Chandler Nursing Center") in Chandler, Texas for $4,050,000. Pursuant to the
Assignment of Agreement for Purchase and Sale of Assets by and between the
Company and Atria Health Centers, Inc., a Delaware corporation that is a
subsidiary of the Company ("Subsidiary"), the Company assigned the Company's
interest in the Briarcliff Purchase Agreement and the Chandler Purchase
Agreement to Subsidiary.
Simultaneous with the closing of these acquisitions, Subsidiary entered
into a Management Agreement with Briarcliff Management Co., Inc., a Texas
corporation ("Manager"), pursuant to which Manager will manage and conduct the
business of the Texas Nursing Center and the Chandler Nursing Center. Subsidiary
will pay Manager a monthly management fee of 5% of the monthly gross billings of
each nursing center net of contractual allowances or other adjustments by any
third party payor, Medicare or Medicaid, and a reasonable allowance for bad
debts.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired:
It is impracticable to provide the required financial statements at this
time, and they will be filed as soon as they are available, but not later
than 60 days after the date of filing this Form 8-K.
(b) Pro Forma Financial Information:
It is impracticable to provide the required pro forma financial statements
at this time, and they will be filed as soon as they are available, but not
later than 60 days after the filing of this Form 8-K.
(c) Exhibits:
2.1 Agreement for Purchase and Sale of Assets by and among Atria Communities,
Inc., Briarcliff Health Center of Texas, Briarcliff Health Center, Inc.,
and Larry S. Parker, Randy Parker and Don Steele dated as of December 15,
1997.
2.2 Agreement for Purchase and Sale of Assets by and among Atria Communities,
Inc., Briarcliff Village Health Center, Briarcliff Village Health Center,
Inc., and Larry S. Parker, Randy Parker, Mary G. Tedford, Laura R. Tedford,
David Tedford and Don Steele dated as of December 15, 1997.
2.3 Agreement for Purchase and Sale of Assets by and among Atria Communities,
Inc., Nursing Care Four, Chandler Nursing Center, Inc., and Larry S.
Parker, Randy Parker, Mary G. Tedford, Laura R. Tedford, David Tedford and
Don Steele dated as of December 15, 1997.
2.4 Agreement for Purchase and Sale of Assets by and between Atria Communities,
Inc. and Larry S. Parker dated as of December 15, 1997.
99.1 Master Participation Agreement dated as of January 30, 1998 among Asset
XVIII Holdings Company, L.L.C., as Lessor, Atria Communities, Inc., as
Lessee, and Bank One, Kentucky, N.A., as Lender.
99.2 Master Lease and Development Agreement dated as of January 30, 1998 between
Asset XVIII Holdings Company, L.L.C., as Lessor, and Atria Communities,
Inc., as Lessee.
99.3 Press Release dated January 7, 1998 announcing the acquisition of five
health care facilities in Texas.
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.
Date: February 17, 1998 By: /s/ Audra J. Eckerle
------------------------
Audra J. Eckerle, Esq.
General Counsel and
Assistant Secretary
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EXHIBIT 2.1
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AGREEMENT FOR PURCHASE AND SALE OF ASSETS
BY AND AMONG
ATRIA COMMUNITIES, INC.,
BRIARCLIFF HEALTH CENTER OF TEXAS,
BRIARCLIFF HEALTH CENTER, INC.,
AND
LARRY S. PARKER, RANDY PARKER,
AND DON STEELE
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December 15, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Purchase and Sale of Assets........................................ 1
1.1 Personal Acquisition Assets.................................. 1
1.2 Real Property Acquisition.................................... 2
1.3 Excluded Assets.............................................. 2
1.4 Assumed Liabilities; No Assumption of Other Liabilities...... 3
2. Purchase Price; Deposit; Payment................................... 3
2.1 Purchase Price; Deposit; Payment............................. 3
2.2 Prorations................................................... 3
2.3 Allocation of Purchase Price................................. 4
3. Deposit; Escrow; First Closing; Termination........................ 4
3.1 Escrow....................................................... 4
3.2 The First Closing............................................ 4
3.3 Actions Taken by Title Agent on First Closing Date
and Thereafter............................................... 5
3.4 Termination of Escrow........................................ 5
3.5 Second Closing............................................... 5
4. Representations and Warranties of Sellers and Shareholders......... 5
4.1 Authority; No Conflict....................................... 5
4.2 Assets Necessary To Business................................. 7
4.3 Books and Records............................................ 7
4.4 Brokers...................................................... 7
4.5 Completeness of Statements................................... 7
4.6 Environmental Matters........................................ 7
4.7 Insurance.................................................... 8
4.8 Litigation................................................... 9
4.9 Taxes........................................................ 9
4.10 Title to Properties; Condition and Repair.................... 10
4.11 Zoning....................................................... 10
5. Representations and Warranties of Owner............................ 10
5.1 Real Property................................................ 10
5.2 Utilities.................................................... 11
6. Representations and Warranties of Operator and Shareholders........ 11
6.1 Absence of Certain Events.................................... 11
6.2 Contracts.................................................... 12
6.3 Current Compensation of Employees............................ 12
6.4 Employee Benefits............................................ 13
6.5 Financial Statements......................................... 13
</TABLE>
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TABLE OF CONTENTS
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<CAPTION>
Section Page
<S> <C>
6.6 Labor Matters................................................ 13
6.7 Liabilities Not Disclosed On Balance Sheet................... 13
6.8 Medicare, Medicaid and Other Third Party Payors.............. 14
6.9 Permits...................................................... 14
6.10 Proprietary Property......................................... 14
7. Representations and Warranties of Buyer............................ 14
7.1 Corporate Status............................................. 14
7.2 Authority; Consents; Enforcement: Noncontravention;
Noncompetes.................................................. 14
7.3 No Agent or Broker........................................... 15
8. Additional Covenants of the Parties................................ 15
8.1 Access and Investigation..................................... 15
8.2 Operation of the Facility Pending First Closing.............. 15
8.3 Operation of the Facility Pending Second Closing............. 15
8.4 Required Consent............................................. 16
8.5 Notification................................................. 16
8.6 No Negotiation............................................... 16
8.7 Approvals of Governmental Bodies............................. 17
8.8 Transition of the Facility................................... 17
8.9 Operator's Employees and Employee Benefits................... 17
8.10 Survey....................................................... 18
8.11 Title Insurance.............................................. 18
8.12 Filing of Taxes; Payment..................................... 18
8.13 Sales and Other State Taxes.................................. 18
8.14 Non-Competition Agreements................................... 18
8.15 Further Assurances........................................... 19
9. Conditions Precedent to Buyer's Obligation to Close at First
Closing............................................................ 19
9.1 Accuracy of Representations.................................. 19
9.2 Sellers' Performance......................................... 19
9.3 No Proceedings............................................... 19
9.4 Consents..................................................... 19
9.5 Texas DHS Authorization...................................... 19
9.6 Other Documents.............................................. 19
9.7 Title Policy................................................. 20
9.8 No Prohibition............................................... 20
10. Conditions Precedent to Sellers' Obligation to Close............... 20
10.1 Accuracy of Representations.................................. 20
10.2 Buyer's Performance.......................................... 20
10.3 No Injunction................................................ 20
</TABLE>
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TABLE OF CONTENTS
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<CAPTION>
Section Page
<S> <C>
10.4 Consents.................................................... 20
10.5 Definitive Agreements for Purchase and Sale of Other
Facilities.................................................. 20
10.6 Other Documents............................................. 21
11. Termination....................................................... 21
11.1 Termination Events.......................................... 21
11.2 Effect of Termination....................................... 22
12. Deliveries and Actions To Be Taken At First Closing............... 22
12.1 Deliveries by Sellers....................................... 22
12.2 Deliveries by Buyer......................................... 23
13. Second Closing.................................................... 24
13.1 Conditions Precedent to Parties Obligation to Close
at Second Closing........................................... 24
13.2 Deliveries and Action to be Taken at Second Closing......... 24
14. Indemnification; Remedies......................................... 25
14.1 Survival; Right to Indemnification.......................... 25
14.2 Indemnification and Payment of Damages By Owner............. 25
14.3 Indemnification and Payment of Damages By Operator.......... 25
14.4 Indemnification and Payment of Damages by Shareholders...... 25
14.5 Indemnification By Buyer.................................... 26
14.6 Indemnity Claims............................................ 26
14.7 Remedies; Right of Set-Off.................................. 27
15. Miscellaneous Provisions.......................................... 28
15.1 Amendment; Waiver........................................... 28
15.2 Assignment; Binding Effect.................................. 28
15.3 Construction and Interpretation of Agreement................ 28
15.4 Severability of Provisions.................................. 29
15.5 Confidentiality of Certain Information...................... 29
15.6 Confidentiality of Agreement................................ 30
15.7 Exhibits and Schedules...................................... 30
15.8 Counterparts................................................ 30
15.9 Entire Agreement............................................ 30
15.10 Expenses.................................................... 30
15.11 Further Assurances.......................................... 31
15.12 Governing Law............................................... 31
15.13 No Public Announcement...................................... 31
15.14 Notices..................................................... 31
15.15 Recovery of Expenses by Prevailing Party.................... 32
15.16 Cumulative Remedies; Specific Performance................... 32
</TABLE>
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TABLE OF CONTENTS
Section Page
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EXHIBITS
Description Exhibit
Certain Definitions.................................................... A
Assumed Contracts...................................................... B
Purchase Price Allocation.............................................. C
Survey Requirements.................................................... D
Bill of Sale........................................................... E
Assignment and Assumption Agreement.................................... F
Non-Competition Agreement.............................................. G
Lease Agreement........................................................ H
SCHEDULES
Description Schedule
Authority, No Conflict and Organization, Seller's Consents............. 4.1
Broker Fees............................................................ 4.4
Environmental Matters.................................................. 4.6
Insurance.............................................................. 4.7
Litigation............................................................. 4.8
Taxes.................................................................. 4.9
Personal Property...................................................... 4.10
Real Property.......................................................... 5.1
Absence of Certain Events.............................................. 6.1
Contracts.............................................................. 6.2
Employees and Compensation............................................. 6.3
Financial Statements................................................... 6.5
Labor Matters.......................................................... 6.6
Absence of Undisclosed Liabilities..................................... 6.7
Permits................................................................ 6.9
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AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets is entered into and effective
as of December 15, 1997, by and among Atria Communities, Inc., a Delaware
corporation ("Buyer"), Briarcliff Health Center of Texas, a Texas general
partnership ("Owner"), Briarcliff Health Center, Inc., a Texas corporation doing
business as Village on Copeland ("Operator"), and Larry S. Parker, Randy
Parker, and Don Steele (collectively, the "Shareholders"). (Owner and Operator
are hereinafter referred to collectively as "Sellers".)
Recitals:
A. Owner owns certain "Real Property" (as defined in Section 1.2) located at
5317 New Copeland Road, Tyler, Texas 75703. Operator leases the Real Property
from Owner and operates an independent living facility and a Class A personal
care home having 64 units (the "Facility") at such location.
B. Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer
the Real Property and the Facility, and all of the assets and properties located
at the Facility and owned or used by either Seller in connection with the
operation of the Facility, pursuant to the terms of this Agreement.
C. In addition to the terms defined in this Agreement, certain other terms
used in this Agreement are in the Exhibit of Certain Defined Terms attached to
this Agreement as Exhibit A and such terms, when used in this Agreement, have
the meaning set forth in that Exhibit.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Purchase and Sale of Assets.
1.1 Personal Acquisition Assets. Upon the terms and subject to the
conditions of this Agreement, at the "First Closing" on the "First Closing Date"
(as such terms are defined in Section 3.2), Sellers shall sell, transfer,
convey, assign and deliver to Buyer, and Buyer shall purchase and acquire from
Seller, free and clear of all Encumbrances (other than the "Permitted
Encumbrances" (as defined in Section 9.7)), all of each Seller's respective
right, title and interest under, in and to the following (collectively, the
"Personal Acquisition Assets"):
(a) All of the assets and properties reflected on the "Acquisition
Balance Sheet" (as defined in Section 6.5) and those assets and properties
acquired since the date of the Acquisition Balance Sheet, except those assets
that have been disposed of in the Ordinary Course of Business between the date
of the Acquisition Balance Sheet and the First Closing Date;
(b) All machinery, equipment, computer hardware and software (subject
to any restrictions by the licensor on the assignment thereof) tools, supplies,
spare parts, furniture, motor vehicles and all other tangible personal property
and assets located at the Facility and owned or
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leased by either Seller and used or held for use in connection with the
Facility, including those identified on Schedule 4.10 (the "Personal Property");
(c) All inventories of cleaning supplies, food, all medical supplies,
inventory of drugs and other medical inventory and all other inventories and
supplies located in and about the Facility (the "Inventory");
(d) Resident records for all residents in the Facility on the First
Closing Date;
(e) All of each Seller's respective interest (including all rights,
benefits, duties and obligations) in those Contracts listed on Exhibit B
("Assumed Contracts"), including all assumable prepaid expenses and deposits
arising under the Assumed Contracts;
(f) All Governmental Authorizations owned, held or utilized by either
Seller in connection with the ownership of the Acquisition Assets and the
operation of the Facility, and all pending applications therefor, in each case
to the extent transferrable to Buyer, including those listed on Schedule 6.9
(the "Permits");
(g) All data and records of each Seller related to the Acquisition
Assets including equipment logs, operating guides and manuals, and other similar
documents and records ("Data and Records");
(h) All rights to the name "Village on Copeland";
(i) The going concern value and goodwill associated with the operation
of the Facility; and
(j) All other properties and assets of every kind, character or
description, tangible or intangible, owned by either Seller and located at, and
used or held for use in connection with, the Facility, whether or not similar to
the items or types specifically set forth above.
1.2 Real Property Acquisition. Upon the terms and subject to the conditions
of this Agreement, at the "Second Closing" on the "Second Closing Date" (as such
terms are defined in Section 3.5) Owner shall sell, transfer, convey and assign
and delivery to Buyer, and Buyer shall purchase and acquire from Owner, free and
clear of all Encumbrances (other than the Permitted Encumbrances), all of
Owner's right, title and interest in and to the real property described on
Schedule 5.1, together with all improvements, buildings and fixtures located
thereon and all easements and rights appurtenant thereto (the "Real Property").
The Real Property and the Personal Acquisition Assets are hereafter collectively
referred to as the "Acquisition Assets".
1.3 Excluded Assets. The only assets of either Seller located at, or used
in connection with the operation of, the Facility not included in the
Acquisition Assets and not to be purchased and sold under this Agreement are the
following (collectively, the "Excluded Assets"):
(a) All cash, cash equivalents, securities and investments, loan
costs, if any, and accounts receivable, notes receivable, premiums receivable,
commissions receivable, and other
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rights to receive payments from residents of the Facility or from others,
including all trade accounts receivable representing amounts payable to either
Seller for services rendered to residents of the Facility prior to the First
Closing Date;
(b) Any Contract to which either Seller is a party that is not listed
on Exhibit B; and
(c) Records related to Organizational Documents of each Seller and all
medical records of all patients other than the Straddle Patients.
1.4 Assumed Liabilities; No Assumption of Other Liabilities. Effective as
of the First Closing, Buyer shall assume, perform and discharge only those
obligations of either Seller arising solely under the Assumed Contracts on or
after the First Closing Date. Except for the Liabilities identified in the
immediately preceding sentence, Buyer does not assume, and shall not in any
manner become responsible or liable for, and each Seller shall retain, pay,
discharge and perform in full, all other Liabilities of such Seller. Each
Sellers shall remain liable and responsible for all of its Liabilities of any
nature whatsoever not expressly assumed by Buyer under the terms of this
Agreement.
2. Purchase Price; Deposit; Payment.
2.1 Purchase Price; Deposit; Payment.
(a) The purchase price for the Acquisition Assets shall be $5,200,000
("Purchase Price").
(b) Within ten days of Buyer's receipt of an indemnification letter
from the title insurance company ("Title Company") for which Smith County
Abstract Company ("Title Agent") is an agent, Buyer shall deliver $250,000 to
Title Agent or Title Company, to be held by Title Agent or Title Company in an
interest-bearing account as a good faith deposit ("Deposit").
2.2 Prorations. All ad valorem real property taxes and assessments on the
Real Property that are due and payable in the year of First Closing shall be
prorated on the basis of a 365-day year, in the manner customarily followed in
Tyler, Texas as of the First Closing Date. All rents actually received by either
Seller from residents for the month in which the First Closing occurs shall be
prorated between Buyer and Sellers based on the number of days in the month. At
the First Closing, the net amount of such prorations shall be paid by Buyer to
Sellers in addition to the Purchase Price, or shall be paid by Sellers to Buyer,
as the case may be. If the First Closing occurs before the amounts of the taxes
and assessments to be prorated pursuant hereto are known by the parties, such
taxes and assessments shall be prorated at the First Closing based upon the
amounts assessed in the immediately preceding calendar or fiscal year, and when
the amount of taxes and assessments for the year in which the First Closing
occurs are known by the parties, the parties shall reapportion such taxes or
assessments based upon the actual amount thereof.
2.3 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Acquisition Assets as specified in Exhibit C to this Agreement. After
the First and Second
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Closings, the parties agree to make consistent use of the allocation for all Tax
purposes and in any and all filings, declarations and reports with the IRS
related to this Agreement, including, the reports required to be filed under
Section 1060 of the IRC, if applicable. Buyer shall prepare and deliver IRS Form
8594 to Sellers within 45 days after the First Closing Date if such form is
required to be filed with the Internal Revenue Service. In any proceeding
related to the determination of any Tax, no party hereto shall contend or
represent that such allocation is not correct.
3. Deposit; Escrow; First Closing; Termination.
3.1 Escrow. This Agreement constitutes (a) a contract of purchase and sale
between the parties and (b) escrow instructions to Title Agent for the escrow
created hereby ("Escrow"). Either party may deliver a fully signed copy of this
Agreement to Title Agent, and this Escrow shall be deemed open on the date
("Escrow Opening Date") when Title Agent has received a copy or copies of this
Agreement signed by both parties and the standard terms and conditions of
escrow, if any, that Title Agent may require signed by both parties.
3.2 The First Closing.
(a) To effect the purchase and sale of the Personal Acquisition
Assets, Title Agent will close (the "First Closing") the Escrow and the
transactions described in this Agreement on the date (the "First Closing Date")
when all of the following conditions are satisfied but in no event later than
February 2, 1998 (the "Termination Date"), unless Buyer and Sellers agree
otherwise:
(1) All funds and documents described in Section 12 have been
delivered to Title Agent;
(2) Title Agent has received notification from Buyer that each of
the conditions set forth in Section 9 has been either satisfied or Buyer has
waived satisfaction of any unsatisfied condition;
(3) Title Agent has received notification from each Seller that
each of the conditions set forth in Section 10 has been either satisfied or
each Seller has waived satisfaction of any unsatisfied condition; and
(4) Title Agent determines that it could as of the First Closing
Date issue the "Title Policy" (as defined in Section 9.7), insuring Buyer fee
simple interest to the Real Property with such endorsements that Buyer has
requested, subject to only (1) the Encumbrances for real estate Taxes and
statutory liens for Taxes not yet due and payable, (2) the Permitted
Encumbrances, and, and (3) delivery of the "Deed" (as defined in Section 9.7)
from Owner.
(b) The effective time of the First Closing shall be 12:01 a.m.,
Central Time, on February 1, 1998 (the "Effective Time").
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3.3 Actions Taken by Title Agent on First Closing Date and Thereafter.
(a) On the First Closing Date when all of the conditions set forth in
Section 3.2 have been satisfied, Title Agent shall file with the appropriate
officials the Memorandum of Lease sufficient to record the "Lease" (as defined
in Section 3.2), and shall disburse the funds and documents to the parties in
the manner set forth in Section 12.
(b) If Title Agent cannot close Escrow prior to the Termination Date,
it shall, nevertheless, close Escrow when all conditions have been satisfied or
waived unless Title Agent receives after the Termination Date, but prior to the
close of Escrow, a notice to terminate Escrow from a party who, at the time the
notice is delivered, is not in Breach of any provision of this Agreement.
3.4 Termination of Escrow. Within two working days after delivery of a
notice of termination from one party to this Agreement in accordance with
Section 11.1, Title Agent shall deliver a copy of the notice to the other
parties. Unless one of the other parties delivers to Title Agent a notice of
objection to termination of Escrow within three days after Title Agent delivered
the notice of termination to that party, Title Agent shall promptly terminate
Escrow and shall return all funds (excluding the Deposit) and documents held by
it to the party depositing the same and disburse the Deposit in the manner set
forth in Section 11.2. If Title Agent receives notice of objection to the
termination of Escrow within the three-day period, Title Agent shall hold all
funds (including the Deposit) and documents delivered to it in connection with
Escrow and Title Agent may, in its sole discretion, take no further action until
otherwise directed by other instructions signed by both parties or a final order
or judgment of a court of competent jurisdiction. Title Agent will have no
liability or responsibility for determining that a party giving a notice of
termination is not in default under this Agreement.
3.5 Second Closing. The closing for the purchase and sale of the Real
Property (the "Second Closing") shall take place on October 1, 1998 (the "Second
Closing Date"). On the Second Closing Date Buyer shall deliver to Owner
immediately available funds in the amount of the Purchase Price allocated to the
Real Property.
4. Representations and Warranties of Sellers and Shareholders. Each Seller
and each Shareholder hereby represents and warrants to Buyer as follows:
4.1 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of each Seller, enforceable against it in accordance with its terms.
Each Seller has the full right, power, authority and capacity to execute and
deliver this Agreement and to perform its obligations under this Agreement and
to consummate all of the transactions described in this Agreement.
(b) Each Seller has, and at all times has had, full power and
authority to own and lease its properties as such properties are now owned and
leased and to conduct its business as it is now being conducted. Owner's Federal
Employer Identification Number is 75-2450105 and Operator's Federal Employer
Identification Number is 75-2450106. Each Seller certifies that (a)
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the number shown above is its correct taxpayer identification number, (b) it is
not subject to backup withholding because (1) it has not been notified that it
is subject to backup withholding as a result of a failure to report all interest
or dividends or (2) the Internal Revenue Service has notified it that it is no
longer subject to backup withholding, and (c) it is not a foreign Person within
the meaning of Sections 1445 and 1446 of the IRC, and the regulations
promulgated thereunder.
(c) Except as set forth in Schedule 4.1, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions described in this Agreement will, directly or indirectly (with or
without notice or lapse of time):
(1) Contravene, conflict with, or result in a violation of, any
provision of the Organizational Documents of either Seller or any resolution
adopted by the governing body or equity owners of either Seller;
(2) Contravene, conflict with, or result in a violation of, any
Legal Requirement or give any Governmental Body or other Person the right to
challenge any of the transactions described in this Agreement or to exercise
any remedy or obtain any relief under any Legal Requirement applicable to
either Seller or any of the Acquisition Assets;
(3) Contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by either Seller or that otherwise relates to any
of the Acquisition Assets, except (A) where any such contravention, conflict,
violation, revocation, withdrawal, suspension, cancellation, termination or
modification would not result in a Material Adverse Effect to either Seller,
the Facility, or any of the Acquisition Assets and (B) for the requirement
that Buyer must apply for a license from the Texas Department of Human
Services (the "Texas DHS") to operate the Facility;
(4) Cause either Seller, or to the Knowledge of either Seller
cause Buyer, to become subject to, or to become liable for the payment of, any
Tax to any Governmental Body, other than real estate and ad valorem property
Taxes normally assessed in Texas against owners of such property;
(5) Contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Assumed Contract, other than those
Persons who are parties to Assumed Contracts that require Consent from such
Persons prior to the assignment of the Assumed Contract; or
(6) Result in the imposition or creation of any Encumbrance on or
related to any of the Acquisition Assets owned or used by either Seller.
(d) Neither Seller is nor will it be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the
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consummation or performance of any of the transactions described in this
Agreement, except (A) as set forth in Schedule 4.1, and (B) where the failure to
give such notice or Consent would not have a Material Adverse Effect on either
Seller, the Facility, or any of the Acquisition Assets.
(e) Each Seller has complied, and is in compliance, with all Legal
Requirements applicable to it and its operations and the ownership or use of the
Acquisition Assets, except where the failure to comply would not have a Material
Adverse Effect on either Seller, the Facility, or any of the Acquisition Assets.
Neither Seller has Knowledge of any facts or circumstances which may constitute
or result in any noncompliance.
4.2 Assets Necessary To Business. Except for assets used by either Seller
principally for accounting functions, the Acquisition Assets (provided Buyer
replaces the Excluded Assets) are sufficient for Buyer to operate the Facility
on and after the First Closing Date in the same manner that Operator operated
the Facility prior to the date of this Agreement.
4.3 Books and Records. The books of account of each Seller are complete and
correct in all material respects, and all monies due or to become due from or to
or owing by, and all Liabilities of each Seller, by reason of any transaction,
matter or cause whatsoever have been duly, correctly and completely entered
therein in all material respects.
4.4 Brokers. All negotiations relative to this Agreement and the
transactions described in this Agreement have been conducted by Sellers directly
with Buyer, without the assistance or intervention of any other Person except
for DevCon Real Estate Brokers ("DevCon"). To each Seller's Knowledge, DevCon is
the only Person who may have a valid claim against Buyer for a finder's fee,
investment banking fees, brokerage commission or other like payment.
4.5 Completeness of Statements. Each Seller has disclosed to Buyer in
writing all material facts known to it relating to the representations and
warranties of such Seller made in this Agreement. No representation, warranty or
covenant of either Seller 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 when
taken as a whole.
4.6 Environmental Matters.
(a) Except as disclosed on Schedule 4.6, (1) each Seller is, and at
all times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law, (2) neither Seller has any
basis to expect, nor to the Knowledge of each Seller, has either Seller, or any
other Person for whose conduct either Seller is or may be held responsible,
received any Order, notice, or other communication from (A) any Governmental
Body or Person acting in the public interest, or (B) the current or prior owner
or operator of the Facility, of any actual or Threatened 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
relating to the Facility. Neither Seller has generated, manufactured, refined,
transferred, imported, used, or processed Hazardous Materials from the Facility,
nor, to the Knowledge of each Seller, has any other Person for whose conduct
either Seller is or may
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be held responsible, transported, treated, stored, handled, transferred,
disposed, recycled or received Hazardous Materials.
(b) Except as set forth on Schedule 4.6, there are no pending or, to
the Knowledge of each Seller, 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, affecting the
Facility or any of the Acquisition Assets.
(d) Except as set forth on Schedule 4.6, neither Seller has any basis
to expect, nor has either Seller, or to the Knowledge of each Seller, any other
Person for whose conduct either Seller is or may be held responsible received,
any notice, Order, or other communication that relates to Hazardous Activity,
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 regarding the Facility or any of the Acquisition Assets or to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used or processed by either Seller, or any other Person for whose
conduct either Seller is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(e) Except as set forth on Schedule 4.6, neither one of Sellers, nor
to the Knowledge of each Seller, any other Person for whose conduct either
Seller is or may be held responsible, has any Environmental, Health, and Safety
Liabilities related to the Facility or the Acquisition Assets, or at any
property geologically or hydrologically adjoining the Facility.
(f) Except as set forth on Schedule 4.6, there are no Hazardous
Materials present on or in the Environment at the Real Property or, to the
Knowledge of each Seller, at any geologically or hydrologically adjoining the
Real Property, other part of the Real Property or such adjoining property, or
incorporated into any improvement located thereon or in any Personal Property.
Neither one of Sellers, nor any other Person for whose conduct either Seller is
or may be held responsible, has permitted or conducted, or are aware of, any
Hazardous Activity conducted with respect to the Facility or any of the
Acquisition Assets.
(f) Except as set forth on Schedule 4.6, there has been no Release, or
to the Knowledge of each Seller, a Threat of Release, of any Hazardous Materials
at or from the Facility or the Real Property.
4.7 Insurance. Included as Schedule 4.7 is a complete listing of all
insurance policies related to the Acquisition Assets insuring each Seller, and
bonds issued concerning the Acquisition Assets, detailing the coverage insured
against and the amount thereof, the insurance carrier, the policy number and the
premium payments. Except as disclosed on Schedule 4.7, neither Seller does nor
has either Seller maintained any self-insurance programs. Schedule 4.7 further
includes a statement of all claims for insured losses filed by either Seller
within the three-year period prior to the date hereof. Except as listed on
Schedule 4.7, neither Seller has received any notice from any insurance carrier
that (a) such Seller's 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.
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4.8 Litigation. Except as set forth on Schedule 4.8, to each Seller's
Knowledge, there are no Proceedings or claims, pending or Threatened against or
affecting either Seller, the Acquisition Assets, the Facility, or any employee
of Operator, by or before any Governmental Body. Neither Seller is subject to,
nor in default under, any Order applicable to it, the Facility, the Acquisition
Assets, or any of its employees.
4.9 Taxes.
(a) Each Seller has timely paid in full all ad valorem property Taxes
levied on its respective portion of the Acquisition Assets that have become due
and payable prior to the date of this Agreement. Operator has withheld proper
and accurate amounts from its employees in full and complete compliance with the
Tax withholding provisions of the IRC and other applicable Legal Requirements,
and has filed proper and accurate Tax Returns for all years and periods (and
portions thereof) for which any such Tax Returns were due for employee income
Tax, withholding Taxes, social security Taxes and unemployment Taxes. Operator
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, Operator has made adequate
accruals on its regular books of account.
(b) Each Seller has prepared, signed and filed all federal Tax Returns
required to be filed by all applicable Legal Requirements 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 due and owing on such Tax Returns or which were or are
otherwise due and owing under all applicable Legal Requirements for any periods
for which Tax Returns were due, whether reflected on such Tax Returns and
whether relating to the income of such Seller. The amounts recorded as payable
for Taxes in the Acquisition Balance Sheet is sufficient for the payment of all
Taxes attributable to all periods ended on or before the date of the Acquisition
Balance Sheet and adequate accruals have been made by each Seller for all
Liabilities for Taxes accruing since the date of the Acquisition Balance Sheet.
There are in effect no Contracts or Consents providing for an extension of time
for any assessment of any Tax, or any deficiency against either Seller, other
than routine extensions in filing deadlines. Except as set forth on Schedule
4.9, there are no Proceedings now pending nor Threatened, against either Seller,
nor are there any matters under discussion with the IRS, or other Governmental
Authority, relating to any Taxes, or any claims or deficiencies with respect
thereto. Set forth on Schedule 4.9, is a list of federal income Tax Returns that
IRS has audited.
(c) Except as provided on Schedule 4.9, neither Buyer nor either
Seller are liable for any sales, use, transfer or other similar Tax as a result
of the transactions described in this Agreement and no such Tax will be imposed
by any Governmental Body on the sale of the Acquisition Assets to Buyer, and
Buyer is not required to withhold any portion of the Purchase Price on account
of any such Tax.
4.10 Title to Properties; Condition and Repair. Schedule 4.10 sets forth a
listing of the Personal Property owned or used respectively by each Seller in
the operation of the Facility. Except as disclosed on Schedule 4.10, each Seller
owns the Personal Property included within the Acquisition Assets that it
purports to own or reflected as owned in the books and records of such
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Seller (except for assets held under capitalized leases disclosed in Schedule
6.2 of this Agreement) free and clear of all Encumbrances of any nature
whatsoever, except for the lien for current ad valorem property Taxes not yet
due and payable. Except for the regular, scheduled repairs which are done in the
Ordinary Course of Business, all of the Acquisition Assets are free of material
defect, well maintained, in good working order, condition and repair.
4.11 Zoning. To the Knowledge of each Seller, the operation of the Facility
on the Real Property by Buyer following the First Closing Date does not require
any zoning or planning department approvals in addition to those which either
Seller has already obtained. Buyer is automatically entitled to the benefits of
all such approvals without the necessity of any affirmative action on Buyer's
behalf. Neither Seller has any information which would lead it to believe that
the use of the Real Property will be adversely affected by any pending or
proposed zoning or use changes.
5. Representations and Warranties of Owner. Owner hereby represents and
warrants to Buyer as follows:
5.1 Real Property.
(a) Schedule 5.1 sets forth a complete legal description of the Real
Property. None of the Real Property is subject to any Encumbrance, variance or
other limitation except for (a) mortgages or security interests securing
obligations in an aggregate amount of less than $1,000,000, (b) liens for
current Taxes not yet due, (c) 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 the
Facility, and (d) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto. All buildings,
plants, and structures owned by Owner lie wholly within the boundaries of the
Real Property owned by Owner and, with the exception of any fences located
around the boundaries of the Real Property, do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person.
(b) There are no pending, or Threatened, condemnation Proceedings
relating to the Real Property or other matters affecting its current use,
occupancy or value.
(c) Owner has not received any notice from any Governmental Body, nor
does it otherwise have Knowledge of any contemplated, actual or Threatened
reassessment of the value of the Real Property for ad valorem real property Tax
purposes, other than normal periodic reassessment and any such reassessment that
may occur by virtue of the sale of the Real Property to Buyer and the
recordation of the Deed in the appropriate public office.
5.2 Utilities. The Facility is supplied with utilities and other services
necessary for its operation, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are sufficient for Buyer
to operate the Facility in the same manner that in which Operator operated the
Facility prior to the date of this Agreement and are provided via public roads
or via permanent, irrevocable, appurtenant easements benefitting the Real
Property.
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6. Representations and Warranties of Operator and Shareholders. Owner and each
Shareholder hereby represent and warrant to Buyer as follows:
6.1 Absence of Certain Events. Except as set forth on Schedule 6.1, since
the date of the Acquisition Balance Sheet, Operator has operated the Facility
only in the Ordinary Course of Business and has not:
(a) Experienced any event, occurrence or condition which,
individually or in the aggregate has or is reasonably likely to have a Material
Adverse Effect on the Facility or any of the Acquisition Assets;
(b) Entered into or committed to any transaction that, individually
or in the aggregate, has or is reasonably likely to have, a Material Adverse
Effect on the Facility or any of the Acquisition Assets;
(c) Changed any of its accounting methods, principles or practices;
(d) Incurred or agreed to incur any indebtedness for borrowed money
or allowed any of the Acquisition Assets to be subjected to any Encumbrance
whatsoever, other than non-monetary restrictions which will not materially
interfere with Operator's use and enjoyment of the Acquisition Assets;
(e) Terminated or amended or suffered the termination or amendment of
any Assumed Contracts or Permit, where the loss of such Assumed Contract or
Permit would result in a Material Adverse Effect on Operator or the Facility;
(f) Adopted, modified or amended any Employee Benefit Plan;
(g) Entered into any Contract to do any of the above;
And, except as set forth on Schedule 6.1, Operator has:
(h) Continued its operations at the Facility in the Ordinary Course
of Business and maintained its operations, the Facility, Acquisition Assets,
books of account, records and files in substantially the same manner as
heretofore; and
(i) Used its Best Efforts to preserve its business at the Facility.
6.2 Contracts. Operator has delivered to Buyer a complete copy of each
Assumed Contract listed in Exhibit B. Operator has performed in all respects all
obligations to be performed by it under the terms of any of the Assumed
Contracts through the date of this Agreement, and Operator is not in default
under any Assumed Contract. Moreover, to the Knowledge of Operator, no event has
occurred which, with notice or the passage of time, or both, would constitute a
default under any Assumed Contract. To the Knowledge of Operator, there is no
basis for any of the other parties to Assumed Contracts to assert that Operator
is in default thereunder and the other parties to Assumed Contracts are not in
default thereunder. Except for those Assumed
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Contracts described on Exhibit B whose terms require the prior Consent of the
other party thereto for an assignment to Buyer, the consummation of the
transactions described in this Agreement will not cause a default under any
Assumed Contract. Except as set forth on Schedule 6.2, there are no existing
disputes between Operator, on the one hand, and any other party to any Assumed
Contract, on the other hand.
6.3 Current Compensation of Employees.
(a) Set forth on Schedule 6.3 is a complete list (the "List") of
Operator's employees on the date of such List who work at the Facility along
with the amount of the current wage rate for hourly employees and monthly
salaries for salaried employees and the total compensation paid or due for
services to each management employee for 1997, and a complete description of any
commitments to such management employees regarding compensation payable
thereafter. Except as set forth on Schedule 6.3, since the date of the List on
Schedule 6.3, there has been no change in the management employees who work at
the Facility. Except as set forth on Schedule 6.3, (1) there has been no change
in the salaries or compensation paid to employees of Operator since the date of
the Acquisition Balance Sheet other than in the Ordinary Course of Business of
Operator with updated information being furnished prior to the First Closing,
and (2) Operator has not, because of past practices with or previous commitments
to its employees, established any rights or expectations on the part of such
employees to receive additional compensation inconsistent with past practices
for any period after the date hereof.
(b) Except as set forth on Schedule 6.3, no employee of Operator is a
party to or subject to any Contract containing covenants by such employees not
to compete in any line of business with any Person or restricting the customers
from whom or the area in which the employee may solicit or conduct business.
6.4 Employee Benefits. Except for each group health plan (as defined in
Section 4980B(g)(2) of the IRC) ("Group Health Plan") maintained by Operator,
Operator does not maintain or contribute to any Employee Benefit Plan. To the
Knowledge of Operator, each Group Health Plan maintained by Operator 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
IRC (and the regulations thereunder). For purposes of this Section 6.4, any
reference to Operator shall be deemed to refer also to any Person that is under
common control or affiliated with Operator within the meaning of Section
4001(a)(14) of ERISA and Section 414(b), (c), (m) and (o) of the IRC.
6.5 Financial Statements. Set forth in Schedule 6.5 are the unaudited
financial statements of Operator related to the operation of the Facility for
the period ending September 30, 1997, (the "Financial Statements"). The balance
sheet, dated September 30, 1997, 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 Operator in conformity with GAAP, on
a consistent basis and present fairly, in all material respects, the financial
position of Operator at the date of the Acquisition Balance Sheet included
therein and the results of operations and changes in financial position of
Operator for the period covered thereby, except for (1) the absence of footnotes
(that if presented would not differ materially from those included in the Year-
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End Financial Statements), and (2) normal recurring year-end adjustments that
will not result in a Material Adverse Effect on Operator's financial condition
and results of operations.
6.6 Labor Matters. Except as disclosed on Schedule 6.6, Operator has not
been, nor is it currently a party to, nor is it negotiating, any collective
bargaining agreement. There has not been, there is not presently pending or
existing, and to the Knowledge of Operator, any Threatened, (a) strike,
slowdown, picketing, work stoppage, or employee grievance process, (b)
Proceeding against or affecting Operator's operation of the Facility relating to
(1) an alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission or any comparable Governmental Body, (2) organizational activities,
or other labor or employment dispute against or affecting Operator or the
Facility, or (c) application for certification of a collective bargaining agent.
To the Knowledge of Operator, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute.
6.7 Liabilities Not Disclosed On Balance Sheet. As of the date of the
Acquisition Balance Sheet, Operator, regarding its respective ownership and
operation of the Acquisition Assets, had no material Liabilities except as shown
on the Acquisition Balance Sheet. Except as shown on Schedule 6.7, since the
date of the Acquisition Balance Sheet, Operator has not incurred or become
subject to any Liabilities related to the Facility, other than Liabilities
incurred in the Ordinary Course of Business of the Facility consistent with past
practices, all of which have been paid in full in the Ordinary Course of
Business or are reflected on Operator's regular books of account on the date
hereof and will be reflected on such books on the First Closing Date and none of
which (a) is materially inconsistent with the representations, warranties and
covenants of Operator contained in this Agreement, or (b) has or may be expected
to have a Material Adverse Effect.
6.8 Medicare, Medicaid and Other Third Party Payors. Operator has not
entered into any Contracts between it and Medicare, Medicaid, private insurers,
health maintenance organizations or provider organizations or programs, self-
insured employees and any other entity that maintains or administers third party
payor programs relating to the operation of the Facility.
6.9 Permits. To Operator's Knowledge, Schedule 6.9 sets forth all of the
Permits Operator has obtained from, and the Permits constitute all Governmental
Authorizations required by, all Governmental Bodies that have any oversight or
regulatory responsibility over Operator's operations of the Facility as a
skilled nursing facility, except where the failure to obtain would not have a
Material Adverse Effect on the Facility. Operator has furnished Buyer a complete
copy of each of the Permits. All of the Permits are in full force and effect,
and to Operator's Knowledge, no suspension or cancellation of any of them is
Threatened.
6.10 Proprietary Property. Except for the software and other proprietary
assets used by Operator to perform accounting functions, Schedule 6.10 sets
forth all Proprietary Property used by Operator in connection with its
operations of the Facility. To Operator's Knowledge, Operator owns, or has
obtained proper licenses for the use of, all Proprietary Property used by it.
Operator
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has not received notice of any claim that it is violating or infringing any
Proprietary Property of any third party.
7. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to each Seller and Shareholder as follows:
7.1 Corporate Status. Buyer is a corporation duly incorporated and existing
under the laws of the State of Delaware. Buyer 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
such businesses have and are now being conducted.
7.2 Authority; Consents; Enforcement: Noncontravention; Noncompetes.
(a) Authority. Buyer has the corporate power and authority to execute,
deliver and perform this Agreement, and all other agreements, certificates or
documents described in this Agreement ("Buyer Ancillary Documents"), and has
taken all actions required to authorize, execute, deliver and perform this
Agreement and the Buyer Ancillary Documents, including approval by the Board of
Directors of Buyer.
(b) Consents. No Consent or registration, declaration or filing with
any Governmental Body is required for Buyer to execute this Agreement and
perform the transactions described in this Agreement by Buyer.
(c) Enforcement. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.
(d) Noncontravention. The execution and delivery of this Agreement and
the Buyer Ancillary Documents by Buyer do not violate any provision of the
Organizational Documents of Buyer and will not result in a breach or violation
or default under any Order of any Governmental Body to which Buyer is subject or
result in a breach by Buyer under any Contract to which it is bound. Neither the
execution and the delivery of this Agreement, nor the compliance with, and
fulfillment of, the terms, conditions and provisions hereof or thereof, will (a)
violate any Legal Requirement applicable to Buyer; or (b) require the Consent or
the making by Buyer of any declaration, filing or registration with, any
Governmental Body or other Person.
7.3 No Agent or Broker. Except for DevCon, no agent or broker or other
person acting pursuant to authority given by Buyer is entitled to any commission
or finder's fee, or other compensation, in connection with the transactions
described in this Agreement.
8. Additional Covenants of the Parties.
8.1 Access and Investigation. Between the date of this Agreement and the
First Closing Date, each Seller shall: (a) afford Buyer and its Representatives
full and free access to such Seller's personnel, properties (including access
for subsurface testing), contracts, books and records, and other documents and
data, (b) furnish Buyer and Buyer's Representatives with copies
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of all such Contracts, books and records, and other existing documents and data
as Buyer may reasonably request, and (c) furnish Buyer and Buyer's
Representatives with such additional information as Buyer may reasonably
request.
8.2 Operation of the Facility Pending First Closing. Between the date of
this Agreement and the First Closing Date, Operator shall:
(a) conduct the Facility only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the Facility, keep
available the services of the current employees and agents of the Facility, and
maintain the relations and good will with suppliers, residents, landlords,
creditors, employees, agents, and others having business relationships with the
Facility and Operator;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the condition
and operation of the Acquisition Assets, and the operation and financial
position and results of the Facility.
8.3 Operation of the Facility Pending Second Closing. At the First Closing
Buyer and Owner shall enter into a Lease for the Real Property, substantially in
the form of Lease, a copy of which is attached as Exhibit H (the "Lease").
Between the First Closing Date and the Second Closing Date the Facility shall be
operated by Buyer pursuant to the terms of the Lease. During the term of the
Lease, the Owner shall not take any steps or action that will result in any
other Encumbrances being placed on the Real Property other than the Permitted
Encumbrance.
8.4 Required Consent. As promptly as practicable after the date of this
Agreement, each Seller shall make any filings required to be made by it under
Legal Requirements in order to consummate the transactions described in this
Agreement. Between the date of this Agreement and the First Closing Date, each
Seller shall, (a) cooperate with Buyer on all filings that Buyer elects to make
or is required by Legal Requirements to make in connection with the transactions
described in this Agreement, and (b) cooperate with Buyer in obtaining all
Consents required by Buyer to consummate the transaction described in this
Agreement.
8.5 Notification. Between the date of this Agreement and the First Closing
Date, each Seller shall promptly notify Buyer if such Seller becomes aware of
any fact or condition that causes or constitutes a Breach of any of the
representations and warranties of it in this Agreement, or if such Seller
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly described in this Agreement) cause or
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, each Seller shall promptly
notify Buyer of the occurrence of any Breach of any covenant of such Seller in
this Agreement or of the occurrence of any event that may make the satisfaction
of the conditions in Section impossible or unlikely.
8.6 No Negotiation.
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(a) Until such time, if any, as this Agreement is terminated pursuant
to Section 11, neither Seller shall:
(1) negotiate, discuss or otherwise communicate with any other
potential purchaser or lessee of the Facility;
(2) solicit or encourage submission of any proposal or offer to
acquire or lease all or any portion of the Facility;
(3) participate in any discussion or negotiation regarding any
proposal or offer to sell or lease all or any portion of the Facility;
(4) furnish to any Person other than Buyer and its
Representatives any information regarding the Facility, except as required
by any Legal Requirement or in any Proceeding; or
(5) cooperate in any way with, or assist or participate in any
proposal or offer from any Person other than Buyer or its Representatives
to acquire or lease all or any portion of the Facility.
(b) If, prior to the termination of this Agreement, either Seller
receives any unsolicited offer or proposal from any Person other than Buyer to
acquire or lease all or any portion of the Facility, such Seller shall promptly
notify Buyer of such offer or proposal and provide Buyer with copies of any
written materials received by such Seller that relate to such offer or proposal.
8.7 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer shall make all filings required by Legal
Requirements to be made by it to consummate the transactions described in this
Agreement. Between the date of this Agreement and the First Closing Date, Buyer
shall cooperate with Sellers (a) on all filings that either Seller is required
by Legal Requirements to make in connection with the transactions described in
this Agreement, and (b) in obtaining all Consents required by either Seller to
consummate as of the First Closing the transactions described in this Agreement.
8.8 Transition of the Facility. Each Seller covenants with Buyer to
cooperate with Buyer to effect the smooth transition of the control and
operation of the Facility from Sellers to Buyer. Each Seller shall cooperate
with Buyer in providing all information required hereunder and access thereto
and whatever is required to carry out the purposes and intent of the
transactions contemplated by this Agreement.
8.9 Operator's Employees and Employee Benefits.
(a) Prior to the First Closing Date, Operator shall promptly notify
all employees employed at the Facility that Operator will terminate their
employment at the Effective Time. Operator shall retain any and all Liability
for, and shall pay pursuant to Operator's policies, any termination pay,
severance pay, sick pay or vacation pay, any unemployment benefits, and any
other benefits to which Operator's past or current employees, their spouses and
dependent
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children may be entitled by virtue of their employment or termination of their
employment with Operator.
(b) Following the First Closing Date, Operator shall maintain Group
Health Plans comparable to its current Group Health Plan for at least as long as
Operator's past or current employees, their spouses and dependent children are
eligible for continuation health coverage under COBRA. If Operator terminates
one or more Group Health Plans which cover past or current employees who are not
hired by Buyer, their spouses and dependent children, Operator's remaining Group
Health Plan or Plans shall be considered the successor plan or plans under COBRA
for such individuals. Buyer will waive the enrollment period and pre-existing
condition requirements of its current Group Health Plan for those employees of
Operator that Buyer hires upon consummation of the transactions described in
this Agreement so that the termination of the employment of such employees by
Operator and the hiring of such employees by Buyer will not trigger any COBRA
benefits for these employees.
(c) Buyer shall have no obligation to employ any employees of
Operator subsequent to the First Closing. To the extent any of such employees
are employed by Buyer following the Closing, such employment shall be on terms
and conditions determined by Buyer and Buyer shall have no obligation to offer
such employee the same or similar wages, salaries or benefits as are paid or
provided by Operator prior to the First Closing.
8.10 Survey. Promptly following the execution and delivery of this
Agreement, Owner will obtain an ALTA survey of the Real Property ("Survey")
satisfying all of the requirements set forth as Exhibit D.
8.11 Title Insurance.
(a) Promptly following the execution and delivery of this Agreement,
Owner shall deliver to Buyer a commitment (the "Title Commitment") to issue the
Title Policy from Title Company and all underlying documents related to the
exceptions described or listed in the Title Commitment (the "Title Commitment
Documents"). Within 10 days of the later of (1) the date Buyer receives a copy
of the Survey or (2) the date Buyer receives a copy of the Title Commitment and
all the Title Commitment Documents, Buyer shall notify Owner of all matters on
the Title Commitment to which Buyer objects. If Buyer fails to object to any
such exception within the 10-day period, Buyer shall be deemed to have accepted
such exceptions.
(b) Owner shall take all steps necessary to satisfy all the
requirements set forth in the Title Commitment prior to the First Closing Date.
Buyer hereby objects to, and Owner shall use its Best Efforts to remove, correct
or delete prior to or at the First Closing (1) all standard exceptions set forth
in the Title Commitment that are capable of being satisfied or removed, (2) any
gap, overlap, boundary dispute, hiatus or encroachment referred to in the Title
Commitment or identified on the Survey which affects the Real Property or any
adjacent properties, (3) any mortgages and other monetary liens and Encumbrances
affecting the Real Property, and (d) any matter to which Buyer has objected
under this Section 8.11.
8.12 Filing of Taxes; Payment. Each Seller shall, for all periods through
the First Closing Date:
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(a) prepare and timely file (including extensions) all Tax Returns
that it is required to file under all applicable laws;
(b) timely pay all Taxes it is required to pay;
(c) withhold and timely pay over to the applicable authorities all
Taxes that it is required to withhold and pay over; and
(d) timely pay all Taxes on any sales and the income and gain, if
any, that it realizes on the transactions contemplated by this Agreement,
including the sale of the Acquisition Assets.
8.13 Sales and Other State Taxes. Each Seller shall notify the taxing
authorities which require notice prior to the completion of the transactions
described in this Agreement and on the date hereof filed the required notices
with the other taxing authorities.
8.14 Non-Competition Agreements. At the First Closing, each Seller and each
Shareholder shall execute and deliver to Buyer a non-competition agreement
substantially in the form of Exhibit G attached to this Agreement (the "Non-
Competition Agreement").
8.15 Further Assurances. Each of the parties agrees that it will, at any
time, and from time to time, after the date hereof, upon the request and at the
expense of the appropriate party, do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, and such further acts, assignments,
transfers, conveyances, and assurances as may be required to complete the
transactions contemplated herein. After the date hereof, at the expense of
Buyer, each Seller shall use its Best Efforts to cause any necessary third party
to, execute such documents and do such acts and things as Buyer may reasonably
require for the purpose of giving to Buyer the full benefit of all the
provisions of this Agreement and as may be reasonably required to complete the
transactions contemplated herein.
9. Conditions Precedent to Buyer's Obligation to Close at First Closing.
Buyer's obligation to consummate the transactions described in this Agreement as
happening as of the First Closing, and to take the actions required to be taken
by Buyer, at the First Closing, is subject to the satisfaction, at or prior to
the First Closing, of each of the following conditions (any of which may be
waived by Buyer, in whole or in part):
9.1 Accuracy of Representations. Each representation and warranty of each
Seller and Shareholder in this Agreement must be accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the First Closing Date as if made on the First Closing Date.
9.2 Sellers' Performance. All of the covenants and obligations that each
Seller is required to perform or to comply with pursuant to this Agreement at or
prior to the First Closing must have been duly performed and complied with in
all material respects.
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9.3 No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person Affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions described in this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the transactions described in this
Agreement.
9.4 Consents. Each of the Consents identified on Schedule 7.2 must have
been obtained and must be in full force and effect and Buyer has obtained all
Governmental Authorizations necessary or required for it to assume operation of
the Facility other than the authorization from the Texas DHS.
9.5 Texas DHS Authorization. Buyer has received written confirmation from
the Texas DHS that Buyer is qualified to operate the Facility and that the Texas
DHS is prepared to issue Buyer a license subject to the successful completion of
Texas DHS's survey of the Facility and Buyer's operation of the Facility.
9.6 Other Documents. Buyer must have received such other documents as it
may reasonably request for the purpose of (a) evidencing the accuracy of any of
the representations and warranties of each Seller and Shareholder, (b)
evidencing the performance by each Seller of, or the compliance by each Seller
with, any covenant or obligation required to be performed or complied with by
it, (c) evidencing the satisfaction of any condition referred to in this Section
9, or (d) otherwise facilitating the consummation or performance of any of the
transactions contemplated herein.
9.7 Title Policy. Title Company is able to issue an ALTA Policy of Title
Insurance on Form B-1992, insuring Buyer's fee simple title to the Real Property
in the amount of the Purchase Price allocated to the Real Property ("Title
Policy"), with such endorsements that Buyer has requested and subject to only
(a) the delivery of a general warranty deed from Owner acceptable to the Title
Company conveying fee simple title to the Real Property to Buyer (the "Deed"),
(b) the Encumbrances for real estate Taxes and statutory liens for Taxes not yet
due and payable, and (c) those other Encumbrances to which Buyer has not
objected in accordance with Section 8.11 (the "Permitted Encumbrances").
9.8 No Prohibition. Neither the consummation nor the performance of any of
the transactions contemplated herein will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person Affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
10. Conditions Precedent to Sellers' Obligation to Close. Each Seller's
obligation to consummate the transactions described in this Agreement as
happening as of the First Closing Date and to take the other actions required to
be taken by such Seller at the First Closing is subject to the satisfaction, at
or prior to the First Closing, of each of the following conditions (any of which
may be jointly waived by Sellers, in whole or in part):
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10.1 Accuracy of Representations. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the First Closing Date as if made on the First Closing Date.
10.2 Buyer's Performance. All of the covenants and obligations that Buyer
is required to perform or to comply with pursuant to this Agreement at or prior
to the First Closing must have been performed and complied with in all material
respects.
10.3 No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the Acquisition Assets
by Sellers to Buyer.
10.4 Consents. Each of the Consents identified on Schedule must have been
obtained and must be in full force and effect.
10.5 Definitive Agreements for Purchase and Sale of Other Facilities.
(a) Buyer and Larry S. Parker shall have entered into a definitive
agreement for the purchase by Buyer of the facility having approximately 62
units licensed as a Class A Personal Care Facility under Texas law and
approximately 100 apartments designed for elderly residents, known as the
Briarcliff Village Retirement Center and Personal Care Center and located at
3500 South Vine Street, Tyler, Texas 75701, and all conditions precedent to
Buyer's and Parker's obligations to close the transaction described in that
agreement, have been satisfied or waived and the parties have closed such
transaction contemporaneously with the closing of the transactions described in
this Agreement.
(b) Buyer, Briarcliff Village Health Center, a Texas general
partnership ("Health Center"), and Briarcliff Village Health Center Inc., a
Texas corporation ("Village Health Center") shall have entered into a definitive
agreement for the purchase by Buyer of the Facility licensed as a Class B
Facility with approximately 12 units and as a skilled nursing facility having
approximately 230 units, known as the Briarcliff Village Health Center and
located at 3403 South Vine Street, Tyler, Texas 75701, and all conditions
precedent to Buyer's, Health Center's and Village Health Center's obligations to
close the transaction described in that agreement, have been satisfied or waived
and the parties have closed such transaction contemporaneously with the closing
of the transactions described in this Agreement.
(c) Buyer, Briarcliff Health Center of Texas, a Texas general
partnership, and Briarcliff Health Center, Inc. d/b/a Village on Copeland, a
Texas corporation, shall have entered into a definitive agreement for the
purchase by, and Buyer and Owner shall have entered into a definitive agreement
for the lease by, Buyer of the facility licensed as a Class B Personal Care
Facility under Texas law, known as the Village on Copeland and located at 5317
Copeland Road, Tyler, Texas 75703 ("Copeland").
10.6 Other Documents. Sellers must have received such other documents as
Sellers may reasonably request for the purpose of (a) evidencing the accuracy of
any representation or warranty of Buyer, (b) evidencing the performance by Buyer
of, or the compliance by Buyer with,
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any covenant or obligation required to be performed or complied with by Buyer,
(c) evidencing the satisfaction of any condition referred to in this Section ,
or (d) otherwise facilitating the consummation of any of the transactions
contemplated herein.
11. Termination.
11.1 Termination Events. By notice given to Title Agent and the other
parties to this Agreement, this Agreement may be terminated:
(a) by Buyer if any of the conditions in Section 9 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Termination Date;
(b) by Sellers, if any of the conditions in Section 10 have not
been materially satisfied as of the Termination Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of either
Seller to comply with its obligations under this Agreement) and Sellers have not
waived such condition on or before the Termination Date;
(c) by either Buyer or Sellers if a Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived;
(d) by mutual consent of Buyer and Sellers; or
(e) by either Buyer or Sellers if the First 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 the Termination Date, or such later date as the parties may agree upon.
11.2 Effect of Termination.
(a) If Buyer terminates this Agreement pursuant to Section 11.1(a)
or Section 11.1(c) or if the parties terminate this Agreement pursuant to
Section 11.1(d) or Section 11.1(e), Title Agent shall return to Buyer the
Deposit and all interest earned thereon.
(b) If Sellers terminate this Agreement pursuant to Section 11.1(b)
or Section (c), Title Agent shall deliver the Deposit and all interest earned
thereon to Sellers only if all of the conditions in Section 9 have been
satisfied and neither Seller is in Breach of this Agreement. Otherwise, Title
Agent shall remit the Deposit and all interest earned thereon to Buyer.
(c) The remedies set forth in Section 11.2(b) are the exclusive
remedies of Sellers for their termination of this Agreement. Buyer's right of
termination under Section 11.1 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.
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(d) If this Agreement is terminated pursuant to Section 11.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 15.5 will survive; provided, however, that if
this Agreement is terminated by Buyer because of the Breach of the Agreement by
either Seller or because one or more of the conditions to Buyer's obligations
under this Agreement is not satisfied as a result of either Seller's failure to
comply with its obligations under this Agreement, Buyer's right to pursue all
legal remedies will survive such termination unimpaired.
12. Deliveries and Actions To Be Taken At First Closing.
12.1 Deliveries by Sellers. At or prior to the First Closing, Sellers
shall deliver to Title Agent (duly executed where appropriate) to be held by it
in Escrow and to be disbursed in accordance with the provisions of Section 3.2:
(a) A Bill of Sale for the Acquisition Assets in the form of Exhibit
E attached hereto;
(b) An assignment and assumption agreement in the form of Exhibit F
attached hereto executed in counterpart by each Seller (the "Assignment and
Assumption Agreement");
(c) The Non-Competition Agreements executed in counterpart by each
Seller and each Shareholder;
(d) The Lease and a Memorandum of Lease acceptable to the Title
Agent, both executed in counterpart by Owner;
(e) Registration, title and motor vehicle transfer forms for, and
other documentation required to transfer to Buyer and enable Buyer to properly
license, each motor vehicle which is part of the Acquisition Assets;
(f) Confirmation that all of the Encumbrances other than the
Permitted Encumbrances have been removed as an Encumbrance against the
Acquisition Assets;
(g) A certificate signed by each Seller certifying the fulfillment of
the conditions set forth in Section 9.1 through 9.3; and
(h) Consents of the other parties to the Assumed Contracts for those
Assumed Contracts where such consent is required for the assumption of such
Assumed Contracts.
12.2 Deliveries by Buyer. At or prior to the First Closing, Buyer shall
deliver to Title Agent (duly executed where appropriate) to be held by it in
Escrow and to be disbursed in accordance with the provisions of Section 3.2:
(a) Immediately available funds in the amount by which the Purchase
Price for the Personal Acquisition Assets (adjusted to reflect appropriate
credits and debits required by Section 2.2) exceeds the sum of the Deposit plus
the accrued interest thereon;
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(b) Certified copies of the Resolutions of the Board of Directors of
Buyer approving the transactions described in this Agreement;
(c) The Assignment and Assumption Agreement executed in counterpart
by Buyer;
(d) The Non-Competition Agreements executed in counterpart by Buyer;
(e) The Lease and a Memorandum of Lease acceptable to the Title
Agent, both executed in counterpart by Buyer;
(f) Certificates of good standing from the Secretaries of State of
Delaware and Texas;
(g) A certificate signed by an executive officer of Buyer certifying
fulfillment of the conditions set forth in Section 10.1 through 10.3; and
(h) Such other documents as may be reasonably necessary to effect the
First Closing.
13. Second Closing.
13.1 Conditions Precedent to Parties Obligation to Close at Second Closing.
(a) Buyer's obligation to consummate the transactions described in
this Agreement as happening as of the Second Closing, and to take the actions
required to be taken by Buyer, at the Second Closing, is subject to the
satisfaction, at or prior to the Second Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
(1) Each representation and warranty of Owner in this Agreement
must be accurate in all material respects as of the Second Closing Date;
(2) All of the covenants and obligations that Owner is required
to perform or to comply with pursuant to this Agreement at or prior to the
Second Closing must have been duly performed and complied with in all
material respects; and
(3) Title Company commits irrevocably to issue the Title Policy
subject only to the (A) Encumbrances for real estate Taxes and statutory
liens for Taxes not yet due and payable, (B) Permitted Encumbrances, with
those endorsements that Buyer requested prior to the First Closing Date,
and (C) those Encumbrances arising as a result of Buyer's actions or
omissions as a lessee under the Lease.
(b) Owner's obligation to consummate the transactions described in
this Agreement as happening as of the Second Closing, and to take the actions
required to be taken by Owner, at the Second Closing, is subject to the
satisfaction, at or prior to the Second Closing, of each of the following
conditions (any of which may be waived by Owner, in whole or in part):
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(1) Each representation and warranty of Buyer in this Agreement
must be accurate in all material respects as of the Second Closing Date;
and
(2) All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to the
Second Closing must have been duly performed and complied with in all
material respects.
13.2 Deliveries and Action to be Taken at Second Closing. At the Second
Closing
(a) Buyer shall deliver to Owner immediately available funds in the
amount by which the Purchase Price for the Real Property; and
(b) Owner shall deliver to Buyer the Deed and such other documents
that the Title Company has requested in order to the issue to Buyer the Title
Policy.
14. Indemnification; Remedies.
14.1 Survival; Right to Indemnification. All representations, warranties,
covenants and obligations in this Agreement, and any other certificate or
document delivered pursuant to this Agreement, shall survive the First Closing
and Second Closing. If a party waives any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, such party's right to indemnification, payment of
Damages or other remedy based on a Breach of such representations, warranties,
covenants and obligations is waived only to the extent of the party's Knowledge
of facts and circumstances at the time the Breach is waived.
14.2 Indemnification and Payment of Damages By Owner. Owner shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Owner in
this Agreement;
(b) any Breach by Owner of any covenant, agreement or obligation of
Owner in this Agreement; and
(c) any Liability of Owner, and all claims, demands and Proceedings
made or brought against Buyer by reason of Owner's ownership, use, operation or
condition of the Acquisition Assets prior to the First Closing Date or any of
the transactions described in this Agreement, but excluding the Assumed
Liabilities.
14.3 Indemnification and Payment of Damages By Operator. Operator shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
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(a) any Breach of any representation or warranty made by Operator in
this Agreement;
(b) any Breach by Operator of any covenant, agreement or obligation
of Operator in this Agreement; and
(c) any Liability of Operator, and all claims, demands and
Proceedings made or brought against Buyer by reason of Operator's ownership,
use, operation or condition of the Acquisition Assets prior to the First Closing
Date or any of the transactions described in this Agreement, but excluding the
Assumed Liabilities.
14.4 Indemnification and Payment of Damages by Shareholders.
(a) Shareholders shall indemnify and hold Buyer's Indemnitees
harmless from, and shall pay to Buyer's Indemnitees the amount of, all Damages,
arising, directly or indirectly, from or in connection with:
(1) any Breach of any representation or warranty contained in
Section or Section of this Agreement; or
(2) any Breach by Operator or Shareholders, or both, of any of
their covenants in this Agreement.
(b) If Shareholders pay a claim to Buyer's Indemnitees pursuant to
this Agreement, then Shareholders shall be subrogated to all rights of Buyer's
Indemnitees against others for recovery of Damages, except affiliates,
employees, officers, directors, successors or assigns of Buyer's Indemnitees.
14.5 Indemnification By Buyer. Buyer shall indemnify and hold Sellers,
their Affiliates, and their respective successors and assigns (collectively,
"Sellers' Indemnitees") harmless from, and will pay to Sellers' Indemnitees the
amount of, all Damages arising directly or indirectly from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement;
(b) any Breach by Buyer of any covenant, agreement or obligation of
Buyer in this Agreement; and
(c) any claim, demand or Proceeding made or brought against Sellers
resulting from Buyer's operation of the Acquisition Assets after the First
Closing Date.
14.6 Indemnity Claims.
(a) Notification of Claims. If any claim ("Claim") is asserted by a
party as to which such party may be entitled to indemnification hereunder, such
party (an "Indemnitee") shall notify ("Claims Notice") the party required by the
terms of this Agreement to indemnify the Indemnitee (an "Indemnifying Party")
within 10 days after (1) receipt of notice of commencement of any
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third-party litigation against such Indemnitee, (2) receipt by such Indemnitee
of notice of any Claim by a third party ("Third Party Claim") pursuant to an
invoice, notice of claim or assessment, against such Indemnitee, or (3) such
Indemnitee becomes aware of the existence of any other event for which
indemnification may be sought from the Indemnifying Party. The Claims Notice
shall describe the Claim and the specific facts and circumstances in reasonable
detail, shall include copies of the notices referred to in (1) and (2), above,
shall indicate the amount, if known, or an estimate, if possible, of Damages
that have been or may be incurred or suffered.
(b) Defense of Third Party Claim by Indemnifying Party. The
Indemnifying Party may elect to defend or compromise any Third Party Claim, at
its own expense and by its own counsel, who shall be reasonably acceptable to
the Indemnitee. The Indemnitee may participate, at its own expense, in the
defense of any Third Party Claim assumed by the Indemnifying Party. Without the
approval of the Indemnitee, which approval shall not be unreasonably withheld or
delayed, the Indemnifying Party shall not compromise a Third Party Claim
defended by the Indemnifying Party which would require the Indemnitee to perform
or take any action or to refrain from performing or taking any action. If the
Indemnifying Party does not acknowledge its obligation to indemnify the
Indemnitee for a Third Party Claim, the Indemnitee shall have the right to
oversee the defense, compromise or settlement of such Claim and to consult with
its own counsel regarding the actions taken by the Indemnifying Party, all at
the expense of the Indemnifying Party.
(c) Assumption of Defense by Indemnitee. Notwithstanding anything in
this Section 14.6 to the contrary, if an Indemnitee determines in good faith
that there is a reasonable probability that a Proceeding may adversely affect
the Indemnitee or the Indemnitee's Affiliates other than as a result of monetary
Damages for which it would be entitled to indemnification under this Agreement,
the Indemnitee may, by notice to the Indemnifying Party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the Indemnifying
Party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its Consent (which may not be
unreasonably withheld or delayed).
(d) Defense of Claim by Indemnitee. If, within 20 days of the
Indemnifying Party's receipt of a Claim Notice involving a Third Party Claim,
the Indemnifying Party shall not have notified the Indemnitee of its election to
assume the defense, the Indemnitee shall have the right to assume control of the
defense or compromise of such Claim, and the costs and expenses of such defense,
including costs of investigation and reasonable attorneys' fees, shall be added
to the Claim. The Indemnitee shall have the right to compromise such Claim
without the Consent of the Indemnifying Party.
(e) Cooperation of Parties. The party assuming the defense of any
Claim shall keep the other party reasonably informed at all times of the
progress and development of the party's defense of and compromise efforts
related to such Claim and shall furnish the other party with copies of all
relevant pleading, correspondence and other papers. In addition, the parties
shall cooperate with each other, and make available to each other and their
representatives all available relevant records or other materials required by
them for their use in defending, compromising or contesting any Claim. The
failure to notify the Indemnifying Party timely of the commencement
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of such actions in accordance with Section 14.6(a) shall relieve the
Indemnifying Party from the obligation to indemnify under Sections 14.2, 14.3,
14.4 and 14.5, as the case may be, but only to the extent the Indemnifying Party
establishes by competent evidence that it or he is or has been materially and
adversely prejudiced by such untimely Claims Notice.
14.7 Remedies; Right of Set-Off. The remedies provided in this Section 14
shall not be deemed exclusive of or limit any other remedies that may be
available to an Indemnitee. If a Buyer's Indemnitee is entitled to
indemnification as provided in Sections 14.2, 14.3, and 14.4, Buyer shall have
the right to set-off the entire amount thereof against the amounts, if any, that
Buyer may owe Sellers, provided, it shall be a condition to the exercise of the
right of set-off that Buyer gives Sellers notice specifying in reasonable detail
the basis for such set-off. Neither the exercise of, nor the failure to
exercise, such right of set-off will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it.
15. Miscellaneous Provisions.
15.1 Amendment; Waiver. This Agreement may be amended, modified or
superseded only by a written instrument signed by all of the parties to this
Agreement. No party shall be deemed to have waived compliance by another party
of any provision of this Agreement unless such waiver is contained in a written
instrument signed by the waiving party and no waiver that may be given by a
party will be applicable except in the specific instance for which it is given.
The failure of any party to enforce at any time any of the provisions of this
Agreement or to exercise any right or option contained in this Agreement or to
require at any time performance of any of the provisions of this Agreement, by
any of the other parties shall not be construed to be a waiver of such
provisions and shall not affect the validity of this Agreement or any of its
provisions or the right of such party thereafter to enforce each provision of
this Agreement. No course of dealing shall operate as a waiver or modification
of any provision of this Agreement or otherwise prejudice such party's rights,
powers and remedies.
15.2 Assignment; Binding Effect. Sellers shall have the right to assign
their rights under this Agreement with respect to the Acquisition Assets to a
qualified intermediary in order to consummate a tax-free exchange under section
1031 of the Code. Buyer agrees that it will fully cooperate with Sellers to
effect such an exchange as long as Buyer is not required to take title to any
other property and incurs no additional expense. Sellers may not otherwise
assign their rights hereunder without the Consent of Buyer. Buyer may assign any
of its rights and obligations under this Agreement without the prior Consent of
Sellers to any Affiliate of Buyer if Buyer remains responsible for its
obligations under this Agreement under the terms of such assignment. Buyer may
not otherwise assign its rights hereunder without the written consent of
Sellers. Subject to the foregoing, all the provisions of this Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the parties
to this Agreement and their respective heirs, legal representatives, successors
and assigns.
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15.3 Construction and Interpretation of Agreement.
(a) Section titles or 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 of its provisions. All references in this
Agreement to Sections shall refer to Sections of this Agreement unless the
context clearly otherwise requires.
(b) When used in this Agreement, the word "including" shall have its
normal common meaning and any list of items that may follow such word shall not
be deemed to represent a complete list of the contents of the referent of the
subject.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. If any ambiguity or question of intent or
interpretation arises, no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
(d) Unless the context otherwise requires, when used in this
Agreement, 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.
(e) The parties do not intend that this Agreement shall confer on any
third party any right, remedy or benefit or that any third party shall have any
right to enforce any provision of this Agreement.
15.4 Severability of Provisions. If a court in any proceeding holds any
provision of this Agreement or its application to any person or circumstance
invalid, illegal 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, illegal or unenforceable, shall not be
affected, and shall be valid, legal 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 in this Agreement. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties intend that the court add to this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be valid and enforceable, so as to effect the original intent
of the parties to the greatest extent possible.
15.5 Confidentiality of Certain Information.
(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 "Confidential Information")
which any of them may receive from any other party concerning such other party.
Failure to mark any of the Confidential Information as non-public, proprietary
or confidential shall not affect its status as Confidential Information under
the terms of this Agreement. Confidential Information shall not include any
information in the possession of the receiving party (a) that is developed by
such party without reference to and independent of any Confidential Information,
(b) is learned from a third party not under any duty of confidence
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<PAGE>
to the disclosing party, or (c) becomes part of the public domain through no
fault of the receiving party.
(b) None of the parties nor their respective agents or employees
shall, without the prior consent of the disclosing party, disclose or use any
such Confidential Information, in whole or in part, except in connection with
the performance of the transactions described in this Agreement. Unless
otherwise required by law, none of the parties shall disclose any Confidential
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, all of whom must agree
to keep the Confidential Information confidential. If the First Closing does not
occur, each party will destroy or return to the disclosing party all copies of
documents that contain that party's Confidential Information.
15.6 Confidentiality of Agreement. Unless otherwise required by law, no
party shall disclose either the terms or existence of this Agreement to any
person other than a party's counsel and its other representatives or such other
third parties with whom it must communicate to consummate the transactions
described in this Agreement.
15.7 Exhibits and Schedules. All Exhibits and Schedules to this Agreement,
if any, shall constitute part of this Agreement and shall be deemed to be
incorporated in this Agreement by reference and made a part of this Agreement as
if set out in full at the point where first mentioned. Nothing in the Schedules
shall be deemed adequate to disclose an exception to a representation or
warranty made in this Agreement unless the Schedule identifies the exception
with particularity and describes the relevant facts in detail. If any
inconsistency between the statements in the body of this Agreement and those in
the Schedules (other than an exception expressly set forth as such in the
Schedules to a specifically identified representation or warranty), the
statements in the body of this Agreement shall control. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made in this Agreement (unless the representation
or warranty has to do with the existence of the document or other item itself).
The parties intend that each representation, warranty, covenant and obligation
contained in this Agreement shall have independent significance. If any party
has breached any representation, warranty, covenant or obligation contained in
this Agreement in any respect, merely because there exists another
representation, warranty, covenant or obligation relating to the same subject
matter (regardless of the relative levels of specificity) which the party has
not breached shall not detract from or mitigate the party's breach of the first
representation, warranty, covenant or obligation.
15.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
15.9 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties related to its subject matter and supersedes all
prior proposals, understandings, agreements, correspondence, arrangements and
contemporaneous oral agreements relating to
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<PAGE>
subject matter of this Agreement. No representation, promise, inducement or
statement of intention has been made by any party which has not been embodied in
this Agreement.
15.10 Expenses. Sellers shall pay (a) all transfer taxes, intangible taxes
and similar Taxes and all sales, use transfer and similar Taxes, relating to the
transfer of the Acquisition Assets to Buyer, (b) the cost of the Survey, and (c)
the cost of their legal counsel. Buyer shall pay (a) the cost of its legal
counsel, (b) the cost of any environmental assessment of the Real Property (c)
the cost of DevCon's sales commission, (d) the cost of any recordation fees to
put the Deed of record with the appropriate Governmental Body, and (e) the cost
of premiums on the Title Policy. Except as otherwise expressly provided for in
this Agreement, each party will bear its or his own expenses incurred in
connection with the preparation, execution and performance of its obligations
under this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.
15.11 Further Assurances. Each party shall execute and deliver such
additional documents or take such additional actions as may be requested by
another party to this Agreement if such requested document or action is
reasonably necessary to effect the transactions described in this Agreement.
15.12 Governing Law. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Texas,
without giving effect to any conflict of law rule or principle of such state.
15.13 No Public Announcement. No party shall make any press release or
other public announcement regarding this Agreement or the transactions described
in this Agreement, unless such party is obligated by law or the rules of any
stock exchange upon which its shares are traded to make such a disclosure. When
a party determines that it is obligated by law or the rules of a stock exchange
to make such a disclosure, it shall notify all of the other parties prior to
such disclosure and all of the parties shall cooperate to cause a mutually
agreeable release or announcement to be issued.
15.14 Notices. All notices, requests, consents, approvals, waivers, demands
and other communications required or permitted to be given or made under this
Agreement shall be in writing and shall be deemed delivered to the parties (a)
on the date of personal delivery or transmission by facsimile transmission, (b)
on the first business day following the date of delivery to a nationally
recognized overnight courier service, or (d) or the third business day following
the date of deposit in the United States Mail, postage prepaid, by certified
mail, in each case, addressed as follows, or to such other address, person or
entity as any party may designate by notice to the others in accordance
herewith:
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<PAGE>
If to Buyer: Atria Communities, inc.
515 West Market Street, Suite 200
Louisville, KY 40202
Attn: J. Timothy Wesley, Chief Financial
Officer and Audra J. Eckerle,
General Counsel
Facsimile: (502) 596-4160
With Copy to: Carmin D. Grandinetti, Esq.
Greenebaum Doll & McDonald pllc
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202
Facsimile Number: (502) 540-2129
If to Sellers or Shareholders: Larry S. Parker
8215 Cambridge Road
Tyler, TX 75703
Facsimile Number: (903) 593-0484
With Copy to: James B. Gillen, Jr., Esq.
Conner, Gillen, Yarbrough & Anderson, P.C.
613 Shelley Park Plaza
Tyler, TX 75701
Facsimile Number: (903) 581-8790
15.15 Recovery of Expenses by Prevailing Party. The party prevailing in any
civil action, arbitration or other proceeding shall be entitled to recover from
the nonprevailing party, in addition to any damages the prevailing party may
have been awarded, all reasonable expenses that the prevailing party may have
incurred in connection with such proceeding, including accounting fees
attorneys' fees and expert witnesses' fees.
15.16 Cumulative Remedies; Specific Performance. No right or remedy
conferred upon or reserved to any of the parties under the terms of this
Agreement is intended to be, nor shall it be deemed, exclusive of any other
right or remedy provided in this Agreement or by law or equity, but each shall
be cumulative of every other right or remedy. The parties understand and
acknowledge that a party may be damaged irreparably by reason of a failure of
another party to perform any obligation under this Agreement. Accordingly, if
any party attempts to enforce the provisions of this Agreement by specific
performance (including preliminary or permanent injunctive relief), the party
against whom such action or proceeding is brought waives the claim or defense
that the other party has an adequate remedy at law.
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<PAGE>
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
Atria Communities, Inc.
By: /s/ J. Timothy Wesley
------------------------------
Title: Chief Financial Officer
---------------------------
("Buyer")
Briarcliff Health Center of Texas
By: /s/ Larry S. Parker
------------------------------
Title: General Partner
---------------------------
("Owner")
Briarcliff Health Center, Inc.
By: /s/ Larry S. Parker
------------------------------
Title: President
---------------------------
("Operator")
/s/ Larry S. Parker
---------------------------------
Larry S. Parker
/s/ Randy Parker
---------------------------------
Randy Parker
/s/ Don Steele
---------------------------------
Don Steele
("Shareholders")
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<PAGE>
EXHIBIT 2.2
------------------------------------------------
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
BY AND AMONG
ATRIA COMMUNITIES, INC.,
BRIARCLIFF VILLAGE HEALTH CENTER,
BRIARCLIFF VILLAGE HEALTH CENTER, INC.,
AND
LARRY S. PARKER, RANDY PARKER, MARY G. TEDFORD,
LAURA R. TEDFORD, DAVID TEDFORD, AND DON STEELE
------------------------------------------------
December 15, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Purchase and Sale of Assets.............................................. 1
1.1 Acquisition Assets.................................................. 1
1.2 Excluded Assets..................................................... 3
1.3 Assumed Liabilities; No Assumption of Other Liabilities............. 3
2. Purchase Price; Deposit; Payment......................................... 3
2.1 Purchase Price; Deposit; Payment.................................... 3
2.2 Prorations.......................................................... 3
2.3 Allocation of Purchase Price........................................ 4
3. Deposit; Escrow; Closing; Termination.................................... 4
3.1 Escrow.............................................................. 4
3.2 The Closing......................................................... 4
3.3 Actions Taken by Title Agent on Closing Date and Thereafter......... 5
3.4 Termination of Escrow............................................... 5
4. Representations and Warranties of Sellers and Shareholders............... 5
4.1 Authority; No Conflict.............................................. 5
4.2 Assets Necessary To Business........................................ 7
4.3 Books and Records................................................... 7
4.4 Brokers............................................................. 7
4.5 Completeness of Statements.......................................... 7
4.6 Environmental Matters............................................... 7
4.7 Insurance........................................................... 8
4.8 Litigation.......................................................... 9
4.9 Taxes............................................................... 9
4.10 Title to Properties; Condition and Repair.......................... 10
4.11 Zoning............................................................. 10
5. Representations and Warranties of Owner.................................. 10
5.1 Real Property....................................................... 10
5.2 Utilities........................................................... 11
6. Representations and Warranties of Operator and Shareholders.............. 11
6.1 Absence of Certain Events........................................... 11
6.2 Contracts........................................................... 12
6.3 Current Compensation of Employees................................... 12
6.4 Employee Benefits................................................... 12
6.5 Financial Statements................................................ 13
6.6 Healthcare Legal Requirements....................................... 13
6.7 Labor Matters....................................................... 13
</TABLE>
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<PAGE>
TABLE OF CONTENTS
Section Page
6.8 Liabilities Not Disclosed On Balance Sheet....................... 13
6.9 Medicare, Medicaid and Other Third Party Payors.................. 14
6.10 Permits.......................................................... 14
6.11 Proprietary Property............................................. 14
7. Representations and Warranties of Buyer................................ 14
7.1 Corporate Status................................................. 15
7.2 Authority; Consents; Enforcement; Noncontravention; Noncompetes.. 15
7.3 No Agent or Broker............................................... 15
8. Additional Covenants of the Parties.................................... 15
8.1 Access and Investigation......................................... 15
8.2 Operation of the Facility........................................ 16
8.3 Required Consent................................................. 16
8.4 Notification..................................................... 16
8.5 No Negotiation................................................... 16
8.6 Approvals of Governmental Bodies................................. 17
8.7 Patients' Accounts............................................... 17
8.8 Retroactive Settlements.......................................... 17
8.9 Patients' Personal Funds Accounts................................ 18
8.10 Preservation of Records; Access By Sellers....................... 18
8.11 Transition of the Facility....................................... 18
8.12 Compliance with Legal Requirements............................... 18
8.13 Operator's Employees and Employee Benefits....................... 19
8.14 Survey........................................................... 19
8.15 Title Insurance.................................................. 19
8.16 Filing of Taxes; Payment......................................... 20
8.17 Sales and Other State Taxes...................................... 20
8.18 Non-Competition Agreements....................................... 20
8.19 Management Agreement............................................. 20
8.20 Further Assurances............................................... 20
9. Conditions Precedent to Buyer's Obligation to Close.................... 21
9.1 Accuracy of Representations...................................... 21
9.2 Sellers' Performance............................................. 21
9.3 No Proceedings................................................... 21
9.4 Consents......................................................... 21
9.5 Texas DHS Authorization.......................................... 21
9.6 Other Documents.................................................. 21
9.7 Title Policy..................................................... 22
9.8 No Prohibition................................................... 22
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<PAGE>
TABLE OF CONTENTS
Section Page
10. Conditions Precedent to Sellers' Obligation to Close............. 22
10.1 Accuracy of Representations...................................... 22
10.2 Buyer's Performance.............................................. 22
10.3 No Injunction.................................................... 22
10.4 Consents......................................................... 22
10.5 Definitive Agreements for Purchase and Sale of Other Facilities.. 22
10.6 Other Documents.................................................. 23
11. Termination........................................................... 23
11.1 Termination Events............................................... 23
11.2 Effect of Termination............................................ 24
12. Deliveries and Actions To Be Taken At Closing ........................ 24
12.1 Deliveries by Sellers............................................ 24
12.2 Deliveries by Buyer.............................................. 25
13. Indemnification; Remedies............................................. 26
13.1 Survival; Right to Indemnification............................... 26
13.2 Indemnification and Payment of Damages By Owner.................. 26
13.3 Indemnification and Payment of Damages By Operator............... 26
13.4 Indemnification and Payment of Damages by Shareholders........... 27
13.5 Indemnification By Buyer......................................... 27
13.6 Indemnity Claims................................................. 27
13.7 Remedies; Right of Set-Off....................................... 29
14. Miscellaneous Provisions.............................................. 29
14.1 Amendment; Waiver................................................ 29
14.2 Assignment; Binding Effect....................................... 29
14.3 Construction and Interpretation of Agreement..................... 29
14.4 Severability of Provisions....................................... 30
14.5 Confidentiality of Certain Information........................... 30
14.6 Confidentiality of Agreement..................................... 31
14.7 Exhibits and Schedules........................................... 31
14.8 Counterparts..................................................... 31
14.9 Entire Agreement................................................. 31
14.10 Expenses......................................................... 32
14.11 Further Assurances............................................... 32
14.12 Governing Law.................................................... 32
14.13 No Public Announcement........................................... 32
14.14 Notices.......................................................... 32
14.15 Recovery of Expenses by Prevailing Party......................... 33
14.16 Cumulative Remedies; Specific Performance........................ 33
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<PAGE>
TABLE OF CONTENTS
Section Page
-iv-
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
Description Exhibit
<S> <C>
Certain Definitions.................................................... A
Assumed Contracts...................................................... B
Purchase Price Allocation.............................................. C
Survey Requirements.................................................... D
Bill of Sale........................................................... E
Assignment and Assumption Agreement.................................... F
Non-Competition Agreement.............................................. G
Management Agreement................................................... H
</TABLE>
SCHEDULES
<TABLE>
<CAPTION>
Description............................................................ Schedule
<S>.................................................................... <C>
Authority, No Conflict and Organization, Seller's Consents............. 4.1
Broker Fees............................................................ 4.4
Environmental Matters.................................................. 4.6
Insurance.............................................................. 4.7
Litigation............................................................. 4.8
Taxes.................................................................. 4.9
Personal Property...................................................... 4.10
Real Property.......................................................... 5.1
Absence of Certain Events.............................................. 6.1
Contracts.............................................................. 6.2
Employees and Compensation............................................. 6.3
Financial Statements................................................... 6.5
Labor Matters.......................................................... 6.7
Absence of Undisclosed Liabilities..................................... 6.8
Medicare, Medicaid and Other Third Party Payor Contracts............... 6.9
Permits................................................................ 6.10
</TABLE>
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<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets is entered into and
effective as of December 15, 1997, by and among Atria Communities, Inc., a
Delaware corporation ("Buyer"), Briarcliff Village Health Center, a Texas
general partnership ("Owner"), Briarcliff Village Health Center, Inc., a Texas
corporation ("Operator"), and Larry S. Parker, Randy Parker, Mary G. Tedford,
Laura R. Tedford, David Tedford and Don Steele (collectively, the
"Shareholders"). (Owner and Operator are hereinafter referred to collectively as
"Sellers".)
Recitals:
A. Owner owns certain "Real Property" (as defined in Section 1.1(b))
located at 3403 South Vine Street, Tyler, Texas 75701. Operator leases the Real
Property from Owner and operates a facility licensed as a Class B Personal Care
Facility with approximately 12 beds and a skilled nursing facility having
approximately 230 beds (the "Facility") at such location.
B. The Real Property being conveyed by this Agreement consists of three
parcels of land. Larry S. Parker, Randy Parker and Don Steele own two of these
parcels of land, in their individual capacities, as tenants in common. For
purposes of all representations and warranties related to the Real Property and
the conveyance of the Real Property, the term "Sellers" shall include Larry S.
Parker, Randy Parker and Don Steele.
C. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer the Real Property and the Facility, and all of the assets and properties
located at the Facility and owned or used by either Seller in connection with
the operation of the Facility, pursuant to the terms of this Agreement.
D. In addition to the terms defined in this Agreement, certain other terms
used in this Agreement are in the Exhibit of Certain Defined Terms attached to
this Agreement as Exhibit A and such terms, when used in this Agreement, have
the meaning set forth in that Exhibit.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Purchase and Sale of Assets.
1.1 Acquisition Assets. Upon the terms and subject to the conditions of
this Agreement, at the "Closing" on the "Closing Date" (as such terms are
defined in Section 3.2), Sellers shall sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and
clear of all Encumbrances (other than the "Permitted Encumbrances" (as defined
in Section 9.7)), all of each Seller's respective right, title and interest
under, in and to the Facility and, except as otherwise provided in Section 1.2,
all of each Seller's property and assets, real and personal, tangible and
intangible that are located at, and used in connection with the operation of,
the Facility, including the following (collectively, the "Acquisition Assets"):
<PAGE>
(a) All of the assets and properties reflected on the "Acquisition
Balance Sheet" (as defined in Section 6.5) and those assets and properties
acquired since the date of the Acquisition Balance Sheet, except those assets
that have been disposed of in the Ordinary Course of Business between the date
of the Acquisition Balance Sheet and the Closing Date;
(b) The real property described on Schedule 5.1, together with all
improvements, buildings and fixtures located thereon and all easements and
rights appurtenant thereto (the "Real Property");
(c) All machinery, equipment, fixtures, computer hardware and software
(subject to any restrictions by the licensor on the assignment thereof) tools,
supplies, spare parts, furniture, vehicles and all other tangible personal
property and assets located at the Facility and owned or leased by either Seller
and used or held for use in connection with the Facility, including those
identified on Schedule 4.10 (the "Personal Property");
(d) All inventories of cleaning supplies, food, all medical supplies,
inventory of drugs and other medical inventory and all other inventories and
supplies located in and about the Facility (the "Inventory");
(e) Patient medical records for all patients in the Facility on the
Closing Date (the "Straddle Patients");
(f) All of each Seller's respective interest (including all rights,
benefits, duties and obligations) in those Contracts listed on Exhibit B
("Assumed Contracts"), including all assumable prepaid expenses and deposits
arising under the Assumed Contracts;
(g) All Governmental Authorizations owned, held or utilized by either
Seller in connection with the ownership of the Acquisition Assets and the
operation of the Facility, and all pending applications therefor, in each case
to the extent transferrable to Buyer, including those listed on Schedule 6.10
(the "Permits");
(h) All data and records of each Seller related to the Acquisition
Assets including equipment logs, operating guides and manuals, and other similar
documents and records ("Data and Records");
(i) All rights to the name "Briarcliff Health Center";
(j) The going concern value and goodwill associated with the operation
of the Facility; and
(k) All other properties and assets of every kind, character or
description, tangible or intangible, owned by either Seller and located at, and
used or held for use in connection with, the Facility, whether or not similar to
the items or types specifically set forth above.
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<PAGE>
1.2 Excluded Assets. The only assets of either Seller located at, or used
in connection with the operation of, the Facility not included in the
Acquisition Assets and not to be purchased and sold under this Agreement are the
following (collectively, the "Excluded Assets"):
(a) All cash, cash equivalents, securities and investments, loan
costs, if any, and accounts receivable, notes receivable, premiums receivable,
commissions receivable, and other rights to receive payments from residents of
the Facility or from others, including all trade accounts receivable
representing amounts payable to either Seller for services rendered to residents
of the Facility prior to the Closing Date;
(b) Any Contract to which either Seller is a party that is not listed
on Exhibit B; and
(c) Records related to Organizational Documents of each Seller and all
medical records of all patients other than the Straddle Patients.
1.3 Assumed Liabilities; No Assumption of Other Liabilities. Effective as
of the Closing, Buyer shall assume, perform and discharge only those obligations
of either Seller arising solely under the Assumed Contracts on or after the
Closing Date. Except for the Liabilities identified in the immediately preceding
sentence, Buyer does not assume, and shall not in any manner become responsible
or liable for, and each Seller shall retain, pay, discharge and perform in full,
all other Liabilities of such Seller. Each Sellers shall remain liable and
responsible for all of its Liabilities of any nature whatsoever not expressly
assumed by Buyer under the terms of this Agreement.
2. Purchase Price; Deposit; Payment.
2.1 Purchase Price; Deposit; Payment.
(a) The purchase price for the Acquisition Assets shall be $10,890,000
("Purchase Price").
(b) Within ten days of Buyer's receipt of an indemnification letter
from the title insurance company ("Title Company") for which Smith County
Abstract Company ("Title Agent") is an agent, Buyer shall deliver $250,000 to
Title Agent or Title Company, to be held by Title Agent or Title Company in an
interest-bearing account as a good faith deposit ("Deposit").
2.2 Prorations. All ad valorem real property taxes and assessments on the
Real Property that are due and payable in the year of Closing shall be prorated
on the basis of a 365-day year, in the manner customarily followed in Tyler,
Texas as of the Closing Date. All rents actually received by either Seller from
residents for the month in which the Closing occurs shall be prorated between
Buyer and Sellers based on the number of days in the month. At the Closing, the
net amount of such prorations shall be paid by Buyer to Sellers in addition to
the Purchase Price, or shall be paid by Sellers to Buyer, as the case may be.
If the Closing occurs before the amounts of the taxes and assessments to be
prorated pursuant hereto are known by the parties, such taxes and assessments
shall be prorated at the Closing based upon the amounts assessed in
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<PAGE>
the immediately preceding calendar or fiscal year, and when the amount of taxes
and assessments for the year in which the Closing occurs are known by the
parties, the parties shall reapportion such taxes or assessments based upon the
actual amount thereof.
2.3 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Acquisition Assets as specified in Exhibit C to this Agreement. After
the Closing, the parties agree to make consistent use of the allocation for all
Tax purposes and in any and all filings, declarations and reports with the IRS
related to this Agreement, including, the reports required to be filed under
Section 1060 of the IRC, if applicable. Buyer shall prepare and deliver IRS Form
8594 to Sellers within 45 days after the Closing Date if such form is required
to be filed with the Internal Revenue Service. In any proceeding related to the
determination of any Tax, no party hereto shall contend or represent that such
allocation is not correct.
3. Deposit; Escrow; Closing; Termination.
3.1 Escrow. This Agreement constitutes (a) a contract of purchase and sale
between the parties and (b) escrow instructions to Title Agent for the escrow
created hereby ("Escrow"). Either party may deliver a fully signed copy of this
Agreement to Title Agent, and this Escrow shall be deemed open on the date
("Escrow Opening Date") when Title Agent has received a copy or copies of this
Agreement signed by both parties and the standard terms and conditions of
escrow, if any, that Title Agent may require signed by both parties.
3.2 The Closing.
(a) Title Agent will close (the "Closing") the Escrow and the
transactions described in this Agreement on the date (the "Closing Date") that
all of the following conditions are satisfied but in no event later than
February 2, 1998 (the "Termination Date"), unless Buyer and Sellers agree
otherwise:
(1) All funds and documents described in Section 12 have been
delivered to Title Agent;
(2) Title Agent has received notification from Buyer that each of the
conditions set forth in Section 9 has been either satisfied or Buyer has
waived satisfaction of any unsatisfied condition;
(3) Title Agent has received notification from each Seller that each
of the conditions set forth in Section 10 has been either satisfied or each
Seller has waived satisfaction of any unsatisfied condition; and
(4) Title Agent can issue the "Title Policy" (as defined in Section
9.7), insuring fee simple title to the Real Property in the amount of the
Purchase Price, subject to only (1) the Encumbrances for real estate Taxes
and statutory liens for Taxes not yet due and payable, and (2) the
Permitted Encumbrances, and with such endorsements that Buyer has
requested.
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<PAGE>
(b) The effective time of the Closing shall be 12:01 a.m., Central
Time, on February 1, 1998 (the "Effective Time").
3.3 Actions Taken by Title Agent on Closing Date and Thereafter.
(a) On the Closing Date when all of the conditions set forth in
Section 3.2 have been satisfied, Title Agent shall file with the appropriate
officials the "Deed" (as defined in Section 12.1(e)) and such other documents as
may be necessary to procure the Title Policy, and shall disburse the funds and
documents to the parties in the manner set forth in Section 12.
(b) If Title Agent cannot close Escrow prior to the Termination Date,
it shall, nevertheless, close Escrow when all conditions have been satisfied or
waived unless Title Agent receives after the Termination Date, but prior to the
close of Escrow, a notice to terminate Escrow from a party who, at the time the
notice is delivered, is not in Breach of any provision of this Agreement.
3.4 Termination of Escrow. Within two working days after delivery of a
notice of termination from one party to this Agreement in accordance with
Section 11.1, Title Agent shall deliver a copy of the notice to the other
parties. Unless one of the other parties delivers to Title Agent a notice of
objection to termination of Escrow within three days after Title Agent delivered
the notice of termination to that party, Title Agent shall promptly terminate
Escrow and shall return all funds (excluding the Deposit) and documents held by
it to the party depositing the same and disburse the Deposit in the manner set
forth in Section 11.2. If Title Agent receives notice of objection to the
termination of Escrow within the three-day period, Title Agent shall hold all
funds (including the Deposit) and documents delivered to it in connection with
Escrow and Title Agent may, in its sole discretion, take no further action until
otherwise directed by other instructions signed by both parties or a final order
or judgment of a court of competent jurisdiction. Title Agent will have no
liability or responsibility for determining that a party giving a notice of
termination is not in default under this Agreement.
4. Representations and Warranties of Sellers and Shareholders. Each Seller
and each Shareholder hereby represents and warrants to Buyer as follows:
4.1 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of each Seller, enforceable against it in accordance with its terms.
Each Seller has the full right, power, authority and capacity to execute and
deliver this Agreement and to perform its obligations under this Agreement and
to consummate all of the transactions described in this Agreement.
(b) Each Seller has, and at all times has had, full power and
authority to own and lease its properties as such properties are now owned and
leased and to conduct its business as it is now being conducted. Owner's Federal
Employer Identification Number is 75-2148433 and Operator's Federal Employer
Identification Number is 75-2141408. Each Seller certifies that (a) the number
shown above is its correct taxpayer identification number, (b) it is not subject
to backup withholding because (1) it has not been notified that it is subject to
backup withholding
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as a result of a failure to report all interest or dividends or (2) the Internal
Revenue Service has notified it that it is no longer subject to backup
withholding, and (c) it is not a foreign Person within the meaning of Sections
1445 and 1446 of the IRC, and the regulations promulgated thereunder.
(c) Except as set forth in Schedule 4.1, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions described in this Agreement will, directly or indirectly (with or
without notice or lapse of time):
(1) Contravene, conflict with, or result in a violation of, any
provision of the Organizational Documents of either Seller or any resolution
adopted by the governing body or equity owners of either Seller;
(2) Contravene, conflict with, or result in a violation of, any
Legal Requirement or give any Governmental Body or other Person the right to
challenge any of the transactions described in this Agreement or to exercise
any remedy or obtain any relief under any Legal Requirement applicable to
either Seller or any of the Acquisition Assets;
(3) Contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by either Seller or that otherwise relates to any
of the Acquisition Assets, except (A) where any such contravention, conflict,
violation, revocation, withdrawal, suspension, cancellation, termination or
modification would not result in a Material Adverse Effect to either Seller,
the Facility, or any of the Acquisition Assets and (B) for the requirement
that Buyer must apply for a license from the Texas Department of Human
Services (the "Texas DHS") to operate the Facility;
(4) Cause either Seller, or to the Knowledge of either Seller
cause Buyer, to become subject to, or to become liable for the payment of, any
Tax to any Governmental Body, other than real estate and ad valorem property
Taxes normally assessed in Texas against owners of such property;
(5) Contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Assumed Contract, other than those
Persons who are parties to Assumed Contracts that require Consent from such
Persons prior to the assignment of the Assumed Contract; or
(6) Result in the imposition or creation of any Encumbrance on or
related to any of the Acquisition Assets owned or used by either Seller.
(d) Neither Seller is nor will it be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the transactions
described in this Agreement, except (A) as set forth in Schedule 4.1, (B) for
compliance with Medicare, Medicaid and Title 40, Chapter
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19 of the Texas Administrative Code (the "Texas Nursing Facility Requirements"),
and (C) where the failure to give such notice or Consent would not have a
Material Adverse Effect on either Seller, the Facility, or any of the
Acquisition Assets.
(e) Each Seller has complied, and is in compliance, with all Legal
Requirements applicable to it and its operations and the ownership or use of the
Acquisition Assets, except (A) for compliance with Medicare, Medicaid and Texas
Nursing Facility Legal Requirements, and (B) where the failure to comply would
not have a Material Adverse Effect on either Seller, the Facility, or any of the
Acquisition Assets. Neither Seller has Knowledge of any facts or circumstances
which may constitute or result in any noncompliance.
4.2 Assets Necessary To Business. Except for assets used by either Seller
principally for accounting functions, the Acquisition Assets (provided Buyer
replaces the Excluded Assets) are sufficient for Buyer to operate the Facility
on and after the Closing Date in the same manner that Operator operated the
Facility prior to the date of this Agreement.
4.3 Books and Records. The books of account of each Seller are complete and
correct in all material respects, and all monies due or to become due from or to
or owing by, and all Liabilities of each Seller, by reason of any transaction,
matter or cause whatsoever have been duly, correctly and completely entered
therein in all material respects.
4.4 Brokers. All negotiations relative to this Agreement and the
transactions described in this Agreement have been conducted by Sellers directly
with Buyer, without the assistance or intervention of any other Person except
for DevCon Real Estate Brokers ("DevCon"). To each Seller's Knowledge, DevCon is
the only Person who may have a valid claim against Buyer for a finder's fee,
investment banking fees, brokerage commission or other like payment.
4.5 Completeness of Statements. Each Seller has disclosed to Buyer in
writing all material facts known to it relating to the representations and
warranties of such Seller made in this Agreement. No representation, warranty or
covenant of either Seller 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 when
taken as a whole.
4.6 Environmental Matters.
(a) Except as disclosed on Schedule 4.6, (1) each Seller is, and at all
times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law, (2) neither Seller has any
basis to expect, nor to the Knowledge of each Seller, has either Seller, or any
other Person for whose conduct either Seller is or may be held responsible,
received any Order, notice, or other communication from (A) any Governmental
Body or Person acting in the public interest, or (B) the current or prior owner
or operator of the Facility, of any actual or Threatened 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
relating to the Facility. Neither Seller has generated, manufactured, refined,
transferred, imported, used, or processed Hazardous Materials from the Facility,
nor,
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to the Knowledge of each Seller, has any other Person for whose conduct either
Seller is or may be held responsible, transported, treated, stored, handled,
transferred, disposed, recycled or received Hazardous Materials.
(b) Except as set forth on Schedule 4.6, there are no pending or, to
the Knowledge of each Seller, 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, affecting the
Facility or any of the Acquisition Assets.
(c) Except as set forth on Schedule 4.6, neither Seller has any basis
to expect, nor has either Seller, or to the Knowledge of each Seller, any other
Person for whose conduct either Seller is or may be held responsible received,
any notice, Order, or other communication that relates to Hazardous Activity,
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 regarding the Facility or any of the Acquisition Assets or to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used or processed by either Seller, or any other Person for whose
conduct either Seller is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) Except as set forth on Schedule 4.6, neither one of Sellers, nor
to the Knowledge of each Seller, any other Person for whose conduct either
Seller is or may be held responsible, has any Environmental, Health, and Safety
Liabilities related to the Facility or the Acquisition Assets, or at any
property geologically or hydrologically adjoining the Facility.
(e) Except as set forth on Schedule 4.6, there are no Hazardous
Materials present on or in the Environment at the Real Property or, to the
Knowledge of each Seller, at any geologically or hydrologically adjoining the
Real Property, other part of the Real Property or such adjoining property, or
incorporated into any improvement located thereon or in any Personal Property.
Neither one of Sellers, nor any other Person for whose conduct either Seller is
or may be held responsible, has permitted or conducted, or are aware of, any
Hazardous Activity conducted with respect to the Facility or any of the
Acquisition Assets.
(f) Except as set forth on Schedule 4.6, there has been no Release, or
to the Knowledge of each Seller, a Threat of Release, of any Hazardous Materials
at or from the Facility or the Real Property.
4.7 Insurance. Included as Schedule 4.7 is a complete listing of all
insurance policies related to the Acquisition Assets insuring each Seller, and
bonds issued concerning the Acquisition Assets, detailing the coverage insured
against and the amount thereof, the insurance carrier, the policy number and the
premium payments. Except as disclosed on Schedule 4.7, neither Seller does nor
has either Seller maintained any self-insurance programs. Schedule 4.7 further
includes a statement of all claims for insured losses filed by either Seller
within the three-year period prior to the date hereof. Except as listed on
Schedule 4.7, neither Seller has received any notice from any insurance carrier
that (a) such Seller's coverage will be canceled in whole or in part or (b)
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that the premiums or premium rates (where the premium is computed on a
fluctuating base) will be increased.
4.8 Litigation. Except as set forth on Schedule 4.8, to each Seller's
Knowledge, there are no Proceedings or claims, pending or Threatened against or
affecting either Seller, the Acquisition Assets, the Facility, or any employee
of Operator, by or before any Governmental Body. Neither Seller is subject to,
nor in default under, any Order applicable to it, the Facility, the Acquisition
Assets, or any of its employees.
4.9 Taxes.
(a) Each Seller has timely paid in full all ad valorem property Taxes
levied on its respective portion of the Acquisition Assets that have become due
and payable prior to the date of this Agreement. Operator has withheld proper
and accurate amounts from its employees in full and complete compliance with the
Tax withholding provisions of the IRC and other applicable Legal Requirements,
and has filed proper and accurate Tax Returns for all years and periods (and
portions thereof) for which any such Tax Returns were due for employee income
Tax, withholding Taxes, social security Taxes and unemployment Taxes. Operator
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, Operator has made adequate
accruals on its regular books of account.
(b) Each Seller has prepared, signed and filed all federal Tax Returns
required to be filed by all applicable Legal Requirements 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 due and owing on such Tax Returns or which were or are
otherwise due and owing under all applicable Legal Requirements for any periods
for which Tax Returns were due, whether reflected on such Tax Returns and
whether relating to the income of such Seller. The amounts recorded as payable
for Taxes in the Acquisition Balance Sheet is sufficient for the payment of all
Taxes attributable to all periods ended on or before the date of the Acquisition
Balance Sheet and adequate accruals have been made by each Seller for all
Liabilities for Taxes accruing since the date of the Acquisition Balance Sheet.
There are in effect no Contracts or Consents providing for an extension of time
for any assessment of any Tax, or any deficiency against either Seller, other
than routine extensions in filing deadlines. Except as set forth on Schedule ,
there are no Proceedings now pending nor Threatened, against either Seller, nor
are there any matters under discussion with the IRS, or other Governmental
Authority, relating to any Taxes, or any claims or deficiencies with respect
thereto. Set forth on Schedule 4.9, is a list of federal income Tax Returns that
IRS has audited.
(c) Except as provided on Schedule 4.9, neither Buyer nor either
Seller are liable for any sales, use, transfer or other similar Tax as a result
of the transactions described in this Agreement and no such Tax will be imposed
by any Governmental Body on the sale of the Acquisition Assets to Buyer, and
Buyer is not required to withhold any portion of the Purchase Price on account
of any such Tax.
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4.10 Title to Properties; Condition and Repair. Schedule 4.10 sets forth a
listing of the Personal Property owned or used respectively by each Seller in
the operation of the Facility. Except as disclosed on Schedule 4.10, each Seller
owns the Personal Property included within the Acquisition Assets that it
purports to own or reflected as owned in the books and records of such Seller
(except for assets held under capitalized leases disclosed in Schedule 6.2 of
this Agreement) free and clear of all Encumbrances of any nature whatsoever,
except for the lien for current ad valorem property Taxes not yet due and
payable. Except for the regular, scheduled repairs which are done in the
Ordinary Course of Business, all of the Acquisition Assets are free of material
defect, well maintained, in good working order, condition and repair.
4.11 Zoning. To the Knowledge of each Seller, the operation of the Facility
on the Real Property by Buyer following the Closing Date does not require any
zoning or planning department approvals in addition to those which either Seller
has already obtained. Buyer is automatically entitled to the benefits of all
such approvals without the necessity of any affirmative action on Buyer's
behalf. Neither Seller has any information which would lead it to believe that
the use of the Real Property will be adversely affected by any pending or
proposed zoning or use changes.
5. Representations and Warranties of Owner. Owner hereby represents and
warrants to Buyer as follows:
5.1 Real Property.
(a) Schedule 5.1 sets forth a complete legal description of the Real
Property. None of the Real Property is subject to any Encumbrance, variance or
other limitation except for (a) mortgages or security interests securing
obligations in an aggregate amount of less than $1,000,000, (b) liens for
current Taxes not yet due, (c) 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 the
Facility, and (d) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto. All buildings,
plants, and structures owned by Owner lie wholly within the boundaries of the
Real Property owned by Owner and, with the exception of any fences located
around the boundaries of the Real Property, do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person.
(b) There are no pending, or Threatened, condemnation Proceedings
relating to the Real Property or other matters affecting its current use,
occupancy or value.
(c) Owner has not received any notice from any Governmental Body, nor
does it otherwise have Knowledge of any contemplated, actual or Threatened
reassessment of the value of the Real Property for ad valorem real property Tax
purposes, other than normal periodic reassessment and any such reassessment that
may occur by virtue of the sale of the Real Property to Buyer and the
recordation of the Deed in the appropriate public office.
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5.2 Utilities. The Facility is supplied with utilities and other services
necessary for its operation, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are sufficient for Buyer
to operate the Facility in the same manner that in which Operator operated the
Facility prior to the date of this Agreement and are provided via public roads
or via permanent, irrevocable, appurtenant easements benefitting the Real
Property.
6. Representations and Warranties of Operator and Shareholders. Owner and
each Shareholder hereby represent and warrant to Buyer as follows:
6.1 Absence of Certain Events. Except as set forth on Schedule 6.1, since
the date of the Acquisition Balance Sheet, Operator has operated the Facility
only in the Ordinary Course of Business and has not:
(a) Experienced any event, occurrence or condition which, individually
or in the aggregate has or is reasonably likely to have a Material Adverse
Effect on the Facility or any of the Acquisition Assets;
(b) Entered into or committed to any transaction that, individually or
in the aggregate, has or is reasonably likely to have, a Material Adverse Effect
on the Facility or any of the Acquisition Assets;
(c) Changed any of its accounting methods, principles or practices;
(d) Incurred or agreed to incur any indebtedness for borrowed money or
allowed any of the Acquisition Assets to be subjected to any Encumbrance
whatsoever, other than non-monetary restrictions which will not materially
interfere with Operator's use and enjoyment of the Acquisition Assets;
(e) Terminated or amended or suffered the termination or amendment of
any Assumed Contracts or Permit, where the loss of such Assumed Contract or
Permit would result in a Material Adverse Effect on Operator or the Facility;
(f) Adopted, modified or amended any Employee Benefit Plan;
(g) Entered into any Contract to do any of the above;
And, except as set forth on Schedule 6.1, Operator has:
(h) Continued its operations at the Facility in the Ordinary Course of
Business and maintained its operations, the Facility, Acquisition Assets, books
of account, records and files in substantially the same manner as heretofore;
and
(i) Used its Best Efforts to preserve its business at the Facility.
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6.2 Contracts. Operator has delivered to Buyer a complete copy of each
Assumed Contract listed in Exhibit B. Operator has performed in all respects all
obligations to be performed by it under the terms of any of the Assumed
Contracts through the date of this Agreement, and Operator is not in default
under any Assumed Contract. Moreover, to the Knowledge of Operator, no event has
occurred which, with notice or the passage of time, or both, would constitute a
default under any Assumed Contract. To the Knowledge of Operator, there is no
basis for any of the other parties to Assumed Contracts to assert that Operator
is in default thereunder and the other parties to Assumed Contracts are not in
default thereunder. Except for those Assumed Contracts described on Exhibit B
whose terms require the prior Consent of the other party thereto for an
assignment to Buyer, the consummation of the transactions described in this
Agreement will not cause a default under any Assumed Contract. Except as set
forth on Schedule 6.2, there are no existing disputes between Operator, on the
one hand, and any other party to any Assumed Contract, on the other hand.
6.3 Current Compensation of Employees.
(a) Set forth on Schedule 6.3 is a complete list (the "List") of
Operator's employees on the date of such List who work at the Facility along
with the amount of the current wage rate for hourly employees and monthly
salaries for salaried employees and the total compensation paid or due for
services to each management employee for 1997, and a complete description of any
commitments to such management employees regarding compensation payable
thereafter. Except as set forth on Schedule 6.3, since the date of the List on
Schedule 6.3, there has been no change in the management employees who work at
the Facility. Except as set forth on Schedule 6.3, 6.3, (1) there has been no
change in the salaries or compensation paid to employees of Operator since the
date of the Acquisition Balance Sheet other than in the Ordinary Course of
Business of Operator with updated information being furnished prior to the
Closing, and (2) Operator has not, because of past practices with or previous
commitments to its employees, established any rights or expectations on the part
of such employees to receive additional compensation inconsistent with past
practices for any period after the date hereof.
(b) Except as set forth on Schedule 6.3, no employee of Operator is a
party to or subject to any Contract containing covenants by such employees not
to compete in any line of business with any Person or restricting the customers
from whom or the area in which the employee may solicit or conduct business.
6.4 Employee Benefits. Except for each group health plan (as defined in
Section 4980B(g)(2) of the IRC) ("Group Health Plan") maintained by Operator,
Operator does not maintain or contribute to any Employee Benefit Plan. To the
Knowledge of Operator, each Group Health Plan maintained by Operator 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
IRC (and the regulations thereunder). For purposes of this Section 6.2, 6.4, any
reference to Operator shall be deemed to refer also to any Person that is under
common control or affiliated with Operator within the meaning of Section
4001(a)(14) of ERISA and Section 414(b), (c), (m) and (o) of the IRC.
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6.5 Financial Statements. Set forth in Schedule 6.5 are the financial
statements of Operator related to the operation of the Facility for the years
ending December 31, 1996, 1995 and 1994, all of which have been audited by Jack
H. Sturgess, independent auditor of Operator. Such financial statements are
hereinafter referred to collectively as the "Year-end Financials." Also set
forth in Schedule 6.5 are the interim unaudited financial statements of Operator
relating to the operations of the Facility for the ten-month period ended
September 30, 1997 (the "Stub Period Financials"). The Year-end Financials and
the Stub Period Financials are hereinafter collectively referred to as the
"Financial Statements" and the balance sheet, dated September 30, 1997, that is
included in the Stub Period Financials is referred to as the "Acquisition
Balance Sheet." The Financial Statements have been prepared from the books and
records of Operator in conformity with GAAP, on a consistent basis and present
fairly, in all material respects, the financial position of Operator at the
respective dates of the balance sheets included therein and the results of
operations and changes in financial position of Operator for the respective
periods covered thereby, except for, in the case of Stub Period Financials, (1)
the absence of footnotes (that if presented would not differ materially from
those included in the Year-End Financial Statements), (2) normal recurring year-
end adjustments that will not result in a Material Adverse Effect on Operator's
financial condition and results of operations, and (3) any year-end adjustments
resulting from the preparation of Medicare cost reports.
6.6 Healthcare Legal Requirements. To Operator's and Shareholders'
Knowledge, Operator has complied, and is in compliance with, all Texas Nursing
Facility Legal Requirements and all Legal Requirements imposed by Medicare and
Medicaid, except where the failure to comply would not have a Material Adverse
Effect on Operator, the Facility or any of the Acquisition Assets.
6.7 Labor Matters. Except as disclosed on Schedule 6.7, Operator has not
been, nor is it currently a party to, nor is it negotiating, any collective
bargaining agreement. There has not been, there is not presently pending or
existing, and to the Knowledge of Operator, any Threatened, (a) strike,
slowdown, picketing, work stoppage, or employee grievance process, (b)
Proceeding against or affecting Operator's operation of the Facility relating to
(1) an alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission or any comparable Governmental Body, (2) organizational activities,
or other labor or employment dispute against or affecting Operator or the
Facility, or (c) application for certification of a collective bargaining agent.
To the Knowledge of Operator, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute.
6.8 Liabilities Not Disclosed On Balance Sheet. As of the date of the
Acquisition Balance Sheet, Operator, regarding its respective ownership and
operation of the Acquisition Assets, had no material Liabilities except as shown
on the Acquisition Balance Sheet. Except as shown on Schedule 6.8, since the
date of the Acquisition Balance Sheet, Operator has not incurred or become
subject to any Liabilities related to the Facility, other than Liabilities
incurred in the Ordinary Course of Business of the Facility consistent with past
practices, all of which have been paid in full in the Ordinary Course of
Business or are reflected on Operator's regular books of account on the date
hereof and will be reflected on such books on the Closing Date and none of
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which (a) is materially inconsistent with the representations, warranties and
covenants of Operator contained in this Agreement, or (b) has or may be expected
to have a Material Adverse Effect.
6.9 Medicare, Medicaid and Other Third Party Payors. Except as disclosed
in any Texas DHS surveys for 1997, copies of which have been made available to
Buyer, Operator has complied with all Medicare and Medicaid Legal Requirements
and has filed all returns, cost reports and other filings in any manner
prescribed thereby, except where the failure to so comply would not result in a
Material Adverse Effect on Operator. All returns, cost reports and other filings
made by Operator since January 1, 1996 to Medicare, Medicaid or any other health
or welfare related Governmental Body or third party payor are true and complete
except where inaccuracy, together with all other such inaccuracies, would not
result in a Material Adverse Effect on Operator. Except as set forth on Schedule
6.9, since January 1, 1996, no deficiency in any such returns, cost reports and
other filings, including deficiencies for late filings, has been asserted or to
Operators' Knowledge Threatened by any Governmental Body or other provider
reimbursement Entities relating to Medicare or Medicaid or third party payor
claims. To Operators' Knowledge, there is no basis for any successful claims or
requests for reimbursement from any such Governmental Body or third party payor
except for any deficiencies, together with all other such deficiencies, which
would be not result in a Material Adverse Effect on Operator. Since January 1,
1996, Operator has not been subject to any audit or investigation relating to
fraudulent Medicare or Medicaid procedure or practices except audits or
investigations which, together with all other such audits, would not result in a
Material Adverse Effect.
6.10 Permits. To Operator's Knowledge, Schedule 6.10 sets forth all of the
Permits Operator has obtained from, and the Permits constitute all Governmental
Authorizations required by, all Governmental Bodies that have any oversight or
regulatory responsibility over Operator's operations of the Facility as a
skilled nursing facility, except where the failure to obtain would not have a
Material Adverse Effect on the Facility. Operator has furnished Buyer a complete
copy of each of the Permits. All of the Permits are in full force and effect,
and to Operator's Knowledge, no suspension or cancellation of any of them is
Threatened.
6.11 Proprietary Property. Except for the software and other proprietary
assets used by Operator to perform accounting functions, Schedule 6.11 sets
forth all Proprietary Property used by Operator in connection with its
operations of the Facility. To Operator's Knowledge, Operator owns, or has
obtained proper licenses for the use of, all Proprietary Property used by it.
Operator has not received notice of any claim that it is violating or infringing
any Proprietary Property of any third party.
7. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to each Seller and Shareholder as follows:
7.1 Corporate Status. Buyer is a corporation duly incorporated and existing
under the laws of the State of Delaware. Buyer 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
such businesses have and are now being conducted.
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7.2 Authority; Consents; Enforcement: Noncontravention; Noncompetes.
(a) Authority. Buyer has the corporate power and authority to execute,
deliver and perform this Agreement, and all other agreements, certificates or
documents described in this Agreement ("Buyer Ancillary Documents"), and has
taken all actions required to authorize, execute, deliver and perform this
Agreement and the Buyer Ancillary Documents, including approval by the Board of
Directors of Buyer.
(b) Consents. No Consent or registration, declaration or filing with
any Governmental Body is required for Buyer to execute this Agreement and
perform the transactions described in this Agreement by Buyer.
(c) Enforcement. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.
(d) Noncontravention. The execution and delivery of this Agreement and
the Buyer Ancillary Documents by Buyer do not violate any provision of the
Organizational Documents of Buyer and will not result in a breach or violation
or default under any Order of any Governmental Body to which Buyer is subject or
result in a breach by Buyer under any Contract to which it is bound. Neither the
execution and the delivery of this Agreement, nor the compliance with, and
fulfillment of, the terms, conditions and provisions hereof or thereof, will (a)
violate any Legal Requirement applicable to Buyer; or (b) require the Consent or
the making by Buyer of any declaration, filing or registration with, any
Governmental Body or other Person.
7.3 No Agent or Broker. Except for DevCon, no agent or broker or other
person acting pursuant to authority given by Buyer is entitled to any commission
or finder's fee, or other compensation, in connection with the transactions
described in this Agreement.
8. Additional Covenants of the Parties.
8.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, each Seller shall: (a) afford Buyer and its Representatives full
and free access to such Seller's personnel, properties (including access for
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Buyer and Buyer's Representatives with copies of all such Contracts,
books and records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Representatives with such additional
information as Buyer may reasonably request.
8.2 Operation of the Facility. Between the date of this Agreement and the
Closing Date, Operator shall:
(a) conduct the Facility only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the Facility, keep
available the services of the current employees and agents of the Facility, and
maintain the relations and good
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will with suppliers, residents, landlords, creditors, employees, agents, and
others having business relationships with the Facility and Operator;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the condition
and operation of the Acquisition Assets, and the operation and financial
position and results of the Facility.
8.3 Required Consent. As promptly as practicable after the date of this
Agreement, each Seller shall make any filings required to be made by it under
Legal Requirements in order to consummate the transactions described in this
Agreement. Between the date of this Agreement and the Closing Date, each Seller
shall, (a) cooperate with Buyer on all filings that Buyer elects to make or is
required by Legal Requirements to make in connection with the transactions
described in this Agreement, and (b) cooperate with Buyer in obtaining all
Consents required by Buyer to consummate the transaction described in this
Agreement.
8.4 Notification. Between the date of this Agreement and the Closing Date,
each Seller shall promptly notify Buyer if such Seller becomes aware of any fact
or condition that causes or constitutes a Breach of any of the representations
and warranties of it in this Agreement, or if such Seller becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly described in this Agreement) cause or constitute a Breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition. During
the same period, each Seller shall promptly notify Buyer of the occurrence of
any Breach of any covenant of such Seller in this Agreement or of the occurrence
of any event that may make the satisfaction of the conditions in Section 9
impossible or unlikely.
8.5 No Negotiation.
(a) Until such time, if any, as this Agreement is terminated pursuant
to Section 11, neither Seller shall:
(1) negotiate, discuss or otherwise communicate with any other
potential purchaser or lessee of the Facility;
(2) solicit or encourage submission of any proposal or offer to
acquire or lease all or any portion of the Facility;
(3) participate in any discussion or negotiation regarding any
proposal or offer to sell or lease all or any portion of the Facility;
(4) furnish to any Person other than Buyer and its
Representatives any information regarding the Facility, except as required
by any Legal Requirement or in any Proceeding; or
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(5) cooperate in any way with, or assist or participate in any
proposal or offer from any Person other than Buyer or its Representatives
to acquire or lease all or any portion of the Facility.
(b) If, prior to the termination of this Agreement, either Seller
receives any unsolicited offer or proposal from any Person other than Buyer to
acquire or lease all or any portion of the Facility, such Seller shall promptly
notify Buyer of such offer or proposal and provide Buyer with copies of any
written materials received by such Seller that relate to such offer or proposal.
8.6 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer shall make all filings required by Legal
Requirements to be made by it to consummate the transactions described in this
Agreement. Between the date of this Agreement and the Closing Date, Buyer shall
cooperate with Sellers on all filings that either Seller is required by Legal
Requirements to make in connection with the transactions contemplated herein,
and (ii) cooperate with Sellers in obtaining all Consents required by either
Seller to consummate the transactions described in this Agreement.
8.7 Patients' Accounts. Sellers shall calculate all patient charges through
the Effective Time and bill all of the Facility's patients. Each Seller agrees
that if it receives any payment for services performed or provided by or at the
Facility that pertains to services performed or provided after the Effective
Time, it shall remit such payment to Buyer within seven days of receipt.
Similarly, Buyer agrees that if it receives any payment for services performed
or provided by either Seller that pertains to services performed or provided
before the Effective Time, it shall remit to Sellers such payment within seven
days of receipt.
8.8 Retroactive Settlements. If any third-party payor, Medicare or Medicaid
reduces any amount payable to Buyer in connection with the retroactive
settlement which reduction results from services provided by Operator at the
Facility prior to the Effective Time, Operator and each Shareholder agrees to
reimburse Buyer, within 15 days of delivery of notice to Operator from Buyer,
the amount of such reduction that results from the services provided by Operator
prior to the Effective Time (a "Retroactive Obligation"). Similarly, if any
third-party payor, Medicare or Medicaid increases any amount payable to Buyer in
connection with a retroactive settlement, which increase relates to services
provided by Operator at the Facility prior to the Effective Time, Buyer agrees
to remit to Operator, within ten days of receipt of such payment, the amount of
such increase that results from the services provided by Operator prior to the
Effective Time (a "Retroactive Payment"). Buyer agrees to promptly notify
Operator and Shareholders of any Retroactive Obligation in order that Operator
may appeal, and Buyer further agrees to cooperate with Operator in any such
appeal.
8.9 Patients' Personal Funds Accounts. At the Effective Time, Sellers shall
transfer, and Buyer shall assume, any control either Seller may have over the
custodial accounts commonly known as the patients' personal funds accounts that
are owned by the Facility's patients, to the extent that such control may be
transferable without the patient's prior consent. Buyer has not made any
investigation as to whether such accounts have been accurately
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maintained and properly administered and Buyer shall assume no liability or
responsibility for any accounting or deficiencies in such accounts existing at
or arising before the Effective Time.
8.10 Preservation of Records; Access By Sellers.
(a) After the Effective Time, Buyer shall keep and preserve all
medical records and other records for Straddle Patients of the Facility that it
obtained from Sellers that are required to be kept and preserved by any Legal
Requirement for the period of time required thereby. Sellers shall keep and
preserve all medical records and other records for all Persons who were patients
of the Facility prior to the Effective Time and who are not Straddle Patients
that are required to be kept and preserved by any Legal Requirement for the
period of time required thereby.
(b) After the Effective Time, upon reasonable notice to Buyer by
Sellers or any of their affiliates, Sellers and their agents shall be entitled,
during regular business hours, to have access to and make copies of all records
pertaining to the operation of the Facility prior to the Effective Time for any
lawful purpose. Any medical records or patient charts shall only be removed from
the Facility for purposes of pending litigation involving a patient to whom such
record or chart refers and in response to a subpoena or court order or for
purposes of introduction into evidence. Any records or charts so removed from
the Facility shall be promptly returned to Buyer following their use by Sellers
or any affiliate thereof.
8.11 Transition of the Facility. Each Seller covenants with Buyer to
cooperate with Buyer to effect the smooth transition of the control and
operation of the Facility from Sellers to Buyer. Each Seller shall cooperate
with Buyer in providing all information required hereunder and access thereto
and whatever is required to carry out the purposes and intent of the
transactions contemplated by this Agreement.
8.12 Compliance with Legal Requirements. Operator shall correct or repair
prior to the Closing Date, at its expense, any deficiencies in the Facility
identified in any survey conducted by any Governmental Body, including state
licensure or Medicare survey or similar report received by Operator prior to the
Closing Date. In addition, Operator and Shareholders shall reimburse all
expenses incurred by Buyer in correcting or repairing, or shall correct or
repair at Operator's and Shareholders' expense, any material deficiencies in the
Acquisition Assets noted by any survey conducted by any Governmental Body,
including the Texas DHS survey, fire marshal report or other similar state or
federal licensure survey received by Buyer within the first eight weeks
following the Closing Date.
8.13 Operator's Employees and Employee Benefits.
(a) Prior to the Closing Date, Operator shall promptly notify all
employees employed at the Facility that Operator will terminate their employment
at the Effective Time. Operator shall retain any and all Liability for, and
shall pay pursuant to Operator's policies, any termination pay, severance pay,
sick pay or vacation pay, any unemployment benefits, and any other benefits to
which Operator's past or current employees, their spouses and dependent
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children may be entitled by virtue of their employment or termination of their
employment with Operator.
(b) Following the Closing Date, Operator shall maintain Group Health
Plans comparable to its current Group Health Plan for at least as long as
Operator's past or current employees, their spouses and dependent children are
eligible for continuation health coverage under COBRA. If Operator terminates
one or more Group Health Plans which cover past or current employees who are not
hired by Buyer, their spouses and dependent children, Operator's remaining Group
Health Plan or Plans shall be considered the successor plan or plans under COBRA
for such individuals. Buyer will waive the enrollment period and pre-existing
condition requirements of its current Group Health Plan for those employees of
Operator that Buyer hires upon consummation of the transactions described in
this Agreement so that the termination of the employment of such employees by
Operator and the hiring of such employees by Buyer will not trigger any COBRA
benefits for these employees.
(c) Buyer shall have no obligation to employ any employees of Operator
subsequent to the Closing. To the extent any of such employees are employed by
Buyer following the Closing, such employment shall be on terms and conditions
determined by Buyer and Buyer shall have no obligation to offer such employee
the same or similar wages, salaries or benefits as are paid or provided by
Operator prior to the Closing.
8.14 Survey. Promptly following the execution and delivery of this
Agreement, Owner will obtain an ALTA survey of the Real Property ("Survey")
satisfying all of the requirements set forth as Exhibit D.
8.15 Title Insurance.
(a) Promptly following the execution and delivery of this Agreement,
Owner shall deliver to Buyer a commitment (the "Title Commitment") to issue the
Title Policy from Title Company and all underlying documents related to the
exceptions described or listed in the Title Commitment (the "Title Commitment
Documents"). Within 10 days of the later of (1) the date Buyer receives a copy
of the Survey or (2) the date Buyer receives a copy of the Title Commitment and
all the Title Commitment Documents, Buyer shall notify Owner of all matters on
the Title Commitment to which Buyer objects. If Buyer fails to object to any
such exception within the 10-day period, Buyer shall be deemed to have accepted
such exceptions.
(b) Owner shall take all steps necessary to satisfy all the
requirements set forth in the Title Commitment prior to the Closing Date. Buyer
hereby objects to, and Owner shall use its Best Efforts to remove, correct or
delete prior to or at the Closing (1) all standard exceptions set forth in the
Title Commitment that are capable of being satisfied or removed, (2) any gap,
overlap, boundary dispute, hiatus or encroachment referred to in the Title
Commitment or identified on the Survey which affects the Real Property or any
adjacent properties, (3) any mortgages and other monetary liens and Encumbrances
affecting the Real Property, and (d) any matter to which Buyer has objected
under this Section.
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8.16 Filing of Taxes; Payment. Each Seller shall, for all periods through
the Closing Date:
(a) prepare and timely file (including extensions) all Tax Returns
that it is required to file under all applicable laws;
(b) timely pay all Taxes it is required to pay;
(c) withhold and timely pay over to the applicable authorities all
Taxes that it is required to withhold and pay over; and
(d) timely pay all Taxes on any sales and the income and gain, if any,
that it realizes on the transactions contemplated by this Agreement, including
the sale of the Acquisition Assets.
8.17 Sales and Other State Taxes. Each Seller shall notify the taxing
authorities which require notice prior to the completion of the transactions
described in this Agreement and on the date hereof filed the required notices
with the other taxing authorities.
8.18 Non-Competition Agreements. At the Closing, each Seller and each
Shareholder shall execute and deliver to Buyer a non-competition agreement
substantially in the form of Exhibit G attached to this Agreement (the "Non-
Competition Agreement").
8.19 Management Agreement. At the Closing, Buyer and Briarcliff Management
Co., Inc. ("Manager") shall execute and deliver a management agreement
substantially in the form of Exhibit H attached to this Agreement (the
"Management Agreement").
8.20 Further Assurances. Each of the parties agrees that it will, at any
time, and from time to time, after the date hereof, upon the request and at the
expense of the appropriate party, do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, and such further acts, assignments,
transfers, conveyances, and assurances as may be required to complete the
transactions contemplated herein. After the date hereof, at the expense of
Buyer, each Seller shall use its Best Efforts to cause any necessary third party
to, execute such documents and do such acts and things as Buyer may reasonably
require for the purpose of giving to Buyer the full benefit of all the
provisions of this Agreement and as may be reasonably required to complete the
transactions contemplated herein.
9. Conditions Precedent to Buyer's Obligation to Close. Buyer's obligation
to consummate the transactions contemplated herein, and to take the actions
required to be taken by Buyer, at the Closing, is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Buyer, in whole or in part):
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9.1 Accuracy of Representations. Each representation and warranty of each
Seller and Shareholder in this Agreement must be accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
9.2 Sellers' Performance. All of the covenants and obligations that each
Seller is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been duly performed and complied with in all
material respects.
9.3 No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person Affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions described in this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the transactions described in this
Agreement.
9.4 Consents. Each of the Consents identified on Schedule 7.2 must have
been obtained and must be in full force and effect and Buyer has obtained all
Governmental Authorizations necessary or required for it to assume operation of
the Facility other than the authorization from the Texas DHS.
9.5 Texas DHS Authorization. Buyer has received written confirmation from
the Texas DHS that Buyer is qualified to operate the Facility and that the Texas
DHS is prepared to issue Buyer a license subject to the successful completion of
Texas DHS's survey of the Facility and Buyer's operation of the Facility.
9.6 Other Documents. Buyer must have received such other documents as it
may reasonably request for the purpose of (a) evidencing the accuracy of any of
the representations and warranties of each Seller and Shareholder, (b)
evidencing the performance by each Seller of, or the compliance by each Seller
with, any covenant or obligation required to be performed or complied with by
it, (c) evidencing the satisfaction of any condition referred to in this Section
9, or (d) otherwise facilitating the consummation or performance of any of the
transactions contemplated herein.
9.7 Title Policy. Title Company shall irrevocably commit to issue an ALTA
Owner's Policy of Title Insurance on Form B-1992, insuring fee simple title to
the Real Property in the amount of the Purchase Price (the "Title Policy"),
subject to only (a) the Encumbrances for real estate Taxes and statutory liens
for Taxes not yet due and payable, and (b) those other Encumbrances to which
Buyer has not objected in accordance with Section 8.15 (the "Permitted
Encumbrances"), and with such endorsements that Buyer has requested.
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9.8 No Prohibition. Neither the consummation nor the performance of any of
the transactions contemplated herein will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person Affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
10. Conditions Precedent to Sellers' Obligation to Close. Each Seller's
obligation to consummate the transactions contemplated herein and to take the
other actions required to be taken by such Seller at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be jointly waived by Sellers, in whole or in part):
10.1 Accuracy of Representations. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
10.2 Buyer's Performance. All of the covenants and obligations that Buyer
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all material
respects.
10.3 No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the Acquisition Assets
by Sellers to Buyer.
10.4 Consents. Each of the Consents identified on Schedule 4.1 must have
been obtained and must be in full force and effect.
10.5 Definitive Agreements for Purchase and Sale of Other Facilities.
(a) Buyer and Larry S. Parker shall have entered into a definitive
agreement for the purchase by Buyer of the facility having approximately 62
units licensed as a Class A Personal Care Facility under Texas law and
approximately 100 apartments designed for elderly residents, known as the
Briarcliff Village Retirement Center and Personal Care Center and located at
3500 South Vine Street, Tyler, Texas 75701, and all conditions precedent to
Buyer's and Parker's obligations to close the transaction described in that
agreement, have been satisfied or waived and the parties have closed such
transaction contemporaneously with the Closing of the transactions described in
this Agreement.
(b) Buyer, Nursing Care Four, a Texas general partnership ("Nursing
Care"), and Chandler Nursing Center, Inc., a Texas corporation ("Nursing
Center") shall have entered into a definitive agreement for the purchase by
Buyer of the skilled nursing facility known as the Chandler Nursing Center
located at 300 Cherry Street, Chandler, Texas 75757, and all conditions
precedent to Buyer's, Nursing Care's and Nursing Center's obligations to close
the transaction described in that agreement, have been satisfied or waived and
the parties have closed
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such transaction contemporaneously with the Closing of the transactions
described in this Agreement.
(c) Buyer, Briarcliff Health Center of Texas, a Texas general
partnership, and Briarcliff Health Center, Inc. d/b/a Village on Copeland, a
Texas corporation, shall have entered into a definitive agreement for the
purchase by, and Buyer and Owner shall have entered into a definitive agreement
for the lease by, Buyer of the facility licensed as a Class B Personal Care
Facility under Texas law, known as the Village on Copeland and located at 5317
New Copeland Road, Tyler, Texas 75703 ("Copeland").
10.6 Other Documents. Sellers must have received such other documents as
Sellers may reasonably request for the purpose of (a) evidencing the accuracy of
any representation or warranty of Buyer, (b) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (c) evidencing the satisfaction of any
condition referred to in this Section 10, or (d) otherwise facilitating the
consummation of any of the transactions contemplated herein.
11. Termination.
11.1 Termination Events. By notice given to Title Agent and the other
parties to this Agreement, this Agreement may be terminated:
(a) by Buyer if any of the conditions in Section 9 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Termination Date;
(b) by Sellers, if any of the conditions in Section 10 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of either
Seller to comply with its obligations under this Agreement) and Sellers have not
waived such condition on or before the Termination Date;
(c) by either Buyer or Sellers if a Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(d) by mutual consent of Buyer and Sellers; or
(e) by either Buyer or Sellers 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 the
Termination Date, or such later date as the parties may agree upon.
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11.2 Effect of Termination.
(a) If Buyer terminates this Agreement pursuant to Section 11.1(a) or
Section 11.1(c) or if the parties terminate this Agreement pursuant to Section
11.1(d) or Section 11.1(e), Title Agent shall return to Buyer the Deposit and
all interest earned thereon.
(b) If Sellers terminate this Agreement pursuant to Section 11.1(b) or
Section 11.1(c), Title Agent shall deliver the Deposit and all interest earned
thereon to Sellers only if all of the conditions in Section 9 have been
satisfied and neither Seller is in Breach of this Agreement. Otherwise, Title
Agent shall remit the Deposit and all interest earned thereon to Buyer.
(c) The remedies set forth in Section 11.2(b) are the exclusive
remedies of Sellers for their termination of this Agreement. Buyer's right of
termination under Section 11.1 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.
(d) If this Agreement is terminated pursuant to Section 11.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 14.5 will survive; provided, however, that if
this Agreement is terminated by Buyer because of the Breach of the Agreement by
either Seller or because one or more of the conditions to Buyer's obligations
under this Agreement is not satisfied as a result of either Seller's failure to
comply with its obligations under this Agreement, Buyer's right to pursue all
legal remedies will survive such termination unimpaired.
12. Deliveries and Actions To Be Taken At Closing.
12.1 Deliveries by Sellers. At or prior to the Closing, Sellers shall
deliver to Title Agent (duly executed where appropriate) to be held by it in
Escrow and to be disbursed in accordance with the provisions of Section 3.2:
(a) A Bill of Sale for the Acquisition Assets in the form of Exhibit E
attached hereto;
(b) An assignment and assumption agreement in the form of Exhibit F
attached hereto executed in counterpart by each Seller (the "Assignment and
Assumption Agreement");
(c) The Non-Competition Agreements executed in counterpart by each
Seller and each Shareholder;
(d) The Management Agreement executed in counterpart by Manager;
(e) General Warranty Deed acceptable to the Title Agent conveying to
Buyer the Real Property (the "Deed");
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(f) Registration, title and motor vehicle transfer forms for, and
other documentation required to transfer to Buyer and enable Buyer to properly
license, each motor vehicle which is part of the Acquisition Assets;
(g) Confirmation that all of the Encumbrances other than the Permitted
Encumbrances have been removed as an Encumbrance against the Acquisition Assets;
(h) A certificate signed by each Seller certifying the fulfillment of
the conditions set forth in Section 9.1 through 9.3; and
(i) Consents of the other parties to the Assumed Contracts for those
Assumed Contracts where such consent is required for the assumption of such
Assumed Contracts.
12.2 Deliveries by Buyer. At or prior to the Closing, Buyer shall deliver
to Title Agent (duly executed where appropriate) to be held by it in Escrow and
to be disbursed in accordance with the provisions of Section 3.2:
(a) Immediately available funds in the amount by which the Purchase
Price (adjusted to reflect appropriate credits and debits required by Section
2.2) exceeds the sum of the Deposit plus the accrued interest thereon;
(b) Certified copies of the Resolutions of the Board of Directors of
Buyer approving the transactions described in this Agreement;
(c) The Assignment and Assumption Agreement executed in counterpart by
Buyer;
(d) The Non-Competition Agreements executed in counterpart by Buyer;
(e) The Management Agreement executed in counterpart by Buyer;
(f) Certificates of good standing from the Secretaries of State of
Delaware and Texas;
(g) A certificate signed by an executive officer of Buyer certifying
fulfillment of the conditions set forth in Section 10.1 through 10.3; and
(h) Such other documents as may be reasonably necessary to effect the
Closing.
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13. Indemnification; Remedies.
13.1 Survival; Right to Indemnification. All representations, warranties,
covenants and obligations in this Agreement, and any other certificate or
document delivered pursuant to this Agreement, shall survive the Closing. If a
party waives any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, such party's right to indemnification, payment of Damages or other
remedy based on a Breach of such representations, warranties, covenants and
obligations is waived only to the extent of the party's Knowledge of facts and
circumstances at the time the Breach is waived.
13.2 Indemnification and Payment of Damages By Owner. Owner shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Owner in this
Agreement;
(b) any Breach by Owner of any covenant, agreement or obligation of
Owner in this Agreement; and
(c) any Liability of Owner, and all claims, demands and Proceedings
made or brought against Buyer by reason of Owner's ownership, use, operation or
condition of the Acquisition Assets prior to the Closing Date or any of the
transactions described in this Agreement, but excluding the Assumed Liabilities.
13.3 Indemnification and Payment of Damages By Operator. Operator shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Operator in
this Agreement;
(b) any Breach by Operator of any covenant, agreement or obligation of
Operator in this Agreement; and
(c) any Liability of Operator, and all claims, demands and Proceedings
made or brought against Buyer by reason of Operator's ownership, use, operation
or condition of the Acquisition Assets prior to the Closing Date or any of the
transactions described in this Agreement, but excluding the Assumed Liabilities.
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13.4 Indemnification and Payment of Damages by Shareholders.
(a) Shareholders shall indemnify and hold Buyer's Indemnitees harmless
from, and shall pay to Buyer's Indemnitees the amount of, all Damages, arising,
directly or indirectly, from or in connection with:
(1) any Breach of any representation or warranty contained in
Section 4.9 or Section 6.9 of this Agreement;
(2) any Breach by Operator or Shareholders, or both, of any of
their covenants in this Agreement; or
(3) any Retroactive Obligation, as defined in Section 8.8,
incurred by Buyer.
(b) If Shareholders pay a claim to Buyer's Indemnitees pursuant to
this Agreement, then Shareholders shall be subrogated to all rights of Buyer's
Indemnitees against others for recovery of Damages, except affiliates,
employees, officers, directors, successors or assigns of Buyer's Indemnitees.
13.5 Indemnification By Buyer. Buyer shall indemnify and hold Sellers,
their Affiliates, and their respective successors and assigns (collectively,
"Sellers' Indemnitees") harmless from, and will pay to Sellers' Indemnitees the
amount of, all Damages arising directly or indirectly from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement;
(b) any Breach by Buyer of any covenant, agreement or obligation of
Buyer in this Agreement; and
(c) any claim, demand or Proceeding made or brought against Sellers
resulting from Buyer's operation of the Acquisition Assets after the Closing
Date.
13.6 Indemnity Claims.
(a) Notification of Claims. If any claim ("Claim") is asserted by a
party as to which such party may be entitled to indemnification hereunder, such
party (an "Indemnitee") shall notify ("Claims Notice") the party required by the
terms of this Agreement to indemnify the Indemnitee (an "Indemnifying Party")
within 10 days after (1) receipt of notice of commencement of any third-party
litigation against such Indemnitee, (2) receipt by such Indemnitee of notice of
any Claim by a third party ("Third Party Claim") pursuant to an invoice, notice
of claim or assessment, against such Indemnitee, or (3) such Indemnitee becomes
aware of the existence of any other event for which indemnification may be
sought from the Indemnifying Party. The Claims Notice shall describe the Claim
and the specific facts and circumstances in reasonable detail, shall include
copies of the notices referred to in (1) and (2), above, shall indicate the
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amount, if known, or an estimate, if possible, of Damages that have been or may
be incurred or suffered.
(b) Defense of Third Party Claim by Indemnifying Party. The
Indemnifying Party may elect to defend or compromise any Third Party Claim, at
its own expense and by its own counsel, who shall be reasonably acceptable to
the Indemnitee. The Indemnitee may participate, at its own expense, in the
defense of any Third Party Claim assumed by the Indemnifying Party. Without the
approval of the Indemnitee, which approval shall not be unreasonably withheld or
delayed, the Indemnifying Party shall not compromise a Third Party Claim
defended by the Indemnifying Party which would require the Indemnitee to perform
or take any action or to refrain from performing or taking any action. If the
Indemnifying Party does not acknowledge its obligation to indemnify the
Indemnitee for a Third Party Claim, the Indemnitee shall have the right to
oversee the defense, compromise or settlement of such Claim and to consult with
its own counsel regarding the actions taken by the Indemnifying Party, all at
the expense of the Indemnifying Party.
(c) Assumption of Defense by Indemnitee. Notwithstanding anything in
this Section 13.6 to the contrary, if an Indemnitee determines in good faith
that there is a reasonable probability that a Proceeding may adversely affect
the Indemnitee or the Indemnitee's Affiliates other than as a result of monetary
Damages for which it would be entitled to indemnification under this Agreement,
the Indemnitee may, by notice to the Indemnifying Party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the Indemnifying
Party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its Consent (which may not be
unreasonably withheld or delayed).
(d) Defense of Claim by Indemnitee. If, within 20 days of the
Indemnifying Party's receipt of a Claim Notice involving a Third Party Claim,
the Indemnifying Party shall not have notified the Indemnitee of its election to
assume the defense, the Indemnitee shall have the right to assume control of the
defense or compromise of such Claim, and the costs and expenses of such defense,
including costs of investigation and reasonable attorneys' fees, shall be added
to the Claim. The Indemnitee shall have the right to compromise such Claim
without the Consent of the Indemnifying Party.
(e) Cooperation of Parties. The party assuming the defense of any
Claim shall keep the other party reasonably informed at all times of the
progress and development of the party's defense of and compromise efforts
related to such Claim and shall furnish the other party with copies of all
relevant pleading, correspondence and other papers. In addition, the parties
shall cooperate with each other, and make available to each other and their
representatives all available relevant records or other materials required by
them for their use in defending, compromising or contesting any Claim. The
failure to notify the Indemnifying Party timely of the commencement of such
actions in accordance with Section 13.6(a) shall relieve the Indemnifying Party
from the obligation to indemnify under Sections 13.2, 13.3, 13.4 and 13.5, as
the case may be, but only to the extent the Indemnifying Party establishes by
competent evidence that it or he is or has been materially and adversely
prejudiced by such untimely Claims Notice.
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<PAGE>
13.7 Remedies; Right of Set-Off. The remedies provided in this Section 13
shall not be deemed exclusive of or limit any other remedies that may be
available to an Indemnitee. If a Buyer's Indemnitee is entitled to
indemnification as provided in Sections 13.2, 13.3, and 13.4, Buyer shall have
the right to set-off the entire amount thereof against the amounts, if any, that
Buyer may owe Sellers, provided, it shall be a condition to the exercise of the
right of set-off that Buyer gives Sellers notice specifying in reasonable detail
the basis for such set-off. Neither the exercise of, nor the failure to
exercise, such right of set-off will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it.
14. Miscellaneous Provisions.
14.1 Amendment; Waiver. This Agreement may be amended, modified or
superseded only by a written instrument signed by all of the parties to this
Agreement. No party shall be deemed to have waived compliance by another party
of any provision of this Agreement unless such waiver is contained in a written
instrument signed by the waiving party and no waiver that may be given by a
party will be applicable except in the specific instance for which it is given.
The failure of any party to enforce at any time any of the provisions of this
Agreement or to exercise any right or option contained in this Agreement or to
require at any time performance of any of the provisions of this Agreement, by
any of the other parties shall not be construed to be a waiver of such
provisions and shall not affect the validity of this Agreement or any of its
provisions or the right of such party thereafter to enforce each provision of
this Agreement. No course of dealing shall operate as a waiver or modification
of any provision of this Agreement or otherwise prejudice such party's rights,
powers and remedies.
14.2 Assignment; Binding Effect. Sellers shall have the right to assign
their rights under this Agreement with respect to the Acquisition Assets to a
qualified intermediary in order to consummate a tax-free exchange under section
1031 of the Code. Buyer agrees that it will fully cooperate with Sellers to
effect such an exchange as long as Buyer is not required to take title to any
other property and incurs no additional expense. Sellers may not otherwise
assign their rights hereunder without the Consent of Buyer. Buyer may assign any
of its rights and obligations under this Agreement without the prior Consent of
Sellers to any Affiliate of Buyer if Buyer remains responsible for its
obligations under this Agreement under the terms of such assignment. Buyer may
not otherwise assign its rights hereunder without the written consent of
Sellers. Subject to the foregoing, all the provisions of this Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the parties
to this Agreement and their respective heirs, legal representatives, successors
and assigns.
14.3 Construction and Interpretation of Agreement.
(a) Section titles or 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 of its provisions. All references in this
Agreement to Sections shall refer to Sections of this Agreement unless the
context clearly otherwise requires.
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<PAGE>
(b) When used in this Agreement, the word "including" shall have its
normal common meaning and any list of items that may follow such word shall not
be deemed to represent a complete list of the contents of the referent of the
subject.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. If any ambiguity or question of intent or
interpretation arises, no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
(d) Unless the context otherwise requires, when used in this
Agreement, 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.
(e) The parties do not intend that this Agreement shall confer on any
third party any right, remedy or benefit or that any third party shall have any
right to enforce any provision of this Agreement.
14.4 Severability of Provisions. If a court in any proceeding holds any
provision of this Agreement or its application to any person or circumstance
invalid, illegal 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, illegal or unenforceable, shall not be
affected, and shall be valid, legal 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 in this Agreement. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties intend that the court add to this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be valid and enforceable, so as to effect the original intent
of the parties to the greatest extent possible.
14.5 Confidentiality of Certain Information.
(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 "Confidential Information")
which any of them may receive from any other party concerning such other party.
Failure to mark any of the Confidential Information as non-public, proprietary
or confidential shall not affect its status as Confidential Information under
the terms of this Agreement. Confidential Information shall not include any
information in the possession of the receiving party (a) that is developed by
such party without reference to and independent of any Confidential Information,
(b) is learned from a third party not under any duty of confidence to the
disclosing party, or (c) becomes part of the public domain through no fault of
the receiving party.
(b) None of the parties nor their respective agents or employees shall,
without the prior consent of the disclosing party, disclose or use any such
Confidential Information, in whole or in part, except in connection with the
performance of the transactions described in this Agreement. Unless otherwise
required by law, none of the parties shall disclose
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<PAGE>
any Confidential 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, all of
whom must agree to keep the Confidential Information confidential. If the
Closing does not occur, each party will destroy or return to the disclosing
party all copies of documents that contain that party's Confidential
Information.
14.6 Confidentiality of Agreement. Unless otherwise required by law, no
party shall disclose either the terms or existence of this Agreement to any
person other than a party's counsel and its other representatives or such other
third parties with whom it must communicate to consummate the transactions
described in this Agreement.
14.7 Exhibits and Schedules. All Exhibits and Schedules to this Agreement,
if any, shall constitute part of this Agreement and shall be deemed to be
incorporated in this Agreement by reference and made a part of this Agreement as
if set out in full at the point where first mentioned. Nothing in the Schedules
shall be deemed adequate to disclose an exception to a representation or
warranty made in this Agreement unless the Schedule identifies the exception
with particularity and describes the relevant facts in detail. If any
inconsistency between the statements in the body of this Agreement and those in
the Schedules (other than an exception expressly set forth as such in the
Schedules to a specifically identified representation or warranty), the
statements in the body of this Agreement shall control. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made in this Agreement (unless the representation
or warranty has to do with the existence of the document or other item itself).
The parties intend that each representation, warranty, covenant and obligation
contained in this Agreement shall have independent significance. If any party
has breached any representation, warranty, covenant or obligation contained in
this Agreement in any respect, merely because there exists another
representation, warranty, covenant or obligation relating to the same subject
matter (regardless of the relative levels of specificity) which the party has
not breached shall not detract from or mitigate the party's breach of the first
representation, warranty, covenant or obligation.
14.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
14.9 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties related to its subject matter and supersedes all
prior proposals, understandings, agreements, correspondence, arrangements and
contemporaneous oral agreements relating to subject matter of this Agreement. No
representation, promise, inducement or statement of intention has been made by
any party which has not been embodied in this Agreement.
-31-
<PAGE>
14.10 Expenses. Sellers shall pay (a) all transfer taxes, intangible taxes
and similar Taxes and all sales, use transfer and similar Taxes, relating to the
transfer of the Acquisition Assets to Buyer, (b) the cost of the Survey, and (c)
the cost of their legal counsel. Buyer shall pay (a) the cost of its legal
counsel, (b) the cost of any environmental assessment of the Real Property (c)
the cost of DevCon's sales commission, (d) the cost of any recordation fees to
put the Deed of record with the appropriate Governmental Body, and (e) the cost
of premiums on the Title Policy. Except as otherwise expressly provided for in
this Agreement, each party will bear its or his own expenses incurred in
connection with the preparation, execution and performance of its obligations
under this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.
14.11 Further Assurances. Each party shall execute and deliver such
additional documents or take such additional actions as may be requested by
another party to this Agreement if such requested document or action is
reasonably necessary to effect the transactions described in this Agreement.
14.12 Governing Law. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Texas,
without giving effect to any conflict of law rule or principle of such state.
14.13 No Public Announcement. No party shall make any press release or
other public announcement regarding this Agreement or the transactions described
in this Agreement, unless such party is obligated by law or the rules of any
stock exchange upon which its shares are traded to make such a disclosure. When
a party determines that it is obligated by law or the rules of a stock exchange
to make such a disclosure, it shall notify all of the other parties prior to
such disclosure and all of the parties shall cooperate to cause a mutually
agreeable release or announcement to be issued.
14.14 Notices. All notices, requests, consents, approvals, waivers, demands
and other communications required or permitted to be given or made under this
Agreement shall be in writing and shall be deemed delivered to the parties (a)
on the date of personal delivery or transmission by facsimile transmission, (b)
on the first business day following the date of delivery to a nationally
recognized overnight courier service, or (d) or the third business day following
the date of deposit in the United States Mail, postage prepaid, by certified
mail, in each case, addressed as follows, or to such other address, person or
entity as any party may designate by notice to the others in accordance
herewith:
If to Buyer: Atria Communities, inc.
515 West Market Street, Suite 200
Louisville, KY 40202
Attn: J. Timothy Wesley, Chief Financial
Officer and Audra J. Eckerle, General
Counsel
Facsimile: (502) 596-4160
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<PAGE>
With Copy to: Carmin D. Grandinetti, Esq.
Greenebaum Doll & McDonald pllc
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202
Facsimile Number: (502) 540-2129
If to Sellers or Shareholders: Larry S. Parker
8215 Cambridge Road
Tyler, TX 75703
Facsimile Number: (903) 593-0484
With Copy to: James B. Gillen, Jr., Esq.
Conner, Gillen, Yarbrough & Anderson, P.C.
613 Shelley Park Plaza
Tyler, TX 75701
Facsimile Number: (903) 581-8790
14.15 Recovery of Expenses by Prevailing Party. The party prevailing in any
civil action, arbitration or other proceeding shall be entitled to recover from
the nonprevailing party, in addition to any damages the prevailing party may
have been awarded, all reasonable expenses that the prevailing party may have
incurred in connection with such proceeding, including accounting fees
attorneys' fees and expert witnesses' fees.
14.16 Cumulative Remedies; Specific Performance. No right or remedy
conferred upon or reserved to any of the parties under the terms of this
Agreement is intended to be, nor shall it be deemed, exclusive of any other
right or remedy provided in this Agreement or by law or equity, but each shall
be cumulative of every other right or remedy. The parties understand and
acknowledge that a party may be damaged irreparably by reason of a failure of
another party to perform any obligation under this Agreement. Accordingly, if
any party attempts to enforce the provisions of this Agreement by specific
performance (including preliminary or permanent injunctive relief), the party
against whom such action or proceeding is brought waives the claim or defense
that the other party has an adequate remedy at law.
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
Atria Communities, Inc.
By: /s/ J. Timothy Wesley
------------------------------------
Title: Chief Financial Officer
---------------------------------
("Buyer")
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<PAGE>
BRIARCLIFF VILLAGE HEALTH CENTER
By: /s/ Larry S. Parker
------------------------------------------
Title: General Partner
---------------------------------------
("Owner")
BRIARCLIFF VILLAGE HEALTH CENTER, INC.
By: /s/ Larry S. Parker
------------------------------------------
Title: President
---------------------------------------
("Operator")
/s/ Larry S. Parker
---------------------------------------------
LARRY S. PARKER
/s/ Randy Parker
---------------------------------------------
RANDY PARKER
/s/ Mary G. Tedford
---------------------------------------------
MARY G. TEDFORD
/s/ Laura R. Tedford
---------------------------------------------
LAURA R. TEDFORD
/s/ David Tedford
---------------------------------------------
DAVID TEDFORD
/s/ Don Steele
---------------------------------------------
DON STEELE
("Shareholders")
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<PAGE>
EXHIBIT 2.3
-----------------------------------------------
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
BY AND AMONG
ATRIA COMMUNITIES, INC.,
NURSING CARE FOUR,
CHANDLER NURSING CENTER, INC.,
AND
LARRY S. PARKER, RANDY PARKER, MARY G. TEDFORD,
LAURA R. TEDFORD, DAVID TEDFORD, AND DON STEELE
-----------------------------------------------
December 15, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Purchase and Sale of Assets............................................ 1
1.1 Acquisition Assets................................................ 1
1.2 Excluded Assets................................................... 2
1.3 Assumed Liabilities; No Assumption of Other Liabilities........... 3
2. Purchase Price; Deposit; Payment....................................... 3
2.1 Purchase Price; Deposit; Payment.................................. 3
2.2 Prorations........................................................ 3
2.3 Allocation of Purchase Price...................................... 4
3. Deposit; Escrow; Closing; Termination.................................. 4
3.1 Escrow............................................................ 4
3.2 The Closing....................................................... 4
3.3 Actions Taken by Title Agent on Closing Date and Thereafter....... 5
3.4 Termination of Escrow............................................. 5
4. Representations and Warranties of Sellers and Shareholders............. 5
4.1 Authority; No Conflict............................................ 5
4.2 Assets Necessary To Business...................................... 7
4.3 Books and Records................................................. 7
4.4 Brokers........................................................... 7
4.5 Completeness of Statements........................................ 7
4.6 Environmental Matters............................................. 7
4.7 Insurance......................................................... 8
4.8 Litigation........................................................ 9
4.9 Taxes............................................................. 9
4.10 Title to Properties; Condition and Repair......................... 10
4.11 Zoning............................................................ 10
5. Representations and Warranties of Owner................................ 10
5.1 Real Property..................................................... 10
5.2 Utilities......................................................... 11
6. Representations and Warranties of Operator and Shareholders............ 11
6.1 Absence of Certain Events......................................... 11
6.2 Contracts......................................................... 12
6.3 Current Compensation of Employees................................. 12
6.4 Employee Benefits................................................. 12
6.5 Financial Statements.............................................. 13
6.6 Healthcare Legal Requirements..................................... 13
6.7 Labor Matters..................................................... 13
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
6.8 Liabilities Not Disclosed On Balance Sheet....................... 13
6.9 Medicare, Medicaid and Other Third Party Payors.................. 14
6.10 Permits.......................................................... 14
6.11 Proprietary Property............................................. 14
7. Representations and Warranties of Buyer................................ 14
7.1 Corporate Status................................................. 15
7.2 Authority; Consents; Enforcement: Noncontravention; Noncompetes.. 15
7.3 No Agent or Broker............................................... 15
8. Additional Covenants of the Parties.................................... 15
8.1 Access and Investigation......................................... 15
8.2 Operation of the Facility........................................ 16
8.3 Required Consent................................................. 16
8.4 Notification..................................................... 16
8.5 No Negotiation................................................... 16
8.6 Approvals of Governmental Bodies................................. 17
8.7 Patients' Accounts............................................... 17
8.8 Retroactive Settlements.......................................... 17
8.9 Patients' Personal Funds Accounts................................ 18
8.10 Preservation of Records; Access By Sellers....................... 18
8.11 Transition of the Facility....................................... 18
8.12 Compliance with Legal Requirements............................... 18
8.13 Operator's Employees and Employee Benefits....................... 19
8.14 Survey........................................................... 19
8.15 Title Insurance.................................................. 19
8.16 Filing of Taxes; Payment......................................... 20
8.17 Sales and Other State Taxes...................................... 20
8.18 Non-Competition Agreements....................................... 20
8.19 Management Agreement............................................. 20
8.20 Further Assurances............................................... 20
9. Conditions Precedent to Buyer's Obligation to Close.................... 21
9.1 Accuracy of Representations...................................... 21
9.2 Sellers' Performance............................................. 21
9.3 No Proceedings................................................... 21
9.4 Consents......................................................... 21
9.5 Texas DHS Authorization.......................................... 21
9.6 Other Documents.................................................. 21
9.7 Title Policy..................................................... 22
9.8 No Prohibition................................................... 22
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
10. Conditions Precedent to Sellers' Obligation to Close.................. 22
10.1 Accuracy of Representations..................................... 22
10.2 Buyer's Performance............................................. 22
10.3 No Injunction................................................... 22
10.4 Consents........................................................ 22
10.5 Definitive Agreements for Purchase and Sale of Other Facilities. 22
10.6 Other Documents................................................. 23
11. Termination........................................................... 23
11.1 Termination Events.............................................. 23
11.2 Effect of Termination........................................... 24
12. Deliveries and Actions To Be Taken At Closing......................... 24
12.1 Deliveries by Sellers........................................... 24
12.2 Deliveries by Buyer............................................. 25
13. Indemnification; Remedies............................................. 26
13.1 Survival; Right to Indemnification.............................. 26
13.2 Indemnification and Payment of Damages By Owner................. 26
13.3 Indemnification and Payment of Damages By Operator.............. 26
13.4 Indemnification and Payment of Damages by Shareholders.......... 27
13.5 Indemnification By Buyer........................................ 27
13.6 Indemnity Claims................................................ 27
13.7 Remedies; Right of Set-Off...................................... 29
14. Miscellaneous Provisions.............................................. 29
14.1 Amendment; Waiver............................................... 29
14.2 Assignment; Binding Effect...................................... 29
14.3 Construction and Interpretation of Agreement.................... 30
14.4 Severability of Provisions...................................... 30
14.5 Confidentiality of Certain Information.......................... 30
14.6 Confidentiality of Agreement.................................... 31
14.7 Exhibits and Schedules.......................................... 31
14.8 Counterparts.................................................... 32
14.9 Entire Agreement................................................ 32
14.10 Expenses........................................................ 32
14.11 Further Assurances.............................................. 32
14.12 Governing Law................................................... 32
14.13 No Public Announcement.......................................... 32
14.14 Notices......................................................... 32
14.15 Recovery of Expenses by Prevailing Party........................ 33
14.16 Cumulative Remedies; Specific Performance....................... 33
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
</TABLE>
-iv-
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
Description Exhibit
<S> <C>
Certain Definitions....................................................... A
Assumed Contracts......................................................... B
Purchase Price Allocation................................................. C
Survey Requirements....................................................... D
Bill of Sale.............................................................. E
Assignment and Assumption Agreement....................................... F
Non-Competition Agreement................................................. G
Management Agreement...................................................... H
SCHEDULES
Description Schedule
Authority, No Conflict and Organization, Seller's Consents................ 4.1
Broker Fees............................................................... 4.4
Environmental Matters..................................................... 4.6
Insurance................................................................. 4.7
Litigation................................................................ 4.8
Taxes..................................................................... 4.9
Personal Property......................................................... 4.10
Real Property............................................................. 5.1
Absence of Certain Events................................................. 6.1
Contracts................................................................. 6.2
Employees and Compensation................................................ 6.3
Financial Statements...................................................... 6.5
Labor Matters............................................................. 6.7
Absence of Undisclosed Liabilities........................................ 6.8
Medicare, Medicaid and Other Third Party Payor Contracts.................. 6.9
Permits................................................................... 6.10
</TABLE>
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<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets is entered into and
effective as of December 15, 1997, by and among Atria Communities, Inc., a
Delaware corporation ("Buyer"), Nursing Care Four, a Texas general partnership
("Owner"), Chandler Nursing Center, Inc., a Texas corporation ("Operator"), and
Larry S. Parker, Randy Parker, Mary G. Tedford, Laura R. Tedford, David Tedford
and Don Steele (collectively, the "Shareholders"). (Owner and Operator are
hereinafter referred to collectively as "Sellers".)
Recitals:
A. Owner owns certain "Real Property" (as defined in Section 1.1(b))
located at 300 Cherry Street, Chandler, Texas 75758. Operator leases the Real
Property from Owner and operates a skilled nursing facility having 90 beds (the
"Facility") at such location.
B. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer the Real Property and the Facility, and all of the assets and properties
located at the Facility and owned or used by either Seller in connection with
the operation of the Facility, pursuant to the terms of this Agreement.
C. In addition to the terms defined in this Agreement, certain other terms
used in this Agreement are in the Exhibit of Certain Defined Terms attached to
this Agreement as Exhibit A and such terms, when used in this Agreement, have
the meaning set forth in that Exhibit.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Purchase and Sale of Assets.
1.1 Acquisition Assets. Upon the terms and subject to the conditions of
this Agreement, at the "Closing" on the "Closing Date" (as such terms are
defined in Section 3.2), Sellers shall sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and
clear of all Encumbrances (other than the "Permitted Encumbrances" (as defined
in Section 9.7)), all of each Seller's respective right, title and interest
under, in and to the Facility and, except as otherwise provided in Section 1.2,
all of each Seller's property and assets, real and personal, tangible and
intangible that are located at, and used in connection with the operation of,
the Facility, including the following (collectively, the "Acquisition Assets"):
(a) All of the assets and properties reflected on the "Acquisition
Balance Sheet" (as defined in Section 6.5) and those assets and properties
acquired since the date of the Acquisition Balance Sheet, except those assets
that have been disposed of in the Ordinary Course of Business between the date
of the Acquisition Balance Sheet and the Closing Date;
(b) The real property described on Schedule 5.1, together with all
improvements, buildings and fixtures located thereon and all easements and
rights appurtenant thereto (the "Real Property");
<PAGE>
(c) All machinery, equipment, fixtures, computer hardware and software
(subject to any restrictions by the licensor on the assignment thereof) tools,
supplies, spare parts, furniture, vehicles and all other tangible personal
property and assets located at the Facility and owned or leased by either Seller
and used or held for use in connection with the Facility, including those
identified on Schedule 4.10 (the "Personal Property");
(d) All inventories of cleaning supplies, food, all medical supplies,
inventory of drugs and other medical inventory and all other inventories and
supplies located in and about the Facility (the "Inventory");
(e) Patient medical records for all patients in the Facility on the
Closing Date (the "Straddle Patients");
(f) All of each Seller's respective interest (including all rights,
benefits, duties and obligations) in those Contracts listed on Exhibit B
("Assumed Contracts"), including all assumable prepaid expenses and deposits
arising under the Assumed Contracts;
(g) All Governmental Authorizations owned, held or utilized by either
Seller in connection with the ownership of the Acquisition Assets and the
operation of the Facility, and all pending applications therefor, in each case
to the extent transferrable to Buyer, including those listed on Schedule 6.10
(the "Permits");
(h) All data and records of each Seller related to the Acquisition
Assets including equipment logs, operating guides and manuals, and other similar
documents and records ("Data and Records");
(i) All rights to the name "Chandler Nursing Center";
(j) The going concern value and goodwill associated with the operation
of the Facility; and
(k) All other properties and assets of every kind, character or
description, tangible or intangible, owned by either Seller and located at, and
used or held for use in connection with, the Facility, whether or not similar to
the items or types specifically set forth above.
1.2 Excluded Assets. The only assets of either Seller located at, or used
in connection with the operation of, the Facility not included in the
Acquisition Assets and not to be purchased and sold under this Agreement are the
following (collectively, the "Excluded Assets"):
(a) All cash, cash equivalents, securities and investments, loan
costs, if any, and accounts receivable, notes receivable, premiums receivable,
commissions receivable, and other rights to receive payments from residents of
the Facility or from others, including all trade accounts receivable
representing amounts payable to either Seller for services rendered to residents
of the Facility prior to the Closing Date;
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<PAGE>
(b) Any Contract to which either Seller is a party that is not listed
on Exhibit B; and
(c) Records related to Organizational Documents of each Seller and all
medical records of all patients other than the Straddle Patients.
1.3 Assumed Liabilities; No Assumption of Other Liabilities. Effective as
of the Closing, Buyer shall assume, perform and discharge only those obligations
of either Seller arising solely under the Assumed Contracts on or after the
Closing Date. Except for the Liabilities identified in the immediately preceding
sentence, Buyer does not assume, and shall not in any manner become responsible
or liable for, and each Seller shall retain, pay, discharge and perform in full,
all other Liabilities of such Seller. Each Seller shall remain liable and
responsible for all of its Liabilities of any nature whatsoever not expressly
assumed by Buyer under the terms of this Agreement.
2. Purchase Price; Deposit; Payment.
2.1 Purchase Price; Deposit; Payment.
(a) The purchase price for the Acquisition Assets shall be $4,050,000
("Purchase Price").
(b) Within ten days of Buyer's receipt of an indemnification letter
from the title insurance company ("Title Company") for which Smith County
Abstract Company ("Title Agent") is an agent, Buyer shall deliver $250,000 to
Title Agent or Title Company, to be held by Title Agent or Title Company in an
interest-bearing account as a good faith deposit ("Deposit").
2.2 Prorations. All ad valorem real property taxes and assessments on the
Real Property that are due and payable in the year of Closing shall be prorated
on the basis of a 365-day year, in the manner customarily followed in Tyler,
Texas as of the Closing Date. All rents actually received by either Seller from
residents for the month in which the Closing occurs shall be prorated between
Buyer and Sellers based on the number of days in the month. At the Closing, the
net amount of such prorations shall be paid by Buyer to Sellers in addition to
the Purchase Price, or shall be paid by Sellers to Buyer, as the case may be. If
the Closing occurs before the amounts of the taxes and assessments to be
prorated pursuant hereto are known by the parties, such taxes and assessments
shall be prorated at the Closing based upon the amounts assessed in the
immediately preceding calendar or fiscal year, and when the amount of taxes and
assessments for the year in which the Closing occurs are known by the parties,
the parties shall reapportion such taxes or assessments based upon the actual
amount thereof.
2.3 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Acquisition Assets as specified in Exhibit C to this Agreement. After
the Closing, the parties agree to make consistent use of the allocation for all
Tax purposes and in any and all filings, declarations and reports with the IRS
related to this Agreement, including, the reports required to be filed under
Section 1060 of the IRC, if applicable. Buyer shall prepare and deliver IRS Form
8594 to Sellers within 45 days after the Closing Date if such form is required
to be filed
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with the Internal Revenue Service. In any proceeding related to the
determination of any Tax, no party hereto shall contend or represent that such
allocation is not correct.
3. Deposit; Escrow; Closing; Termination.
3.1 Escrow. This Agreement constitutes (a) a contract of purchase and sale
between the parties and (b) escrow instructions to Title Agent for the escrow
created hereby ("Escrow"). Either party may deliver a fully signed copy of this
Agreement to Title Agent, and this Escrow shall be deemed open on the date
("Escrow Opening Date") when Title Agent has received a copy or copies of this
Agreement signed by both parties and the standard terms and conditions of
escrow, if any, that Title Agent may require signed by both parties.
3.2 The Closing.
(a) Title Agent will close (the "Closing") the Escrow and the
transactions described in this Agreement on the date (the "Closing Date") that
all of the following conditions are satisfied but in no event later than
February 2, 1998 (the "Termination Date"), unless Buyer and Sellers agree
otherwise:
(1) All funds and documents described in Section 12 have been
delivered to Title Agent;
(2) Title Agent has received notification from Buyer that each of
the conditions set forth in Section 9 has been either satisfied or Buyer
has waived satisfaction of any unsatisfied condition;
(3) Title Agent has received notification from each Seller that
each of the conditions set forth in Section 10 has been either satisfied or
each Seller has waived satisfaction of any unsatisfied condition; and
(4) Title Agent can issue the "Title Policy" (as defined in
Section 9.7), insuring fee simple title to the Real Property in the amount
of the Purchase Price, subject to only (1) the Encumbrances for real estate
Taxes and statutory liens for Taxes not yet due and payable, and (2) the
Permitted Encumbrances, and with such endorsements that Buyer has
requested.
(b) The effective time of the Closing shall be 12:01 a.m., Central
Time, on February 1, 1998 (the "Effective Time").
3.3 Actions Taken by Title Agent on Closing Date and Thereafter.
(a) On the Closing Date when all of the conditions set forth in
Section 3.2 have been satisfied, Title Agent shall file with the appropriate
officials the "Deed" (as defined in Section 12.1(e)) and such other documents as
may be necessary to procure the Title Policy, and shall disburse the funds and
documents to the parties in the manner set forth in Section 12.
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(b) If Title Agent cannot close Escrow prior to the Termination Date,
it shall, nevertheless, close Escrow when all conditions have been satisfied or
waived unless Title Agent receives after the Termination Date, but prior to the
close of Escrow, a notice to terminate Escrow from a party who, at the time the
notice is delivered, is not in Breach of any provision of this Agreement.
3.4 Termination of Escrow. Within two working days after delivery of a
notice of termination from one party to this Agreement in accordance with
Section 11.1, Title Agent shall deliver a copy of the notice to the other
parties. Unless one of the other parties delivers to Title Agent a notice of
objection to termination of Escrow within three days after Title Agent delivered
the notice of termination to that party, Title Agent shall promptly terminate
Escrow and shall return all funds (excluding the Deposit) and documents held by
it to the party depositing the same and disburse the Deposit in the manner set
forth in Section 11.2. If Title Agent receives notice of objection to the
termination of Escrow within the three-day period, Title Agent shall hold all
funds (including the Deposit) and documents delivered to it in connection with
Escrow and Title Agent may, in its sole discretion, take no further action until
otherwise directed by other instructions signed by both parties or a final order
or judgment of a court of competent jurisdiction. Title Agent will have no
liability or responsibility for determining that a party giving a notice of
termination is not in default under this Agreement.
4. Representations and Warranties of Sellers and Shareholders. Each Seller
and each Shareholder hereby represents and warrants to Buyer as follows:
4.1 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of each Seller, enforceable against it in accordance with its terms.
Each Seller has the full right, power, authority and capacity to execute and
deliver this Agreement and to perform its obligations under this Agreement and
to consummate all of the transactions described in this Agreement.
(b) Each Seller has, and at all times has had, full power and
authority to own and lease its properties as such properties are now owned and
leased and to conduct its business as it is now being conducted. Owner's Federal
Employer Identification Number is 75-2148432 and Operator's Federal Employer
Identification Number is 75-2041481. Each Seller certifies that (a) the number
shown above is its correct taxpayer identification number, (b) it is not subject
to backup withholding because (1) it has not been notified that it is subject to
backup withholding as a result of a failure to report all interest or dividends
or (2) the Internal Revenue Service has notified it that it is no longer subject
to backup withholding, and (c) it is not a foreign Person within the meaning of
Sections 1445 and 1446 of the IRC, and the regulations promulgated thereunder.
(c) Except as set forth in Schedule 4.1, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions described in this Agreement will, directly or indirectly (with or
without notice or lapse of time):
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(1) Contravene, conflict with, or result in a violation of, any
provision of the Organizational Documents of either Seller or any
resolution adopted by the governing body or equity owners of either Seller;
(2) Contravene, conflict with, or result in a violation of, any
Legal Requirement or give any Governmental Body or other Person the right
to challenge any of the transactions described in this Agreement or to
exercise any remedy or obtain any relief under any Legal Requirement
applicable to either Seller or any of the Acquisition Assets;
(3) Contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by either Seller or that otherwise relates to
any of the Acquisition Assets, except (A) where any such contravention,
conflict, violation, revocation, withdrawal, suspension, cancellation,
termination or modification would not result in a Material Adverse Effect
to either Seller, the Facility, or any of the Acquisition Assets and (B)
for the requirement that Buyer must apply for a license from the Texas
Department of Human Services (the "Texas DHS") to operate the Facility;
(4) Cause either Seller, or to the Knowledge of either Seller
cause Buyer, to become subject to, or to become liable for the payment of,
any Tax to any Governmental Body, other than real estate and ad valorem
property Taxes normally assessed in Texas against owners of such property;
(5) Contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Assumed Contract, other than those
Persons who are parties to Assumed Contracts that require Consent from such
Persons prior to the assignment of the Assumed Contract; or
(6) Result in the imposition or creation of any Encumbrance on or
related to any of the Acquisition Assets owned or used by either Seller.
(d) Neither Seller is nor will it be required to give any notice to or
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
transactions described in this Agreement, except (A) as set forth in
Schedule 4.1, (B) for compliance with Medicare, Medicaid and Title 40,
Chapter 19 of the Texas Administrative Code (the "Texas Nursing Facility
Requirements"), and (C) where the failure to give such notice or Consent
would not have a Material Adverse Effect on either Seller, the Facility, or
any of the Acquisition Assets.
(e) Each Seller has complied, and is in compliance, with all Legal
Requirements applicable to it and its operations and the ownership or use
of the Acquisition Assets, except (A) for compliance with Medicare,
Medicaid and Texas Nursing Facility Legal Requirements, and (B) where the
failure to comply would not have a Material Adverse Effect on either
Seller, the
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Facility, or any of the Acquisition Assets. Neither Seller has Knowledge of any
facts or circumstances which may constitute or result in any noncompliance.
4.2 Assets Necessary To Business. Except for assets used by either Seller
principally for accounting functions, the Acquisition Assets (provided Buyer
replaces the Excluded Assets) are sufficient for Buyer to operate the Facility
on and after the Closing Date in the same manner that Operator operated the
Facility prior to the date of this Agreement.
4.3 Books and Records. The books of account of each Seller are complete and
correct in all material respects, and all monies due or to become due from or to
or owing by, and all Liabilities of each Seller, by reason of any transaction,
matter or cause whatsoever have been duly, correctly and completely entered
therein in all material respects.
4.4 Brokers. All negotiations relative to this Agreement and the
transactions described in this Agreement have been conducted by Sellers directly
with Buyer, without the assistance or intervention of any other Person except
for DevCon Real Estate Brokers ("DevCon"). To each Seller's Knowledge, DevCon is
the only Person who may have a valid claim against Buyer for a finder's fee,
investment banking fees, brokerage commission or other like payment.
4.5 Completeness of Statements. Each Seller has disclosed to Buyer in
writing all material facts known to it relating to the representations and
warranties of such Seller made in this Agreement. No representation, warranty or
covenant of either Seller 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 when
taken as a whole.
4.6 Environmental Matters.
(a) Except as disclosed on Schedule 4.6, (1) each Seller is, and at
all times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law, (2) neither Seller has any
basis to expect, nor to the Knowledge of each Seller, has either Seller, or any
other Person for whose conduct either Seller is or may be held responsible,
received any Order, notice, or other communication from (A) any Governmental
Body or Person acting in the public interest, or (B) the current or prior owner
or operator of the Facility, of any actual or Threatened 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
relating to the Facility. Neither Seller has generated, manufactured, refined,
transferred, imported, used, or processed Hazardous Materials from the Facility,
nor, to the Knowledge of each Seller, has any other Person for whose conduct
either Seller is or may be held responsible, transported, treated, stored,
handled, transferred, disposed, recycled or received Hazardous Materials.
(b) Except as set forth on Schedule 4.6, there are no pending or, to
the Knowledge of each Seller, 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, affecting the
Facility or any of the Acquisition Assets.
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(c) Except as set forth on Schedule 4.6, neither Seller has any basis
to expect, nor has either Seller, or to the Knowledge of each Seller, any other
Person for whose conduct either Seller is or may be held responsible received,
any notice, Order, or other communication that relates to Hazardous Activity,
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 regarding the Facility or any of the Acquisition Assets or to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used or processed by either Seller, or any other Person for whose
conduct either Seller is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) Except as set forth on Schedule 4.6, neither one of Sellers, nor
to the Knowledge of each Seller, any other Person for whose conduct either
Seller is or may be held responsible, has any Environmental, Health, and Safety
Liabilities related to the Facility or the Acquisition Assets, or at any
property geologically or hydrologically adjoining the Facility.
(e) Except as set forth on Schedule 4.6, there are no Hazardous
Materials present on or in the Environment at the Real Property or, to the
Knowledge of each Seller, at any geologically or hydrologically adjoining the
Real Property, other part of the Real Property or such adjoining property, or
incorporated into any improvement located thereon or in any Personal Property.
Neither one of Sellers, nor any other Person for whose conduct either Seller is
or may be held responsible, has permitted or conducted, or are aware of, any
Hazardous Activity conducted with respect to the Facility or any of the
Acquisition Assets.
(f) Except as set forth on Schedule 4.6, there has been no Release, or
to the Knowledge of each Seller, a Threat of Release, of any Hazardous Materials
at or from the Facility or the Real Property.
4.7 Insurance. Included as Schedule 4.7 is a complete listing of all
insurance policies related to the Acquisition Assets insuring each Seller, and
bonds issued concerning the Acquisition Assets, detailing the coverage insured
against and the amount thereof, the insurance carrier, the policy number and the
premium payments. Except as disclosed on Schedule 4.7, neither Seller does nor
has either Seller maintained any self-insurance programs. Schedule 4.7 further
includes a statement of all claims for insured losses filed by either Seller
within the three-year period prior to the date hereof. Except as listed on
Schedule 4.7, neither Seller has received any notice from any insurance carrier
that (a) such Seller's 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.
4.8 Litigation. Except as set forth on Schedule 4.8, to each Seller's
Knowledge, there are no Proceedings or claims, pending or Threatened against or
affecting either Seller, the Acquisition Assets, the Facility, or any employee
of Operator, by or before any Governmental Body. Neither Seller is subject to,
nor in default under, any Order applicable to it, the Facility, the Acquisition
Assets, or any of its employees.
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4.9 Taxes.
(a) Each Seller has timely paid in full all ad valorem property Taxes
levied on its respective portion of the Acquisition Assets that have become due
and payable prior to the date of this Agreement. Operator has withheld proper
and accurate amounts from its employees in full and complete compliance with the
Tax withholding provisions of the IRC and other applicable Legal Requirements,
and has filed proper and accurate Tax Returns for all years and periods (and
portions thereof) for which any such Tax Returns were due for employee income
Tax, withholding Taxes, social security Taxes and unemployment Taxes. Operator
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, Operator has made adequate
accruals on its regular books of account.
(b) Each Seller has prepared, signed and filed all federal Tax Returns
required to be filed by all applicable Legal Requirements 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 due and owing on such Tax Returns or which were or are
otherwise due and owing under all applicable Legal Requirements for any periods
for which Tax Returns were due, whether reflected on such Tax Returns and
whether relating to the income of such Seller. The amounts recorded as payable
for Taxes in the Acquisition Balance Sheet is sufficient for the payment of all
Taxes attributable to all periods ended on or before the date of the Acquisition
Balance Sheet and adequate accruals have been made by each Seller for all
Liabilities for Taxes accruing since the date of the Acquisition Balance Sheet.
There are in effect no Contracts or Consents providing for an extension of time
for any assessment of any Tax, or any deficiency against either Seller, other
than routine extensions in filing deadlines. Except as set forth on Schedule
4.9, there are no Proceedings now pending nor Threatened, against either Seller,
nor are there any matters under discussion with the IRS, or other Governmental
Authority, relating to any Taxes, or any claims or deficiencies with respect
thereto. Set forth on Schedule 4.9, is a list of federal income Tax Returns that
IRS has audited.
(c) Except as provided on Schedule 4.9, neither Buyer nor either
Seller are liable for any sales, use, transfer or other similar Tax as a result
of the transactions described in this Agreement and no such Tax will be imposed
by any Governmental Body on the sale of the Acquisition Assets to Buyer, and
Buyer is not required to withhold any portion of the Purchase Price on account
of any such Tax.
4.10 Title to Properties; Condition and Repair. Schedule 4.10 sets forth a
listing of the Personal Property owned or used respectively by each Seller in
the operation of the Facility. Except as disclosed on Schedule 4.10, each Seller
owns the Personal Property included within the Acquisition Assets that it
purports to own or reflected as owned in the books and records of such Seller
(except for assets held under capitalized leases disclosed in Schedule 6.2 of
this Agreement) free and clear of all Encumbrances of any nature whatsoever,
except for the lien for current ad valorem property Taxes not yet due and
payable. Except for the regular, scheduled repairs which are done in the
Ordinary Course of Business, all of the Acquisition Assets are free of material
defect, well maintained, in good working order, condition and repair.
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4.11 Zoning. To the Knowledge of each Seller, the operation of the Facility
on the Real Property by Buyer following the Closing Date does not require any
zoning or planning department approvals in addition to those which either Seller
has already obtained. Buyer is automatically entitled to the benefits of all
such approvals without the necessity of any affirmative action on Buyer's
behalf. Neither Seller has any information which would lead it to believe that
the use of the Real Property will be adversely affected by any pending or
proposed zoning or use changes.
5. Representations and Warranties of Owner. Owner hereby represents and
warrants to Buyer as follows:
5.1 Real Property.
(a) Schedule 5.1 sets forth a complete legal description of the Real
Property. None of the Real Property is subject to any Encumbrance, variance or
other limitation except for (a) mortgages or security interests securing
obligations in an aggregate amount of less than $1,000,000, (b) liens for
current Taxes not yet due, (c) 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 the
Facility, and (d) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto. All buildings,
plants, and structures owned by Owner lie wholly within the boundaries of the
Real Property owned by Owner and, with the exception of any fences located
around the boundaries of the Real Property, do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person.
(b) There are no pending, or Threatened, condemnation Proceedings
relating to the Real Property or other matters affecting its current use,
occupancy or value.
(c) Owner has not received any notice from any Governmental Body, nor
does it otherwise have Knowledge of any contemplated, actual or Threatened
reassessment of the value of the Real Property for ad valorem real property Tax
purposes, other than normal periodic reassessment and any such reassessment that
may occur by virtue of the sale of the Real Property to Buyer and the
recordation of the Deed in the appropriate public office.
5.2 Utilities. The Facility is supplied with utilities and other services
necessary for its operation, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are sufficient for Buyer
to operate the Facility in the same manner that in which Operator operated the
Facility prior to the date of this Agreement and are provided via public roads
or via permanent, irrevocable, appurtenant easements benefitting the Real
Property.
6. Representations and Warranties of Operator and Shareholders. Owner and
each Shareholder hereby represent and warrant to Buyer as follows:
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6.1 Absence of Certain Events. Except as set forth on Schedule 6.1, since
the date of the Acquisition Balance Sheet, Operator has operated the Facility
only in the Ordinary Course of Business and has not:
(a) Experienced any event, occurrence or condition which, individually
or in the aggregate has or is reasonably likely to have a Material Adverse
Effect on the Facility or any of the Acquisition Assets;
(b) Entered into or committed to any transaction that, individually or
in the aggregate, has or is reasonably likely to have, a Material Adverse Effect
on the Facility or any of the Acquisition Assets;
(c) Changed any of its accounting methods, principles or practices;
(d) Incurred or agreed to incur any indebtedness for borrowed money or
allowed any of the Acquisition Assets to be subjected to any Encumbrance
whatsoever, other than non-monetary restrictions which will not materially
interfere with Operator's use and enjoyment of the Acquisition Assets;
(e) Terminated or amended or suffered the termination or amendment of
any Assumed Contracts or Permit, where the loss of such Assumed Contract or
Permit would result in a Material Adverse Effect on Operator or the Facility;
(f) Adopted, modified or amended any Employee Benefit Plan;
(g) Entered into any Contract to do any of the above;
And, except as set forth on Schedule 6.1, Operator has:
(h) Continued its operations at the Facility in the Ordinary Course
of Business and maintained its operations, the Facility, Acquisition Assets,
books of account, records and files in substantially the same manner as
heretofore; and
(i) Used its Best Efforts to preserve its business at the Facility.
6.2 Contracts. Operator has delivered to Buyer a complete copy of each
Assumed Contract listed in Exhibit B. Operator has performed in all respects all
obligations to be performed by it under the terms of any of the Assumed
Contracts through the date of this Agreement, and Operator is not in default
under any Assumed Contract. Moreover, to the Knowledge of Operator, no event has
occurred which, with notice or the passage of time, or both, would constitute a
default under any Assumed Contract. To the Knowledge of Operator, there is no
basis for any of the other parties to Assumed Contracts to assert that Operator
is in default thereunder and the other parties to Assumed Contracts are not in
default thereunder. Except for those Assumed Contracts described on Exhibit B
whose terms require the prior Consent of the other party thereto for an
assignment to Buyer, the consummation of the transactions described in this
Agreement will not cause a default under any Assumed Contract. Except as set
forth on Schedule 6.2, there are
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no existing disputes between Operator, on the one hand, and any other party to
any Assumed Contract, on the other hand.
6.3 Current Compensation of Employees.
(a) Set forth on Schedule is a complete list (the "List") of
Operator's employees on the date of such List who work at the Facility along
with the amount of the current wage rate for hourly employees and monthly
salaries for salaried employees and the total compensation paid or due for
services to each management employee for 1997, and a complete description of any
commitments to such management employees regarding compensation payable
thereafter. Except as set forth on Schedule 6.3, since the date of the List on
Schedule 6.3, there has been no change in the management employees who work at
the Facility. Except as set forth on Schedule 6.3, (1) there has been no change
in the salaries or compensation paid to employees of Operator since the date of
the Acquisition Balance Sheet other than in the Ordinary Course of Business of
Operator with updated information being furnished prior to the Closing, and (2)
Operator has not, because of past practices with or previous commitments to its
employees, established any rights or expectations on the part of such employees
to receive additional compensation inconsistent with past practices for any
period after the date hereof.
(b) Except as set forth on Schedule 6.3, no employee of Operator is a
party to or subject to any Contract containing covenants by such employees not
to compete in any line of business with any Person or restricting the customers
from whom or the area in which the employee may solicit or conduct business.
6.4 Employee Benefits. Except for each group health plan (as defined in
Section 4980B(g)(2) of the IRC) ("Group Health Plan" maintained by Operator,
Operator does not maintain or contribute to any Employee Benefit Plan. To the
Knowledge of Operator, each Group Health Plan maintained by Operator 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
IRC (and the regulations thereunder). For purposes of this Section 6.2, 6.4, any
reference to Operator shall be deemed to refer also to any Person that is under
common control or affiliated with Operator within the meaning of Section
4001(a)(14) of ERISA and Section 414(b), (c), (m) and (o) of the IRC.
6.5 Financial Statements. Set forth in Schedule 6.5 are the financial
statements of Operator related to the operation of the Facility for the years
ending December 31, 1996, 1995 and 1994, all of which have been audited by Jack
H. Sturgess, independent auditor of Operator. Such financial statements are
hereinafter referred to collectively as the "Year-end Financials." Also set
forth in Schedule 6.5 are the interim unaudited financial statements of Operator
relating to the operations of the Facility for the ten-month period ended
October 31, 1997 (the "Stub Period Financials"). The Year-end Financials and the
Stub Period Financials are hereinafter collectively referred to as the
"Financial Statements" and the balance sheet, dated September 30, 1997, that is
included in the Stub Period Financials is referred to as the "Acquisition
Balance Sheet." The Financial Statements have been prepared from the books and
records of Operator in conformity with GAAP, on a consistent basis and present
fairly, in all material respects, the financial position of Operator at the
respective dates of the balance sheets included therein and
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the results of operations and changes in financial position of Operator for the
respective periods covered thereby, except for, in the case of Stub Period
Financials, (1) the absence of footnotes (that if presented would not differ
materially from those included in the Year-End Financial Statements), (2) normal
recurring year-end adjustments that will not result in a Material Adverse Effect
on Operator's financial condition and results of operations, and (3) any year-
end adjustments resulting from the preparation of Medicare cost reports.
6.6 Healthcare Legal Requirements. To Operator's and Shareholders'
Knowledge, Operator has complied, and is in compliance with, all Texas Nursing
Facility Legal Requirements and all Legal Requirements imposed by Medicare and
Medicaid, except where the failure to comply would not have a Material Adverse
Effect on Operator, the Facility or any of the Acquisition Assets.
6.7 Labor Matters. Except as disclosed on Schedule 6.7, Operator has not
been, nor is it currently a party to, nor is it negotiating, any collective
bargaining agreement. There has not been, there is not presently pending or
existing, and to the Knowledge of Operator, any Threatened, (a) strike,
slowdown, picketing, work stoppage, or employee grievance process, (b)
Proceeding against or affecting Operator's operation of the Facility relating to
(1) an alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission or any comparable Governmental Body, (2) organizational activities,
or other labor or employment dispute against or affecting Operator or the
Facility, or (c) application for certification of a collective bargaining agent.
To the Knowledge of Operator, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute.
6.8 Liabilities Not Disclosed On Balance Sheet. As of the date of the
Acquisition Balance Sheet, Operator, regarding its respective ownership and
operation of the Acquisition Assets, had no material Liabilities except as shown
on the Acquisition Balance Sheet. Except as shown on Schedule 6.8, since the
date of the Acquisition Balance Sheet, Operator has not incurred or become
subject to any Liabilities related to the Facility, other than Liabilities
incurred in the Ordinary Course of Business of the Facility consistent with past
practices, all of which have been paid in full in the Ordinary Course of
Business or are reflected on Operator's 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 materially inconsistent with the representations, warranties and
covenants of Operator contained in this Agreement, or (b) has or may be expected
to have a Material Adverse Effect.
6.9 Medicare, Medicaid and Other Third Party Payors. Except as disclosed
in any Texas DHS surveys for 1997, copies of which have been made available to
Buyer, Operator has complied with all Medicare and Medicaid Legal Requirements
and has filed all returns, cost reports and other filings in any manner
prescribed thereby, except where the failure to so comply would not result in a
Material Adverse Effect on Operator. All returns, cost reports and other filings
made by Operator since January 1, 1996 to Medicare, Medicaid or any other health
or welfare related Governmental Body or third party payor are true and complete
except where inaccuracy, together with all other such inaccuracies, would not
result in a Material Adverse Effect on Operator. Except as set forth on
Schedule 6.9, since January 1, 1996, no deficiency in
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any such returns, cost reports and other filings, including deficiencies for
late filings, has been asserted or to Operators' Knowledge Threatened by any
Governmental Body or other provider reimbursement Entities relating to Medicare
or Medicaid or third party payor claims. To Operators' Knowledge, there is no
basis for any successful claims or requests for reimbursement from any such
Governmental Body or third party payor except for any deficiencies, together
with all other such deficiencies, which would be not result in a Material
Adverse Effect on Operator. Since January 1, 1996, Operator has not been subject
to any audit or investigation relating to fraudulent Medicare or Medicaid
procedure or practices except audits or investigations which, together with all
other such audits, would not result in a Material Adverse Effect.
6.10 Permits. To Operator's Knowledge, Schedule 6.10 sets forth all of the
Permits Operator has obtained from, and the Permits constitute all Governmental
Authorizations required by, all Governmental Bodies that have any oversight or
regulatory responsibility over Operator's operations of the Facility as a
skilled nursing facility, except where the failure to obtain would not have a
Material Adverse Effect on the Facility. Operator has furnished Buyer a complete
copy of each of the Permits. All of the Permits are in full force and effect,
and to Operator's Knowledge, no suspension or cancellation of any of them is
Threatened.
6.11 Proprietary Property. Except for the software and other proprietary
assets used by Operator to perform accounting functions, Schedule 6.11 sets
forth all Proprietary Property used by Operator in connection with its
operations of the Facility. To Operator's Knowledge, Operator owns, or has
obtained proper licenses for the use of, all Proprietary Property used by it.
Operator has not received notice of any claim that it is violating or infringing
any Proprietary Property of any third party.
7. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to each Seller and Shareholder as follows:
7.1 Corporate Status. Buyer is a corporation duly incorporated and existing
under the laws of the State of Delaware. Buyer 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
such businesses have and are now being conducted.
7.2 Authority; Consents; Enforcement: Noncontravention; Noncompetes.
(a) Authority. Buyer has the corporate power and authority to execute,
deliver and perform this Agreement, and all other agreements, certificates or
documents described in this Agreement ("Buyer Ancillary Documents"), and has
taken all actions required to authorize, execute, deliver and perform this
Agreement and the Buyer Ancillary Documents, including approval by the Board of
Directors of Buyer.
(b) Consents. No Consent or registration, declaration or filing with
any Governmental Body is required for Buyer to execute this Agreement and
perform the transactions described in this Agreement by Buyer.
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(c) Enforcement. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.
(d) Noncontravention. The execution and delivery of this Agreement and
the Buyer Ancillary Documents by Buyer do not violate any provision of the
Organizational Documents of Buyer and will not result in a breach or violation
or default under any Order of any Governmental Body to which Buyer is subject or
result in a breach by Buyer under any Contract to which it is bound. Neither the
execution and the delivery of this Agreement, nor the compliance with, and
fulfillment of, the terms, conditions and provisions hereof or thereof, will (a)
violate any Legal Requirement applicable to Buyer; or (b) require the Consent or
the making by Buyer of any declaration, filing or registration with, any
Governmental Body or other Person.
7.3 No Agent or Broker. Except for DevCon, no agent or broker or other
person acting pursuant to authority given by Buyer is entitled to any commission
or finder's fee, or other compensation, in connection with the transactions
described in this Agreement.
8. Additional Covenants of the Parties.
8.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, each Seller shall: (a) afford Buyer and its Representatives full
and free access to such Seller's personnel, properties (including access for
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Buyer and Buyer's Representatives with copies of all such Contracts,
books and records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Representatives with such additional
information as Buyer may reasonably request.
8.2 Operation of the Facility. Between the date of this Agreement and the
Closing Date, Operator shall:
(a) conduct the Facility only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the Facility, keep
available the services of the current employees and agents of the Facility, and
maintain the relations and good will with suppliers, residents, landlords,
creditors, employees, agents, and others having business relationships with the
Facility and Operator;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the condition
and operation of the Acquisition Assets, and the operation and financial
position and results of the Facility.
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8.3 Required Consent. As promptly as practicable after the date of this
Agreement, each Seller shall make any filings required to be made by it under
Legal Requirements in order to consummate the transactions described in this
Agreement. Between the date of this Agreement and the Closing Date, each Seller
shall, (a) cooperate with Buyer on all filings that Buyer elects to make or is
required by Legal Requirements to make in connection with the transactions
described in this Agreement, and (b) cooperate with Buyer in obtaining all
Consents required by Buyer to consummate the transaction described in this
Agreement.
8.4 Notification. Between the date of this Agreement and the Closing Date,
each Seller shall promptly notify Buyer if such Seller becomes aware of any fact
or condition that causes or constitutes a Breach of any of the representations
and warranties of it in this Agreement, or if such Seller becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly described in this Agreement) cause or constitute a Breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition. During
the same period, each Seller shall promptly notify Buyer of the occurrence of
any Breach of any covenant of such Seller in this Agreement or of the occurrence
of any event that may make the satisfaction of the conditions in Section
impossible or unlikely.
8.5 No Negotiation.
(a) Until such time, if any, as this Agreement is terminated pursuant
to Section 11, neither Seller shall:
(1) negotiate, discuss or otherwise communicate with any other
potential purchaser or lessee of the Facility;
(2) solicit or encourage submission of any proposal or offer to
acquire or lease all or any portion of the Facility;
(3) participate in any discussion or negotiation regarding any
proposal or offer to sell or lease all or any portion of the Facility;
(4) furnish to any Person other than Buyer and its
Representatives any information regarding the Facility, except as required
by any Legal Requirement or in any Proceeding; or
(5) cooperate in any way with, or assist or participate in any
proposal or offer from any Person other than Buyer or its Representatives
to acquire or lease all or any portion of the Facility.
(b) If, prior to the termination of this Agreement, either Seller
receives any unsolicited offer or proposal from any Person other than Buyer to
acquire or lease all or any portion of the Facility, such Seller shall promptly
notify Buyer of such offer or proposal and provide Buyer with copies of any
written materials received by such Seller that relate to such offer or proposal.
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8.6 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer shall make all filings required by Legal
Requirements to be made by it to consummate the transactions described in this
Agreement. Between the date of this Agreement and the Closing Date, Buyer shall
cooperate with Sellers on all filings that either Seller is required by Legal
Requirements to make in connection with the transactions contemplated herein,
and (ii) cooperate with Sellers in obtaining all Consents required by either
Seller to consummate the transactions described in this Agreement.
8.7 Patients' Accounts. Sellers shall calculate all patient charges through
the Effective Time and bill all of the Facility's patients. Each Seller agrees
that if it receives any payment for services performed or provided by or at the
Facility that pertains to services performed or provided after the Effective
Time, it shall remit such payment to Buyer within seven days of receipt.
Similarly, Buyer agrees that if it receives any payment for services performed
or provided by either Seller that pertains to services performed or provided
before the Effective Time, it shall remit to Sellers such payment within seven
days of receipt.
8.8 Retroactive Settlements. If any third-party payor, Medicare or Medicaid
reduces any amount payable to Buyer in connection with the retroactive
settlement which reduction results from services provided by Operator at the
Facility prior to the Effective Time, Operator and each Shareholder agrees to
reimburse Buyer, within 15 days of delivery of notice to Operator from Buyer,
the amount of such reduction that results from the services provided by Operator
prior to the Effective Time (a "Retroactive Obligation"). Similarly, if any
third-party payor, Medicare or Medicaid increases any amount payable to Buyer in
connection with a retroactive settlement, which increase relates to services
provided by Operator at the Facility prior to the Effective Time, Buyer agrees
to remit to Operator, within ten days of receipt of such payment, the amount of
such increase that results from the services provided by Operator prior to the
Effective Time (a "Retroactive Payment"). Buyer agrees to promptly notify
Operator and Shareholders of any Retroactive Obligation in order that Operator
may appeal, and Buyer further agrees to cooperate with Operator in any such
appeal.
8.9 Patients' Personal Funds Accounts. At the Effective Time, Sellers shall
transfer, and Buyer shall assume, any control either Seller may have over the
custodial accounts commonly known as the patients' personal funds accounts that
are owned by the Facility's patients, to the extent that such control may be
transferable without the patient's prior consent. Buyer has not made any
investigation as to whether such accounts have been accurately maintained and
properly administered and Buyer shall assume no liability or responsibility for
any accounting or deficiencies in such accounts existing at or arising before
the Effective Time.
8.10 Preservation of Records; Access By Sellers.
(a) After the Effective Time, Buyer shall keep and preserve all
medical records and other records for Straddle Patients of the Facility that it
obtained from Sellers that are required to be kept and preserved by any Legal
Requirement for the period of time required thereby. Sellers shall keep and
preserve all medical records and other records for all Persons who were patients
of the Facility prior to the Effective Time and who are not Straddle Patients
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that are required to be kept and preserved by any Legal Requirement for the
period of time required thereby.
(b) After the Effective Time, upon reasonable notice to Buyer by
Sellers or any of their affiliates, Sellers and their agents shall be entitled,
during regular business hours, to have access to and make copies of all records
pertaining to the operation of the Facility prior to the Effective Time for any
lawful purpose. Any medical records or patient charts shall only be removed from
the Facility for purposes of pending litigation involving a patient to whom such
record or chart refers and in response to a subpoena or court order or for
purposes of introduction into evidence. Any records or charts so removed from
the Facility shall be promptly returned to Buyer following their use by Sellers
or any affiliate thereof.
8.11 Transition of the Facility. Each Seller covenants with Buyer to
cooperate with Buyer to effect the smooth transition of the control and
operation of the Facility from Sellers to Buyer. Each Seller shall cooperate
with Buyer in providing all information required hereunder and access thereto
and whatever is required to carry out the purposes and intent of the
transactions contemplated by this Agreement.
8.12 Compliance with Legal Requirements. Operator shall correct or repair
prior to the Closing Date, at its expense, any deficiencies in the Facility
identified in any survey conducted by any Governmental Body, including state
licensure or Medicare survey or similar report received by Operator prior to the
Closing Date. In addition, Operator and Shareholders shall reimburse all
expenses incurred by Buyer in correcting or repairing, or shall correct or
repair at Operator's and Shareholders' expense, any material deficiencies in the
Acquisition Assets noted by any survey conducted by any Governmental Body,
including the Texas DHS survey, fire marshal report or other similar state or
federal licensure survey received by Buyer within the first eight weeks
following the Closing Date.
8.13 Operator's Employees and Employee Benefits.
(a) Prior to the Closing Date, Operator shall promptly notify all
employees employed at the Facility that Operator will terminate their employment
at the Effective Time. Operator shall retain any and all Liability for, and
shall pay pursuant to Operator's policies, any termination pay, severance pay,
sick pay or vacation pay, any unemployment benefits, and any other benefits to
which Operator's past or current employees, their spouses and dependent children
may be entitled by virtue of their employment or termination of their employment
with Operator.
(b) Following the Closing Date, Operator shall maintain Group Health
Plans comparable to its current Group Health Plan for at least as long as
Operator's past or current employees, their spouses and dependent children are
eligible for continuation health coverage under COBRA. If Operator terminates
one or more Group Health Plans which cover past or current employees who are not
hired by Buyer, their spouses and dependent children, Operator's remaining Group
Health Plan or Plans shall be considered the successor plan or plans under COBRA
for such individuals. Buyer will waive the enrollment period and pre-existing
condition requirements of its current Group Health Plan for those employees of
Operator that
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Buyer hires upon consummation of the transactions described in this Agreement so
that the termination of the employment of such employees by Operator and the
hiring of such employees by Buyer will not trigger any COBRA benefits for these
employees.
(c) Buyer shall have no obligation to employ any employees of Operator
subsequent to the Closing. To the extent any of such employees are employed by
Buyer following the Closing, such employment shall be on terms and conditions
determined by Buyer and Buyer shall have no obligation to offer such employee
the same or similar wages, salaries or benefits as are paid or provided by
Operator prior to the Closing.
8.14 Survey. Promptly following the execution and delivery of this
Agreement, Owner will obtain an ALTA survey of the Real Property ("Survey")
satisfying all of the requirements set forth as Exhibit D.
8.15 Title Insurance.
(a) Promptly following the execution and delivery of this Agreement,
Owner shall deliver to Buyer a commitment (the "Title Commitment") to issue the
Title Policy from Title Company and all underlying documents related to the
exceptions described or listed in the Title Commitment (the "Title Commitment
Documents"). Within 10 days of the later of (1) the date Buyer receives a copy
of the Survey or (2) the date Buyer receives a copy of the Title Commitment and
all the Title Commitment Documents, Buyer shall notify Owner of all matters on
the Title Commitment to which Buyer objects. If Buyer fails to object to any
such exception within the 10-day period, Buyer shall be deemed to have accepted
such exceptions.
(b) Owner shall take all steps necessary to satisfy all the
requirements set forth in the Title Commitment prior to the Closing Date. Buyer
hereby objects to, and Owner shall use its Best Efforts to remove, correct or
delete prior to or at the Closing (1) all standard exceptions set forth in the
Title Commitment that are capable of being satisfied or removed, (2) any gap,
overlap, boundary dispute, hiatus or encroachment referred to in the Title
Commitment or identified on the Survey which affects the Real Property or any
adjacent properties, (3) any mortgages and other monetary liens and Encumbrances
affecting the Real Property, and (d) any matter to which Buyer has objected
under this Section 8.15.
8.16 Filing of Taxes; Payment. Each Seller shall, for all periods through
the Closing Date:
(a) prepare and timely file (including extensions) all Tax Returns
that it is required to file under all applicable laws;
(b) timely pay all Taxes it is required to pay;
(c) withhold and timely pay over to the applicable authorities all
Taxes that it is required to withhold and pay over; and
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(d) timely pay all Taxes on any sales and the income and gain, if any,
that it realizes on the transactions contemplated by this Agreement, including
the sale of the Acquisition Assets.
8.17 Sales and Other State Taxes. Each Seller shall notify the taxing
authorities which require notice prior to the completion of the transactions
described in this Agreement and on the date hereof filed the required notices
with the other taxing authorities.
8.18 Non-Competition Agreements. At the Closing, each Seller and each
Shareholder shall execute and deliver to Buyer a non-competition agreement
substantially in the form of Exhibit G attached to this Agreement (the "Non-
Competition Agreement").
8.19 Management Agreement. At the Closing, Buyer and Briarcliff Management
Co., Inc. ("Manager") shall execute and deliver a management agreement
substantially in the form of Exhibit H attached to this Agreement (the
"Management Agreement").
8.20 Further Assurances. Each of the parties agrees that it will, at any
time, and from time to time, after the date hereof, upon the request and at the
expense of the appropriate party, do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, and such further acts, assignments,
transfers, conveyances, and assurances as may be required to complete the
transactions contemplated herein. After the date hereof, at the expense of
Buyer, each Seller shall use its Best Efforts to cause any necessary third party
to, execute such documents and do such acts and things as Buyer may reasonably
require for the purpose of giving to Buyer the full benefit of all the
provisions of this Agreement and as may be reasonably required to complete the
transactions contemplated herein.
9. Conditions Precedent to Buyer's Obligation to Close. Buyer's obligation
to consummate the transactions contemplated herein, and to take the actions
required to be taken by Buyer, at the Closing, is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Buyer, in whole or in part):
9.1 Accuracy of Representations. Each representation and warranty of each
Seller and Shareholder in this Agreement must be accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
9.2 Sellers' Performance. All of the covenants and obligations that each
Seller is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been duly performed and complied with in all
material respects.
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9.3 No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person Affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions described in this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the transactions described in this
Agreement.
9.4 Consents. Each of the Consents identified on Schedule 7.2 must have
been obtained and must be in full force and effect and Buyer has obtained all
Governmental Authorizations necessary or required for it to assume operation of
the Facility other than the authorization from the Texas DHS.
9.5 Texas DHS Authorization. Buyer has received written confirmation from
the Texas DHS that Buyer is qualified to operate the Facility and that the Texas
DHS is prepared to issue Buyer a license subject to the successful completion of
Texas DHS's survey of the Facility and Buyer's operation of the Facility.
9.6 Other Documents. Buyer must have received such other documents as it
may reasonably request for the purpose of (a) evidencing the accuracy of any of
the representations and warranties of each Seller and Shareholder, (b)
evidencing the performance by each Seller of, or the compliance by each Seller
with, any covenant or obligation required to be performed or complied with by
it, (c) evidencing the satisfaction of any condition referred to in this Section
9, or (d) otherwise facilitating the consummation or performance of any of the
transactions contemplated herein.
9.7 Title Policy. Title Company shall irrevocably commit to issue an ALTA
Owner's Policy of Title Insurance on Form B-1992, insuring fee simple title to
the Real Property in the amount of the Purchase Price (the "Title Policy"),
subject to only (a) the Encumbrances for real estate Taxes and statutory liens
for Taxes not yet due and payable, and (b) those other Encumbrances to which
Buyer has not objected in accordance with Section 8.15 (the "Permitted
Encumbrances"), and with such endorsements that Buyer has requested.
9.8 No Prohibition. Neither the consummation nor the performance of any of
the transactions contemplated herein will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person Affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
10. Conditions Precedent to Sellers' Obligation to Close. Each Seller's
obligation to consummate the transactions contemplated herein and to take the
other actions required to be taken by such Seller at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be jointly waived by Sellers, in whole or in part):
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10.1 Accuracy of Representations. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
10.2 Buyer's Performance. All of the covenants and obligations that Buyer
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all material
respects.
10.3 No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the Acquisition Assets
by Sellers to Buyer.
10.4 Consents. Each of the Consents identified on Schedule 4.1 must have
been obtained and must be in full force and effect.
10.5 Definitive Agreements for Purchase and Sale of Other Facilities.
(a) Buyer and Larry S. Parker shall have entered into a definitive
agreement for the purchase by Buyer of the facility having approximately 62
units licensed as a Class A Personal Care Facility under Texas law and
approximately 100 apartments designed for elderly residents, known as the
Briarcliff Village Retirement Center and Personal Care Center and located at
3500 South Vine Street, Tyler, Texas 75701, and all conditions precedent to
Buyer's and Parker's obligations to close the transaction described in that
agreement, have been satisfied or waived and the parties have closed such
transaction contemporaneously with the Closing of the transactions described in
this Agreement.
(b) Buyer, Briarcliff Village Health Center, a Texas general
partnership ("Health Center"), and Briarcliff Village Health Center Inc., a
Texas corporation ("Village Health Center") shall have entered into a definitive
agreement for the purchase by Buyer of the Facility licensed as a Class B
Personal Care Facility with approximately 12 units and as a skilled nursing
facility having approximately 230 units, known as the Briarcliff Village Health
Center and located at 3403 South Vine Street, Tyler, Texas 75701, and all
conditions precedent to Buyer's, Health Center's and Village Health Center's
obligations to close the transaction described in that agreement, have been
satisfied or waived and the parties have closed such transaction
contemporaneously with the Closing of the transactions described in this
Agreement.
(c) Buyer, Briarcliff Health Center of Texas, a Texas general
partnership, and Briarcliff Health Center, Inc. d/b/a Village on Copeland, a
Texas corporation, shall have entered into a definitive agreement for the
purchase by, and Buyer and Owner shall have entered into a definitive agreement
for the lease by, Buyer of the facility licensed as a Class B Personal Care
Facility under Texas law, known as the Village on Copeland and located at 5317
New Copeland Road, Tyler, Texas 75703 ("Copeland").
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10.6 Other Documents. Sellers must have received such other documents as
Sellers may reasonably request for the purpose of (a) evidencing the accuracy of
any representation or warranty of Buyer, (b) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (c) evidencing the satisfaction of any
condition referred to in this Section 10, or (d) otherwise facilitating the
consummation of any of the transactions contemplated herein.
11. Termination.
11.1 Termination Events. By notice given to Title Agent and the other
parties to this Agreement, this Agreement may be terminated:
(a) by Buyer if any of the conditions in Section 9 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Termination Date;
(b) by Sellers, if any of the conditions in Section 10 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of either
Seller to comply with its obligations under this Agreement) and Sellers have not
waived such condition on or before the Termination Date;
(c) by either Buyer or Sellers if a Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(d) by mutual consent of Buyer and Sellers; or
(e) by either Buyer or Sellers 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 the
Termination Date, or such later date as the parties may agree upon.
11.2 Effect of Termination.
(a) If Buyer terminates this Agreement pursuant to Section 11.1(a) or
Section 11.1(c) or if the parties terminate this Agreement pursuant to Section
11.1(d) or Section 11.1(e), Title Agent shall return to Buyer the Deposit and
all interest earned thereon.
(b) If Sellers terminate this Agreement pursuant to Section 11.1(b) or
Section 11.1(c), Title Agent shall deliver the Deposit and all interest earned
thereon to Sellers only if all of the conditions in Section 9 have been
satisfied and neither Seller is in Breach of this Agreement. Otherwise, Title
Agent shall remit the Deposit and all interest earned thereon to Buyer.
(c) The remedies set forth in Section 11.2(b) are the exclusive
remedies of Sellers for their termination of this Agreement. Buyer's right of
termination under
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Section 11.1 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.
(d) If this Agreement is terminated pursuant to Section 11.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 14.5 will survive; provided, however, that if
this Agreement is terminated by Buyer because of the Breach of the Agreement by
either Seller or because one or more of the conditions to Buyer's obligations
under this Agreement is not satisfied as a result of either Seller's failure to
comply with its obligations under this Agreement, Buyer's right to pursue all
legal remedies will survive such termination unimpaired.
12. Deliveries and Actions To Be Taken At Closing.
12.1 Deliveries by Sellers. At or prior to the Closing, Sellers shall
deliver to Title Agent (duly executed where appropriate) to be held by it in
Escrow and to be disbursed in accordance with the provisions of Section 3.2:
(a) A Bill of Sale for the Acquisition Assets in the form of Exhibit E
attached hereto;
(b) An assignment and assumption agreement in the form of Exhibit F
attached hereto executed in counterpart by each Seller (the "Assignment and
Assumption Agreement");
(c) The Non-Competition Agreements executed in counterpart by each
Seller and each Shareholder;
(d) The Management Agreement executed in counterpart by Manager;
(e) General Warranty Deed acceptable to the Title Agent conveying to
Buyer the Real Property (the "Deed");
(f) Registration, title and motor vehicle transfer forms for, and
other documentation required to transfer to Buyer and enable Buyer to properly
license, each motor vehicle which is part of the Acquisition Assets;
(g) Confirmation that all of the Encumbrances other than the Permitted
Encumbrances have been removed as an Encumbrance against the Acquisition Assets;
(h) A certificate signed by each Seller certifying the fulfillment of
the conditions set forth in Section 9.1 through 9.3; and
(i) Consents of the other parties to the Assumed Contracts for those
Assumed Contracts where such consent is required for the assumption of such
Assumed Contracts.
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12.2 Deliveries by Buyer. At or prior to the Closing, Buyer shall deliver
to Title Agent (duly executed where appropriate) to be held by it in Escrow and
to be disbursed in accordance with the provisions of Section 3.2:
(a) Immediately available funds in the amount by which the Purchase
Price (adjusted to reflect appropriate credits and debits required by Section
2.2) exceeds the sum of the Deposit plus the accrued interest thereon;
(b) Certified copies of the Resolutions of the Board of Directors of
Buyer approving the transactions described in this Agreement;
(c) The Assignment and Assumption Agreement executed in counterpart by
Buyer;
(d) The Non-Competition Agreements executed in counterpart by Buyer;
(e) The Management Agreement executed in counterpart by Buyer;
(f) Certificates of good standing from the Secretaries of State of
Delaware and Texas;
(g) A certificate signed by an executive officer of Buyer certifying
fulfillment of the conditions set forth in Section 10.1 through 10.3; and
(h) Such other documents as may be reasonably necessary to effect the
Closing.
13. Indemnification; Remedies.
13.1 Survival; Right to Indemnification. All representations, warranties,
covenants and obligations in this Agreement, and any other certificate or
document delivered pursuant to this Agreement, shall survive the Closing. If a
party waives any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, such party's right to indemnification, payment of Damages or other
remedy based on a Breach of such representations, warranties, covenants and
obligations is waived only to the extent of the party's Knowledge of facts and
circumstances at the time the Breach is waived.
13.2 Indemnification and Payment of Damages By Owner. Owner shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Owner in this
Agreement;
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(b) any Breach by Owner of any covenant, agreement or obligation of
Owner in this Agreement; and
(c) any Liability of Owner, and all claims, demands and Proceedings
made or brought against Buyer by reason of Owner's ownership, use, operation or
condition of the Acquisition Assets prior to the Closing Date or any of the
transactions described in this Agreement, but excluding the Assumed Liabilities.
13.3 Indemnification and Payment of Damages By Operator. Operator shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Operator in
this Agreement;
(b) any Breach by Operator of any covenant, agreement or obligation of
Operator in this Agreement; and
(c) any Liability of Operator, and all claims, demands and Proceedings
made or brought against Buyer by reason of Operator's ownership, use, operation
or condition of the Acquisition Assets prior to the Closing Date or any of the
transactions described in this Agreement, but excluding the Assumed Liabilities.
13.4 Indemnification and Payment of Damages by Shareholders.
(a) Shareholders shall indemnify and hold Buyer's Indemnitees harmless
from, and shall pay to Buyer's Indemnitees the amount of, all Damages, arising,
directly or indirectly, from or in connection with:
(1) any Breach of any representation or warranty contained in
Section 4.9 or Section 6.9 of this Agreement;
(2) any Breach by Operator or Shareholders, or both, of any of
their covenants in this Agreement; or
(3) any Retroactive Obligation, as defined in Section 8.8,
incurred by Buyer.
(b) If Shareholders pay a claim to Buyer's Indemnitees pursuant to
this Agreement, then Shareholders shall be subrogated to all rights of Buyer's
Indemnitees against others for recovery of Damages, except affiliates,
employees, officers, directors, successors or assigns of Buyer's Indemnitees.
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<PAGE>
13.5 Indemnification By Buyer. Buyer shall indemnify and hold Sellers,
their Affiliates, and their respective successors and assigns (collectively,
"Sellers' Indemnitees") harmless from, and will pay to Sellers' Indemnitees the
amount of, all Damages arising directly or indirectly from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement;
(b) any Breach by Buyer of any covenant, agreement or obligation of
Buyer in this Agreement; and
(c) any claim, demand or Proceeding made or brought against Sellers
resulting from Buyer's operation of the Acquisition Assets after the Closing
Date.
13.6 Indemnity Claims.
(a) Notification of Claims. If any claim ("Claim") is asserted by a
party as to which such party may be entitled to indemnification hereunder, such
party (an "Indemnitee") shall notify ("Claims Notice") the party required by the
terms of this Agreement to indemnify the Indemnitee (an "Indemnifying Party")
within 10 days after (1) receipt of notice of commencement of any third-party
litigation against such Indemnitee, (2) receipt by such Indemnitee of notice of
any Claim by a third party ("Third Party Claim") pursuant to an invoice, notice
of claim or assessment, against such Indemnitee, or (3) such Indemnitee becomes
aware of the existence of any other event for which indemnification may be
sought from the Indemnifying Party. The Claims Notice shall describe the Claim
and the specific facts and circumstances in reasonable detail, shall include
copies of the notices referred to in (1) and (2), above, shall indicate the
amount, if known, or an estimate, if possible, of Damages that have been or may
be incurred or suffered.
(b) Defense of Third Party Claim by Indemnifying Party. The
Indemnifying Party may elect to defend or compromise any Third Party Claim, at
its own expense and by its own counsel, who shall be reasonably acceptable to
the Indemnitee. The Indemnitee may participate, at its own expense, in the
defense of any Third Party Claim assumed by the Indemnifying Party. Without the
approval of the Indemnitee, which approval shall not be unreasonably withheld or
delayed, the Indemnifying Party shall not compromise a Third Party Claim
defended by the Indemnifying Party which would require the Indemnitee to perform
or take any action or to refrain from performing or taking any action. If the
Indemnifying Party does not acknowledge its obligation to indemnify the
Indemnitee for a Third Party Claim, the Indemnitee shall have the right to
oversee the defense, compromise or settlement of such Claim and to consult with
its own counsel regarding the actions taken by the Indemnifying Party, all at
the expense of the Indemnifying Party.
(c) Assumption of Defense by Indemnitee. Notwithstanding anything in
this Section 13.6 to the contrary, if an Indemnitee determines in good faith
that there is a reasonable probability that a Proceeding may adversely affect
the Indemnitee or the Indemnitee's Affiliates other than as a result of monetary
Damages for which it would be entitled to indemnification under this Agreement,
the Indemnitee may, by notice to the Indemnifying Party,
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<PAGE>
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the Indemnifying Party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its Consent (which may
not be unreasonably withheld or delayed).
(d) Defense of Claim by Indemnitee. If, within 20 days of the
Indemnifying Party's receipt of a Claim Notice involving a Third Party Claim,
the Indemnifying Party shall not have notified the Indemnitee of its election to
assume the defense, the Indemnitee shall have the right to assume control of the
defense or compromise of such Claim, and the costs and expenses of such defense,
including costs of investigation and reasonable attorneys' fees, shall be added
to the Claim. The Indemnitee shall have the right to compromise such Claim
without the Consent of the Indemnifying Party.
(e) Cooperation of Parties. The party assuming the defense of any
Claim shall keep the other party reasonably informed at all times of the
progress and development of the party's defense of and compromise efforts
related to such Claim and shall furnish the other party with copies of all
relevant pleading, correspondence and other papers. In addition, the parties
shall cooperate with each other, and make available to each other and their
representatives all available relevant records or other materials required by
them for their use in defending, compromising or contesting any Claim. The
failure to notify the Indemnifying Party timely of the commencement of such
actions in accordance with Section 13.6(a) shall relieve the Indemnifying Party
from the obligation to indemnify under Sections 13.2, 13.3, 13.4, and 13.5, as
the case may be, but only to the extent the Indemnifying Party establishes by
competent evidence that it or he is or has been materially and adversely
prejudiced by such untimely Claims Notice.
13.7 Remedies; Right of Set-Off. The remedies provided in this Section 13
shall not be deemed exclusive of or limit any other remedies that may be
available to an Indemnitee. If a Buyer's Indemnitee is entitled to
indemnification as provided in Sections 13.2, 13.3, and 13.4, Buyer shall have
the right to set-off the entire amount thereof against the amounts, if any, that
Buyer may owe Sellers, provided, it shall be a condition to the exercise of the
right of set-off that Buyer gives Sellers notice specifying in reasonable detail
the basis for such set-off. Neither the exercise of, nor the failure to
exercise, such right of set-off will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it.
14. Miscellaneous Provisions.
14.1 Amendment; Waiver. This Agreement may be amended, modified or
superseded only by a written instrument signed by all of the parties to this
Agreement. No party shall be deemed to have waived compliance by another party
of any provision of this Agreement unless such waiver is contained in a written
instrument signed by the waiving party and no waiver that may be given by a
party will be applicable except in the specific instance for which it is given.
The failure of any party to enforce at any time any of the provisions of this
Agreement or to exercise any right or option contained in this Agreement or to
require at any time performance of any of the provisions of this Agreement, by
any of the other parties shall not be construed to be a waiver of such
provisions and shall not affect the validity of this Agreement or any of its
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<PAGE>
provisions or the right of such party thereafter to enforce each provision of
this Agreement. No course of dealing shall operate as a waiver or modification
of any provision of this Agreement or otherwise prejudice such party's rights,
powers and remedies.
14.2 Assignment; Binding Effect. Sellers shall have the right to assign
their rights under this Agreement with respect to the Acquisition Assets to a
qualified intermediary in order to consummate a tax-free exchange under section
1031 of the Code. Buyer agrees that it will fully cooperate with Sellers to
effect such an exchange as long as Buyer is not required to take title to any
other property and incurs no additional expense. Sellers may not otherwise
assign their rights hereunder without the Consent of Buyer. Buyer may assign any
of its rights and obligations under this Agreement without the prior Consent of
Sellers to any Affiliate of Buyer if Buyer remains responsible for its
obligations under this Agreement under the terms of such assignment. Buyer may
not otherwise assign its rights hereunder without the written consent of
Sellers. Subject to the foregoing, all the provisions of this Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the parties
to this Agreement and their respective heirs, legal representatives, successors
and assigns.
14.3 Construction and Interpretation of Agreement.
(a) Section titles or 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 of its provisions. All references in this
Agreement to Sections shall refer to Sections of this Agreement unless the
context clearly otherwise requires.
(b) When used in this Agreement, the word "including" shall have its
normal common meaning and any list of items that may follow such word shall not
be deemed to represent a complete list of the contents of the referent of the
subject.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. If any ambiguity or question of intent or
interpretation arises, no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
(d) Unless the context otherwise requires, when used in this
Agreement, 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.
(e) The parties do not intend that this Agreement shall confer on any
third party any right, remedy or benefit or that any third party shall have any
right to enforce any provision of this Agreement.
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<PAGE>
14.4 Severability of Provisions. If a court in any proceeding holds any
provision of this Agreement or its application to any person or circumstance
invalid, illegal 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, illegal or unenforceable, shall not be
affected, and shall be valid, legal 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 in this Agreement. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties intend that the court add to this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be valid and enforceable, so as to effect the original intent
of the parties to the greatest extent possible.
14.5 Confidentiality of Certain Information.
(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 "Confidential Information")
which any of them may receive from any other party concerning such other party.
Failure to mark any of the Confidential Information as non-public, proprietary
or confidential shall not affect its status as Confidential Information under
the terms of this Agreement. Confidential Information shall not include any
information in the possession of the receiving party (a) that is developed by
such party without reference to and independent of any Confidential Information,
(b) is learned from a third party not under any duty of confidence to the
disclosing party, or (c) becomes part of the public domain through no fault of
the receiving party.
(b) None of the parties nor their respective agents or employees
shall, without the prior consent of the disclosing party, disclose or use any
such Confidential Information, in whole or in part, except in connection with
the performance of the transactions described in this Agreement. Unless
otherwise required by law, none of the parties shall disclose any Confidential
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, all of whom must agree
to keep the Confidential Information confidential. If the Closing does not
occur, each party will destroy or return to the disclosing party all copies of
documents that contain that party's Confidential Information.
14.6 Confidentiality of Agreement. Unless otherwise required by law, no
party shall disclose either the terms or existence of this Agreement to any
person other than a party's counsel and its other representatives or such other
third parties with whom it must communicate to consummate the transactions
described in this Agreement.
14.7 Exhibits and Schedules. All Exhibits and Schedules to this Agreement,
if any, shall constitute part of this Agreement and shall be deemed to be
incorporated in this Agreement by reference and made a part of this Agreement as
if set out in full at the point where first mentioned. Nothing in the Schedules
shall be deemed adequate to disclose an exception to a representation or
warranty made in this Agreement unless the Schedule identifies the exception
with particularity and describes the relevant facts in detail. If any
inconsistency between the
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<PAGE>
statements in the body of this Agreement and those in the Schedules (other than
an exception expressly set forth as such in the Schedules to a specifically
identified representation or warranty), the statements in the body of this
Agreement shall control. Without limiting the generality of the foregoing, the
mere listing (or inclusion of a copy) of a document or other item shall not be
deemed adequate to disclose an exception to a representation or warranty made in
this Agreement (unless the representation or warranty has to do with the
existence of the document or other item itself). The parties intend that each
representation, warranty, covenant and obligation contained in this Agreement
shall have independent significance. If any party has breached any
representation, warranty, covenant or obligation contained in this Agreement in
any respect, merely because there exists another representation, warranty,
covenant or obligation relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the party's breach of the first representation,
warranty, covenant or obligation.
14.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
14.9 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties related to its subject matter and supersedes all
prior proposals, understandings, agreements, correspondence, arrangements and
contemporaneous oral agreements relating to subject matter of this Agreement. No
representation, promise, inducement or statement of intention has been made by
any party which has not been embodied in this Agreement.
14.10 Expenses. Sellers shall pay (a) all transfer taxes, intangible taxes
and similar Taxes and all sales, use transfer and similar Taxes, relating to the
transfer of the Acquisition Assets to Buyer, (b) the cost of the Survey, and (c)
the cost of their legal counsel. Buyer shall pay (a) the cost of its legal
counsel, (b) the cost of any environmental assessment of the Real Property (c)
the cost of DevCon's sales commission, (d) the cost of any recordation fees to
put the Deed of record with the appropriate Governmental Body, and (e) the cost
of premiums on the Title Policy. Except as otherwise expressly provided for in
this Agreement, each party will bear its or his own expenses incurred in
connection with the preparation, execution and performance of its obligations
under this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.
14.11 Further Assurances. Each party shall execute and deliver such
additional documents or take such additional actions as may be requested by
another party to this Agreement if such requested document or action is
reasonably necessary to effect the transactions described in this Agreement.
14.12 Governing Law. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Texas,
without giving effect to any conflict of law rule or principle of such state.
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<PAGE>
14.13 No Public Announcement. No party shall make any press release or
other public announcement regarding this Agreement or the transactions described
in this Agreement, unless such party is obligated by law or the rules of any
stock exchange upon which its shares are traded to make such a disclosure. When
a party determines that it is obligated by law or the rules of a stock exchange
to make such a disclosure, it shall notify all of the other parties prior to
such disclosure and all of the parties shall cooperate to cause a mutually
agreeable release or announcement to be issued.
14.14 Notices. All notices, requests, consents, approvals, waivers, demands
and other communications required or permitted to be given or made under this
Agreement shall be in writing and shall be deemed delivered to the parties (a)
on the date of personal delivery or transmission by facsimile transmission, (b)
on the first business day following the date of delivery to a nationally
recognized overnight courier service, or (d) or the third business day following
the date of deposit in the United States Mail, postage prepaid, by certified
mail, in each case, addressed as follows, or to such other address, person or
entity as any party may designate by notice to the others in accordance
herewith:
If to Buyer: Atria Communities, Inc.
515 West Market Street, Suite 200
Louisville, KY 40202
Attn: J. Timothy Wesley, Chief Financial
Officer and Audra J. Eckerle,
General Counsel
Facsimile: (502) 596-4160
With Copy to: Carmin D. Grandinetti, Esq.
Greenebaum Doll & McDonald PLLC
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202
Facsimile Number: (502) 540-2129
If to Sellers or Shareholders: Larry S. Parker
8215 Cambridge Road
Tyler, TX 75703
Facsimile Number: (903) 593-0484
With Copy to: James B. Gillen, Jr., Esq.
Conner, Gillen, Yarbrough & Anderson, P.C.
613 Shelley Park Plaza
Tyler, TX 75701
Facsimile Number: (903) 581-8790
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<PAGE>
14.15 Recovery of Expenses by Prevailing Party. The party prevailing in
any civil action, arbitration or other proceeding shall be entitled to recover
from the nonprevailing party, in addition to any damages the prevailing party
may have been awarded, all reasonable expenses that the prevailing party may
have incurred in connection with such proceeding, including accounting fees
attorneys' fees and expert witnesses' fees.
14.16 Cumulative Remedies; Specific Performance. No right or remedy
conferred upon or reserved to any of the parties under the terms of this
Agreement is intended to be, nor shall it be deemed, exclusive of any other
right or remedy provided in this Agreement or by law or equity, but each shall
be cumulative of every other right or remedy. The parties understand and
acknowledge that a party may be damaged irreparably by reason of a failure of
another party to perform any obligation under this Agreement. Accordingly, if
any party attempts to enforce the provisions of this Agreement by specific
performance (including preliminary or permanent injunctive relief), the party
against whom such action or proceeding is brought waives the claim or defense
that the other party has an adequate remedy at law.
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
Atria Communities, Inc.
By: /s/ J. Timothy Wesley
-----------------------------
Title: Chief Financial Officer
--------------------------
("Buyer")
Nursing Care Four
By: /s/ Larry S. Parker
-----------------------------
Title: General Partner
--------------------------
("Owner")
Chandler Nursing Center, Inc.
By: /s/ Larry S. Parker
-----------------------------
Title: President
--------------------------
("Operator")
/s/ Larry S. Parker
--------------------------------
Larry S. Parker
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<PAGE>
/s/ Randy Parker
-----------------------------------------
Randy Parker
/s/ Mary G. Tedford
-----------------------------------------
Mary G. Tedford
/s/ Laura R. Tedford
-----------------------------------------
Laura R. Tedford
/s/ David Tedford
-----------------------------------------
David Tedford
/s/ Don Steele
-----------------------------------------
Don Steele
("Shareholders")
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EXHIBIT 2.4
- --------------------------------------------------------------------------------
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
BY AND BETWEEN
ATRIA COMMUNITIES, INC.
AND
LARRY S. PARKER
- --------------------------------------------------------------------------------
December 15, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Purchase and Sale of Assets............................................. 1
1.1 Acquisition Assets................................................ 1
1.2 Excluded Assets................................................... 2
1.3 Assumed Liabilities; No Assumption of Other Liabilities........... 3
2. Purchase Price; Deposit; Payment........................................ 3
2.1 Purchase Price; Deposit; Payment.................................. 3
2.2 Prorations........................................................ 3
2.3 Allocation of Purchase Price...................................... 4
3. Deposit; Escrow; Closing; Termination................................... 4
3.1 Escrow............................................................ 4
3.2 The Closing....................................................... 4
3.3 Actions Taken by Title Agent on Closing Date and Thereafter....... 5
3.4 Termination of Escrow............................................. 5
4. Representations and Warranties of Seller................................ 5
4.1 Authority; No Conflict............................................ 5
4.2 Absence of Certain Events......................................... 7
4.3 Assets Necessary To Business...................................... 7
4.4 Books and Records................................................. 8
4.5 Brokers........................................................... 8
4.6 Completeness of Statements........................................ 8
4.7 Contracts......................................................... 8
4.8 Current Compensation of Employee.................................. 8
4.9 Employee Benefits................................................. 9
4.10 Environmental Matters............................................. 9
4.11 Financial Statements.............................................. 10
4.12 Insurance......................................................... 10
4.13 Labor Matters..................................................... 11
4.14 Liabilities Not Disclosed On Balance Sheet........................ 11
4.15 Litigation........................................................ 11
4.16 Medicare, Medicaid and Other Third Party Payors................... 11
4.17 Permits........................................................... 11
4.18 Proprietary Property.............................................. 12
4.19 Taxes............................................................. 12
4.20 Title to Properties; Condition and Repair......................... 12
4.21 Real Property..................................................... 13
4.22 Utilities......................................................... 13
5. Representations and Warranties of Buyer................................. 14
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
5.1 Corporate Status............................................ 14
5.2 Authority; Consents; Enforcement: Noncontravention;
Noncompetes................................................. 14
5.3 No Agent or Broker.......................................... 14
6. Additional Covenants of the Parties.............................. 14
6.1 Access and Investigation.................................... 14
6.2 Operation of the Facility................................... 15
6.3 Required Consent............................................ 15
6.4 Notification................................................ 15
6.5 No Negotiation.............................................. 15
6.6 Approvals of Governmental Bodies............................ 16
6.7 Transition of the Facility.................................. 16
6.8 Seller's Employees and Employee Benefits.................... 16
6.9 Survey...................................................... 17
6.10 Title Insurance............................................. 17
6.11 Filing of Taxes; Payment.................................... 17
6.12 Sales and Other State Taxes................................. 18
6.13 Development Agreement....................................... 18
6.14 Non-Competition Agreement................................... 18
6.15 Further Assurances.......................................... 18
7. Conditions Precedent to Buyer's Obligation to Close.............. 18
7.1 Accuracy of Representations................................. 18
7.2 Seller's Performance........................................ 18
7.3 No Proceedings.............................................. 18
7.4 Consents.................................................... 19
7.5 Texas DHS Authorization..................................... 19
7.6 Other Documents............................................. 19
7.7 Title Policy................................................ 19
7.8 No Prohibition.............................................. 19
8. Conditions Precedent to Seller's Obligation to Close............. 19
8.1 Accuracy of Representations................................. 19
8.2 Buyer's Performance......................................... 20
8.3 No Injunction............................................... 20
8.4 Consents.................................................... 20
8.5 Definitive Agreements for Purchase and Sale of Other
Facilities.................................................. 20
8.6 Other Documents............................................. 20
9. Termination...................................................... 21
9.1 Termination Events.......................................... 21
9.2 Effect of Termination....................................... 21
</TABLE>
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<PAGE>
TABLE OF CONTENTS
Section Page
10. Deliveries and Actions To Be Taken At Closing........... 22
10.1 Deliveries by Seller............................... 22
10.2 Deliveries by Buyer................................ 22
11. Indemnification; Remedies............................... 23
11.1 Survival; Right to Indemnification................. 23
11.2 Indemnification and Payment of Damages By Seller... 23
11.3 Indemnification By Buyer........................... 23
11.4 Indemnity Claims................................... 24
11.5 Remedies; Right of Set-Off......................... 25
12. Miscellaneous Provisions................................ 25
12.1 Amendment; Waiver.................................. 25
12.2 Limited Assignment; Binding Effect................. 26
12.3 Construction and Interpretation of Agreement....... 26
12.4 Severability of Provisions......................... 26
12.5 Confidentiality of Certain Information............. 27
12.6 Confidentiality of Agreement....................... 27
12.7 Exhibits and Schedules............................. 27
12.8 Counterparts....................................... 28
12.9 Entire Agreement................................... 28
12.10 Expenses........................................... 28
12.11 Further Assurances................................. 28
12.12 Governing Law...................................... 28
12.13 No Public Announcement............................. 28
12.14 Notices............................................ 28
12.15 Recovery of Expenses by Prevailing Party........... 29
12.16 Seller's Knowledge................................. 29
12.17 Cumulative Remedies; Specific Performance.......... 29
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<PAGE>
EXHIBITS
Description Exhibit
Certain Definitions.............................................. A
Assumed Contracts................................................ B
Purchase Price Allocation........................................ C
Survey Requirements.............................................. D
Development Agreement............................................ E
Bill of Sale..................................................... F
Assignment and Assumption Agreement.............................. G
Non-Competition Agreement........................................ H
SCHEDULES
Description Schedule
Authority, No Conflict and Organization, Seller's Consents....... 4.1
Absence of Certain Events........................................ 4.2
Employees and Compensation....................................... 4.8
Environmental Matters............................................ 4.10
Sellers' Financial Statements.................................... 4.11
Insurance........................................................ 4.12
Labor Matters.................................................... 4.13
Absence of Undisclosed Liabilities............................... 4.14
Litigation....................................................... 4.15
Permits.......................................................... 4.17
Personal Property................................................ 4.20
Real Property.................................................... 4.21
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<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets is entered into and
effective as of December 15, 1997, by and between Atria Communities, Inc., a
Delaware corporation ("Buyer") and Larry S. Parker, an individual doing business
as Briarcliff Village Retirement Center ("Seller").
Recitals:
A. Seller operates Briarcliff Village Retirement Center and Personal Care
Center located at 3500 South Vine Street, Tyler, Texas 75701 (the "Facility").
The Facility has approximately 62 apartments licensed as a Class A Personal Care
Facility under Texas law and approximately 100 apartments designed for elderly
residents.
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer the Facility, and all of the assets and properties located at the Facility
and owned or used by Seller in operating the Facility, pursuant to the terms of
this Agreement.
C. In addition to the terms defined in this Agreement, certain other
terms used in this Agreement are in the Exhibit of Certain Defined Terms
attached to this Agreement as Exhibit A and such terms, when used in this
Agreement, have the meaning set forth in that Exhibit.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Purchase and Sale of Assets.
1.1 Acquisition Assets. Upon the terms and subject to the conditions
of this Agreement, at the "Closing" on the "Closing Date" (as such terms are
defined in Section 3.2), Seller shall sell, transfer, convey, assign and deliver
to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of
all Encumbrances (other than the "Permitted Encumbrances" (as defined in Section
7.7)), all of Seller's right, title and interest under, in and to the Facility
and, except as otherwise provided in Section 1.2, all of Seller's property and
assets, real and personal, tangible and intangible that are located at, and used
by Seller in the operation of, the Facility, including the following
(collectively, the "Acquisition Assets"):
(a) All of the assets and properties reflected on the "Acquisition
Balance Sheet" (as defined in Section 4.11) and those assets and properties
acquired since the date of the Acquisition Balance Sheet, except those assets
that have been disposed of in the Ordinary Course of Business between the date
of the Acquisition Balance Sheet and the Closing Date;
(b) The real property described on Schedule 4.21, together with all
improvements, buildings and fixtures located thereon and all easements and
rights appurtenant thereto (the "Real Property");
<PAGE>
(c) All machinery, equipment, fixtures, computer hardware and
software (subject to any restrictions by the licensor on the assignment thereof)
tools, supplies, spare parts, furniture, vehicles and all other tangible
personal property and assets located at the Facility and owned or leased by
Seller and used or held for use in connection with the Facility, including those
identified on Schedule 4.20 (the "Personal Property");
(d) The motor vehicles identified on Schedule 4.20;
(e) All inventories of cleaning supplies, food, all medical supplies,
inventory of drugs and other medical inventory and all other inventories and
supplies located in and about the Facility (the "Inventory");
(f) Resident records, if any, for all residents in the Facility on
the Closing Date;
(g) All of Seller's interest (including all rights, benefits, duties
and obligations) in those Contracts listed on Exhibit B ("Assumed Contracts"),
including all assumable prepaid expenses arising under the Assumed Contracts
(the "Prepaid Expenses");
(h) All Governmental Authorizations owned, held or utilized by Seller
in connection with the ownership of the Acquisition Assets and the operation of
the Facility, and all pending applications therefor, in each case to the extent
transferrable to Buyer, including those listed on Schedule 4.17 (the "Permits");
(i) All data and records of Seller related to the Acquisition Assets
including equipment logs, operating guides and manuals, and other similar
documents and records ("Data and Records");
(j) The nonexclusive right and license to use the name "Briarcliff
Village Retirement Center and Personal Care Center" solely in connection with
the operation of the Facility;
(k) The going concern value and goodwill associated with the
operation of the Facility; and
(l) All other properties and assets of every kind, character or
description, tangible or intangible, owned by Seller and located at, and used or
held for use in connection with, the Facility, whether or not similar to the
items or types specifically set forth above.
1.2 Excluded Assets. The only assets of Seller located at, or used in
connection with the operation of, the Facility not included in the Acquisition
Assets and not to be purchased and sold under this Agreement are the following
(collectively, the "Excluded Assets"):
(a) All cash, cash equivalents, securities and investments, loan
costs and accounts receivable, notes receivable, premiums receivable,
commissions receivable, and other rights to receive payments from residents of
the Facility or from others, including all trade accounts receivable
representing amounts payable to Seller for services rendered to residents of the
Facility prior to the Closing Date;
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(b) Any Contract to which Seller is a party that is not listed on
Exhibit B;
(c) The storage building used in connection with the operation of the
Facility and which is not located on the Real Property; and
(d) Any award to which Seller is entitled pursuant to a condemnation
Proceeding relating to real property adjacent to the Real Property.
1.3 Assumed Liabilities; No Assumption of Other Liabilities. Effective as
of the Closing, Buyer shall assume, perform and discharge only those obligations
of Seller arising solely under the Assumed Contracts on or after the Closing
Date and all resident deposit obligations of Seller arising under Assumed
Contracts with the residents; provided Buyer receives a credit at the Closing of
an amount equal to one-half of the amount of the resident deposits assumed by
Buyer. Except for the Liabilities identified in the immediately preceding
sentence, Buyer does not assume, and shall not in any manner become responsible
or liable for, and Seller shall retain, pay, discharge and perform in full, all
other Liabilities of Seller. Seller shall remain liable and responsible for all
Liabilities of Seller of any nature whatsoever not expressly assumed by Buyer
under the terms of this Agreement.
2. Purchase Price; Deposit; Payment.
2.1 Purchase Price; Deposit; Payment.
(a) The purchase price for the Acquisition Assets shall be $11,530,000
("Purchase Price").
(b) Within ten days of Buyer's receipt of an indemnification letter
from the title insurance company ("Title Company") for which Smith County
Abstract Company ("Title Agent") is an agent, Buyer shall deliver $250,000 to
Title Agent or Title Company, to be held by Title Agent or Title Company in an
interest-bearing account as a good faith deposit ("Deposit").
2.2 Prorations. All ad valorem real property taxes and assessments on the
Real Property that are due and payable in the year of Closing shall be prorated
on the basis of a 365-day year, in the manner customarily followed in Tyler,
Texas as of the Closing Date. All rents actually received by Seller from
residents for the month in which the Closing occurs shall be prorated between
Buyer and Seller based on the number of days in the month. At the Closing, the
net amount of such prorations shall be paid by Buyer to Seller in addition to
the Purchase Price, or shall be paid by Seller to Buyer, as the case may be. If
the Closing occurs before the amounts of the taxes and assessments to be
prorated pursuant hereto are known by the parties, such taxes and assessments
shall be prorated at the Closing based upon the amounts assessed in the
immediately preceding calendar or fiscal year, and when the amount of taxes and
assessments for the year in which the Closing occurs are known by the parties,
the parties shall reapportion such taxes or assessments based upon the actual
amount thereof.
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2.3 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Acquisition Assets as specified in Exhibit C to this Agreement. After
the Closing, the parties agree to make consistent use of the allocation for all
Tax purposes and in any and all filings, declarations and reports with the IRS
related to this Agreement, including, the reports required to be filed under
Section 1060 of the IRC, if applicable. Buyer shall prepare and deliver IRS Form
8594 to Seller within 45 days after the Closing Date if such form is required to
be filed with the Internal Revenue Service. In any proceeding related to the
determination of any Tax, no party hereto shall contend or represent that such
allocation is not correct.
3. Deposit; Escrow; Closing; Termination.
3.1 Escrow. This Agreement constitutes (a) a contract of purchase and sale
between the parties and (b) escrow instructions to Title Agent for the escrow
created hereby ("Escrow"). Either party may deliver a fully signed copy of this
Agreement to Title Agent, and this Escrow shall be deemed open on the date
("Escrow Opening Date") when Title Agent has received a copy or copies of this
Agreement signed by both parties and the standard terms and conditions of
escrow, if any, that Title Agent may require signed by both parties.
3.2 The Closing. Title Agent will close (the "Closing") the Escrow and the
transactions described in this Agreement on the date (the "Closing Date") that
all of the following conditions are satisfied but in no event later than
February 2, 1998 (the "Termination Date"), unless Buyer and Seller agree
otherwise:
(a) All funds and documents described in Section 10 have been
delivered to Title Agent.
(b) Title Agent has received notification from Buyer that each of the
conditions set forth in Section 7 has been either satisfied or Buyer has waived
satisfaction of any unsatisfied condition.
(c) Title Agent has received notification from Seller that each of the
conditions set forth in Section has been either satisfied or Seller has waived
satisfaction of any unsatisfied condition.
(d) Title Agent can issue the "Title Policy" (as defined in Section
7.7), insuring fee simple title to the Real Property in the amount of the
Purchase Price, subject to only (1) the Encumbrances for real estate Taxes and
statutory liens for Taxes not yet due and payable, and (2) the "Permitted
Encumbrances" (as defined in Section 7.7), and with such endorsements that Buyer
has requested.
3.3 Actions Taken by Title Agent on Closing Date and Thereafter.
(a) On the Closing Date when all of the conditions set forth in
Section 3.2 have been satisfied, Title Agent shall file with the appropriate
officials the "Deed" (as defined in Section 10.1(e)) and such other documents as
may be necessary to procure the Title Policy, and
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shall disburse the funds and documents to the parties in the manner set forth in
Section 10. The effective time of the Closing shall be 12:01 a.m., Central Time,
on February 1, 1998 (the "Effective Time").
(b) If Title Agent cannot close Escrow prior to the Termination Date,
it shall, nevertheless, close Escrow when all conditions have been satisfied or
waived unless Title Agent receives after the Termination Date, but prior to the
close of Escrow, a notice to terminate Escrow from a party who, at the time the
notice is delivered, is not in Breach of any provision of this Agreement.
3.4 Termination of Escrow. Within two working days after delivery of a
notice of termination from one party to this Agreement in accordance with
Section 9.1, Title Agent shall deliver a copy of the notice to the other party.
Unless the other party delivers to Title Agent a notice of objection to
termination of Escrow within three days after Title Agent delivered the notice
of termination to that party, Title Agent shall promptly terminate Escrow and
shall return all funds (excluding the Deposit) and documents held by it to the
party depositing the same and disburse the Deposit in the manner set forth in
Section 9.2. If Title Agent receives notice of objection to the termination of
Escrow within the three-day period, Title Agent shall hold all funds (including
the Deposit) and documents delivered to it in connection with Escrow and Title
Agent may, in its sole discretion, take no further action until otherwise
directed by other instructions signed by both parties or a final order or
judgment of a court of competent jurisdiction. Title Agent will have no
liability or responsibility for determining that a party giving a notice of
termination is not in default under this Agreement.
4. Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer as follows:
4.1 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against him in accordance with its terms.
Seller has the full right, power, authority and capacity to execute and deliver
this Agreement and to perform his obligations under this Agreement and to
consummate all of the transactions described in this Agreement.
(b) Seller has, and at all times has had, full power and authority to
own and lease his properties as such properties are now owned and leased and to
conduct his business as it is now being conducted. Seller's Federal Employer
Identification Number is 75-1626550. Seller certifies that (a) the number shown
above is his correct taxpayer identification number, (b) he is not subject to
backup withholding because (1) he has not been notified that he is subject to
backup withholding as a result of a failure to report all interest or dividends
or (2) the Internal Revenue Service has notified him that he is no longer
subject to backup withholding, and (c) he is not a foreign Person within the
meaning of Sections 1445 and 1446 of the IRC, and the regulations promulgated
thereunder.
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(c) Except as set forth in Schedule 4.1, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions described in this Agreement will, directly or indirectly (with or
without notice or lapse of time):
(1) Contravene, conflict with, or result in a violation of, any
Legal Requirement or give any Governmental Body or other Person the right
to challenge any of the transactions described in this Agreement or to
exercise any remedy or obtain any relief under, any Legal Requirement
applicable to Seller, or any of the Acquisition Assets, except where any
such contravention, conflict, violation, or right would not result in a
Material Adverse Effect to Seller, the Facility, or any of the Acquisition
Assets;
(2) Contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Seller or that otherwise relates to Seller's
business, or any of the Acquisition Assets, except where any such
contravention, conflict, violation, revocation, withdrawal, suspension,
cancellation, termination or modification would not result in a Material
Adverse Effect to Seller, the Facility, or any of the Acquisition Assets
and except for the requirement that Buyer must apply for a license from the
Texas Department of Human Services (the "Texas DHS") to operate the
Facility;
(3) Cause Seller, or to the Knowledge of Seller cause Buyer, to
become subject to, or to become liable for the payment of, any Tax to any
Governmental Body, other than real estate and ad valorem property Taxes
normally assessed in Texas against owners of such property;
(4) Contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Assumed Contract, other than those
Persons who are parties to Assumed Contracts that require Consent from such
Persons prior to the assignment of the Assumed Contract; or
(5) Result in the imposition or creation of any Encumbrance on or
related to any of the Acquisition Assets owned or used by Seller.
(d) Seller is not nor will he be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the transactions
described in this Agreement, except as set forth in Schedule 4.1 and except
where the failure to give such notice or Consent would not have a Material
Adverse Effect on Seller, the Facility, or any of the Acquisition Assets.
(e) Seller has complied, and is in compliance, with all Legal
Requirements applicable to him and his operations and the ownership or use of
the Acquisition Assets, except where the failure to comply would not have a
Material Adverse Effect on Seller, the Facility, or any of the Acquisition
Assets. Seller does not have Knowledge of any facts or circumstances which may
constitute or result in any noncompliance.
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4.2 Absence of Certain Events. Except as set forth on Schedule 4.2, since
the date of the Acquisition Balance Sheet, Seller has operated the Facility only
in the Ordinary Course of Business and has not:
(a) Experienced any event, occurrence or condition which, individually
or in the aggregate has or is reasonably likely to have a Material Adverse
Effect on the Facility or any of the Acquisition Assets;
(b) Entered into or committed to any transaction that, individually or
in the aggregate, has or is reasonably likely to have, a Material Adverse Effect
on the Facility or any of the Acquisition Assets;
(c) Changed any of his accounting methods, principles or practices;
(d) Incurred or agreed to incur any indebtedness for borrowed money or
allowed any of the Acquisition Assets to be subjected to any Encumbrance
whatsoever, other than non-monetary restrictions which will not materially
interfere with Seller's use and enjoyment of the Acquisition Assets;
(e) Terminated or amended or suffered the termination or amendment of
any Assumed Contracts or Permit, where the loss of such Assumed Contract or
Permit would result in a Material Adverse Effect on Seller or the Facility;
(f) Adopted, modified or amended any Employee Benefit Plan;
(g) Entered into any Contract to do any of the above;
And, except as set forth on Schedule 4.2, Seller has:
(h) Continued his operations at the Facility in the Ordinary Course of
Business and maintained his operations, the Facility, Acquisition Assets, books
of account, records and files in substantially the same manner as heretofore;
and
(i) Used his Best Efforts to preserve his business at the Facility.
4.3 Assets Necessary To Business. Except for assets used by Seller
principally for accounting functions, the Acquisition Assets (provided Buyer
replaces the Excluded Assets) are sufficient for Buyer to operate the Facility
on and after the Closing Date in the same manner that Seller operated the
Facility prior to the date of this Agreement.
4.4 Books and Records. The books of account of Seller are complete and
correct in all material respects, and all monies due or to become due from or to
or owing by, and all Liabilities of Seller, by reason of any transaction, matter
or cause whatsoever have been duly, correctly and completely entered therein in
all material respects.
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4.5 Brokers. All negotiations relative to this Agreement and the
transactions described in this Agreement have been conducted by Seller directly
with Buyer, without the assistance or intervention of any other Person except
for DevCon Real Estate Brokers ("DevCon"). To Seller's Knowledge, DevCon is the
only Person who may have a valid claim against Buyer for a finder's fee,
investment banking fees, brokerage commission or other like payment.
4.6 Completeness of Statements. Seller has disclosed to Buyer in writing
all material facts known to him relating to the representations and warranties
of Seller made in this Agreement. No representation, warranty or covenant of
Seller 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 when taken as a whole.
4.7 Contracts. Seller has delivered to Buyer a complete copy of each
Assumed Contract listed in Exhibit B. Seller has performed in all respects all
obligations to be performed by him under the terms of Assumed Contracts through
the date of this Agreement, and he is not in default under any Assumed Contract.
Moreover, to the Knowledge of Seller, no event has occurred which, with notice
or the passage of time, or both, would constitute a default under any Assumed
Contract. To the Knowledge of Seller, there is no basis for any of the other
parties to Assumed Contracts to assert that Seller is in default thereunder and
the other parties to Assumed Contracts are not in default thereunder. Except for
those Assumed Contracts described on Exhibit B whose terms require the prior
Consent of the other party thereto for an assignment to Buyer, the consummation
of the transactions described in this Agreement will not cause a default under
any Assumed Contract. There are no existing disputes between Seller, on the one
hand, and any other party to any Assumed Contract, on the other hand.
4.8 Current Compensation of Employee.
(a) Set forth on Schedule 4.8 is a complete list (the "List") of
Seller's employees on the date of such List who work at the Facility along with
the amount of the current wage rate for hourly employees and monthly salaries
for salaried employees and the total compensation paid or due for services to
each management employee for 1997, and a complete description of any commitments
to such management employees regarding compensation payable thereafter. Except
as set forth on Schedule 4.8, since the date of the List on Schedule 4.8, there
has been no change in the management employees who work at the Facility. Except
as set forth on Schedule 4.8, (1) there has been no change in the salaries or
compensation paid to employees of Seller since the date of the Acquisition
Balance Sheet other than in the Ordinary Course of Business of Seller with
updated information being furnished prior to Closing, and (2) Seller has not,
because of past practices with or previous commitments to his employees,
established any rights or expectations on the part of such employees to receive
additional compensation inconsistent with past practices for any period after
the date hereof.
(b) Except as set forth on Schedule 4.8, no employee of Seller is a
party to or subject to any Contract containing covenants by such employees not
to compete in any line of business with any Person or restricting the customers
from whom or the area in which the employee may solicit or conduct business.
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4.9 Employee Benefits. Except for each group health plan (as defined in
Section 4980B(g)(2) of the IRC) ("Group Health Plan") maintained by Seller,
Seller does not maintain or contribute to any Employee Benefit Plan. To the
Knowledge of Seller, each Group Health Plan maintained by Seller 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
IRC (and the regulations thereunder). For purposes of this Section 4.9, any
reference to Seller shall be deemed to refer also to any Person that is under
common control or affiliated with Seller within the meaning of Section
4001(a)(14) of ERISA and Section 414(b), (c), (m) and (o) of the IRC.
4.10 Environmental Matters.
(a) Except as disclosed on Schedule 4.10, (1) Seller is, and at all
times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law, (2) Seller has no basis to
expect, nor to the Knowledge of Seller, has Seller, or any other Person for
whose conduct Seller is or may be held responsible, received any Order, notice,
or other communication from (A) any Governmental Body or Person acting in the
public interest, or (B) the current or prior owner or operator of the Facility,
of any actual or Threatened 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 relating to
the Facility. Seller has not generated, manufactured, refined, transferred,
imported, used, or processed Hazardous Materials from the Facility, nor, to
Seller's Knowledge, has any other Person for whose conduct Seller is or may be
held responsible, transported, treated, stored, handled, transferred, disposed,
recycled or received Hazardous Materials.
(b) Except as set forth on Schedule 4.10, there are no pending or, to
the Knowledge of Seller, 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, affecting the Facility or
any of the Acquisition Assets.
(c) Except as set forth on Schedule 4.10, Seller does not have any
basis to expect, nor has Seller, or to the Knowledge of Seller, any other Person
for whose conduct Seller is or may be held responsible received, any notice,
Order, or other communication that relates to Hazardous Activity, 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 regarding the Facility or any of the Acquisition Assets or to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used or processed by Seller, or any other Person for whose conduct he is or may
be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) Except as set forth on Schedule 4.10, neither Seller, nor to the
Knowledge of Seller, any other Person for whose conduct Seller is or may be held
responsible, have any Environmental, Health, and Safety Liabilities related to
the Facility or the Acquisition Assets, or at any property geologically or
hydrologically adjoining the Facility.
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(e) Except as set forth on Schedule 4.10, there are no Hazardous
Materials present on or in the Environment at the Real Property or, to the
Knowledge of Seller, at any geologically or hydrologically adjoining the Real
Property, other part of the Real Property or such adjoining property, or
incorporated into any improvement located thereon or in any Personal Property.
Neither Seller, nor any other Person for whose conduct Seller is or may be held
responsible, has permitted or conducted, or are aware of, any Hazardous Activity
conducted with respect to the Facility or any of the Acquisition Assets.
(f) Except as set forth on Schedule 4.10, there has been no Release,
or to the Knowledge of Seller, a Threat of Release, of any Hazardous Materials
at or from the Facility or the Real Property.
4.11 Financial Statements. Set forth in Schedule 4.11 are the financial
statements of Seller related to the operation of the Facility for the years
ending December 31, 1996, 1995 and 1994, all of which have been audited by Jack
H. Sturgess, independent auditor of Seller. Such financial statements are
hereinafter referred to collectively as the "Year-end Financials." Also set
forth in Schedule 4.11 are the interim unaudited financial statements of Seller
relating to the operations of the Facility for the ten-month period ended
September 30, 1997 (the "Stub Period Financials"). The Year-end Financials and
the Stub Period Financials are hereinafter collectively referred to as the
"Financial Statements" and the balance sheet, dated September 30, 1997, that is
included in the Stub Period Financials is referred to as the "Acquisition
Balance Sheet." The Financial Statements have been prepared from the books and
records of Seller in conformity with GAAP, on a consistent basis and present
fairly, in all material respects, the financial position of Seller at the
respective dates of the balance sheets included therein and the results of
operations and changes in financial position of Seller for the respective
periods covered thereby, except for, in the case of Stub Period Financials, the
absence of footnotes (that if presented would not differ materially from those
included in the Year-End Financial Statements) and normal recurring year-end
adjustments that will not result in a Material Adverse Effect on Seller's
financial condition and results of operations.
4.12 Insurance. Included as Schedule 4.12 is a complete listing of all
insurance policies related to the Acquisition Assets insuring Seller, and bonds
issued concerning the Acquisition Assets, detailing the coverage insured against
and the amount thereof, the insurance carrier, the policy number and the premium
payments. Except as disclosed on Schedule 4.12, Seller does not and has not
maintained any self-insurance programs. Schedule 4.12 further includes a
statement of all claims for insured losses filed by Seller within the three-year
period prior to the date hereof. Except as listed on Schedule 4.12, Seller has
not received any notice from any insurance carrier that (a) Seller's 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.
4.13 Labor Matters. Except as disclosed on Schedule 4.13, Seller has not
been, nor is he currently a party to, nor is he negotiating, any collective
bargaining agreement. There has not been, there is not presently pending or
existing, and to the Knowledge of Seller, any Threatened, (a) strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) Proceeding against
or affecting Seller's operation of the Facility relating to (1) to the Knowledge
of Seller, an alleged violation of any Legal Requirement pertaining to labor
relations or employment
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matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission
or any comparable Governmental Body, (2) organizational activities, or other
labor or employment dispute against or affecting Seller or the Facility, or (c)
application for certification of a collective bargaining agent. To the Knowledge
of Seller, no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute.
4.14 Liabilities Not Disclosed On Balance Sheet. As of the date of the
Acquisition Balance Sheet, Seller, regarding his ownership and operation of the
Acquisition Assets, had no material Liabilities except as shown on the
Acquisition Balance Sheet. Except as shown on Schedule 4.14, since the date of
the Acquisition Balance Sheet, Seller has not incurred or become subject to any
Liabilities related to the Facility, other than Liabilities incurred in the
Ordinary Course of Business of the Facility consistent with past practices, all
of which have been paid in full in the Ordinary Course of Business or are
reflected on Seller's 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 materially
inconsistent with the representations, warranties and covenants of Seller
contained in this Agreement, or (b) has or may be expected to have a Material
Adverse Effect.
4.15 Litigation. Except as set forth on Schedule 4.15, to Seller's
Knowledge there are no Proceedings or claims, pending or Threatened against or
affecting Seller, the Acquisition Assets, the Facility, or any employee of
Seller, by or before any Governmental Body. Seller is not subject to, nor in
default under, any Order applicable to him, the Facility, the Acquisition
Assets, or any of his employees, and Seller is not in violation of any Legal
Requirements applicable to him.
4.16 Medicare, Medicaid and Other Third Party Payors. Seller has not
entered into any Contracts between him and Medicare, Medicaid, private insurers,
health maintenance organizations, preferred provider organizations or programs,
self-insured employers and any other Entity that maintains or administers third-
party payor programs related to the operations of the Facility.
4.17 Permits. To Seller's Knowledge, Schedule 4.17 sets forth all of the
Permits Seller has obtained from, and the Permits constitute all Governmental
Authorizations required by, all Governmental Bodies that have any oversight or
regulatory responsibility over Seller's operations of the Facility as a Class A
Personal Care Facility under Texas law having approximately 62 units and as an
independent living residence designed for elderly residents having approximately
100 units, except where the failure to obtain would not have a Material Adverse
Effect on the Facility. Seller has furnished Buyer a complete copy of each of
the Permits. All of the Permits are in full force and effect, and to Seller's
Knowledge, no suspension or cancellation of any of them is Threatened.
4.18 Proprietary Property. Except for the software and other proprietary
assets used by Seller to perform accounting functions, Schedule 4.18 sets forth
all Proprietary Property used by Seller in connection with his operations of the
Facility. To Seller's Knowledge, Seller owns, or has obtained proper licenses
for the use of, all Proprietary Property used by him. Seller has not received
notice of any claim that he is violating or infringing any Proprietary Property
of any third party.
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4.19 Taxes.
(a) Seller has timely paid in full all ad valorem property Taxes
levied on the Acquisition Assets that have become due and payable prior to the
date of this Agreement. Seller has withheld proper and accurate amounts from his
employees in full and complete compliance with the Tax withholding provisions of
the IRC and other applicable Legal Requirements, and has filed proper and
accurate Tax Returns for all years and periods (and portions thereof) for which
any such Tax Returns were due for employee income Tax, withholding Taxes, social
security Taxes and unemployment Taxes. Seller has paid or remitted all Taxes and
other amounts from his 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, Seller has made adequate accruals on his regular books of account.
(b) Seller has prepared, signed and filed all federal Tax Returns
required to be filed by all applicable Legal Requirements 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 due and owing on such Tax Returns or which were or are
otherwise due and owing under all applicable Legal Requirements for any periods
for which Tax Returns were due, whether reflected on such Tax Returns and
whether relating to the income of Seller. The amounts recorded as payable for
Taxes in the Acquisition Balance Sheet is sufficient for the payment of all
Taxes attributable to all periods ended on or before the date of the Acquisition
Balance Sheet and adequate accruals have been made by Seller for all Liabilities
for Taxes accruing since the date of the Acquisition Balance Sheet. There are in
effect no Contracts or Consents providing for an extension of time for any
assessment of any Tax, or any deficiency against Seller, other than routine
extensions in filing deadlines. Except as set forth on Schedule 4.19, there are
no Proceedings now pending nor Threatened, against Seller, nor are there any
matters under discussion with the IRS, or other Governmental Authority, relating
to any Taxes, or any claims or deficiencies with respect thereto. Seller's
federal income Tax Returns have not been audited since prior to 1980.
(c) Neither Buyer nor Seller is liable for any sales, use, transfer or
other similar Tax as a result of the transactions described in this Agreement
and no such Tax will be imposed by any Governmental Body on the sale of the
Acquisition Assets to Buyer, and Buyer is not required to withhold any portion
of the Purchase Price on account of any such Tax.
4.20 Title to Properties; Condition and Repair. Schedule 4.20 sets forth an
approximate listing of the Personal Property owned or used by Seller in the
operation of the Facility. Except as disclosed on Schedule 4.20, Seller owns the
Personal Property included within the Acquisition Assets that he purports to own
or reflected as owned in the books and records of Seller (except for assets held
under capitalized leases disclosed in Schedule 4.7 of this Agreement) free and
clear of all Encumbrances of any nature whatsoever, except for the lien for
current ad valorem property Taxes not yet due and payable. Except for the
regular, scheduled repairs which are done in the Ordinary Course of Business,
all of the Acquisition Assets are free of material defect, well maintained, in
good working order, condition and repair.
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4.21 Real Property.
(a) Schedule 4.21 sets forth a complete legal description of the Real
Property. None of the Real Property is subject to any Encumbrance, variance or
other limitation except for (a) mortgages or security interests shown on the
Acquisition Balance Sheet as securing specified liabilities, (b) liens for
current Taxes not yet due, (c) 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 the
Facility, and (d) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto. All buildings,
plants, and structures owned by Seller lie wholly within the boundaries of the
Real Property owned by Seller and, with the exception of any fences located
around the boundaries of the Real Property, do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person.
(b) Except for the condemnation Proceeding as described on Schedule
4.21, there are no pending, or Threatened, condemnation Proceedings relating to
the Real Property or other matters affecting its current use, occupancy or
value.
(c) To the Knowledge of Seller, the operation of the Facility on the
Real Property by Buyer following the Closing Date does not require any zoning or
planning department approvals in addition to those which Seller has already
obtained. Buyer is automatically entitled to the benefits of all such approvals
without the necessity of any affirmative action on Buyer's behalf. Seller does
not have any information which would lead him to believe that the use of the
Real Property will be adversely affected by any pending or proposed zoning or
use changes.
(d) Seller has not received any notice from any Governmental Body, nor
does he otherwise have Knowledge of any contemplated, actual or Threatened
reassessment of the value of the Real Property for ad valorem real property Tax
purposes, other than normal periodic reassessment and any such reassessment that
may occur by virtue of the sale of the Real Property to Buyer and the
recordation of the Deed in the appropriate public office.
4.22 Utilities. The Facility is supplied with utilities and other services
necessary for its operation, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are sufficient for Buyer
to operate the Facility in the same manner that in which Seller operated the
Facility prior to the date of this Agreement and are provided via public roads
or via permanent, irrevocable, appurtenant easements benefitting the Real
Property.
5. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:
5.1 Corporate Status. Buyer is a corporation duly incorporated and existing
under the laws of the State of Delaware. Buyer 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
such businesses have and are now being conducted.
5.2 Authority; Consents; Enforcement: Noncontravention; Noncompetes.
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(a) Authority. Buyer has the corporate power and authority to execute,
deliver and perform this Agreement, and all other agreements, certificates or
documents described in this Agreement ("Buyer Ancillary Documents"), and has
taken all actions required to authorize, execute, deliver and perform this
Agreement and the Buyer Ancillary Documents, including approval by the Board of
Directors of Buyer.
(b) Consents. No Consent or registration, declaration or filing with
any Governmental Body is required for Buyer to execute this Agreement and,
except for obtaining approval by the Texas DHS, perform the transactions
described in this Agreement by Buyer.
(c) Enforcement. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.
(d) Noncontravention. The execution and delivery of this Agreement and
the Buyer Ancillary Documents by Buyer do not violate any provision of the
Organizational Documents of Buyer and will not result in a breach or violation
or default under any Order of any Governmental Body to which Buyer is subject or
result in a breach by Buyer under any Contract to which it is bound. Neither the
execution and the delivery of this Agreement, nor the compliance with, and
fulfillment of, the terms, conditions and provisions hereof or thereof, will (a)
violate any Legal Requirement applicable to Buyer; or (b) require the Consent or
the making by Buyer of any declaration, filing or registration with, any
Governmental Body or other Person.
5.3 No Agent or Broker. Except for DevCon, no agent or broker or other
person acting pursuant to authority given by Buyer is entitled to any commission
or finder's fee, or other compensation, in connection with the transactions
described in this Agreement.
6. Additional Covenants of the Parties.
6.1 Access and Investigation . Between the date of this Agreement and the
Closing Date, Seller shall: (a) afford Buyer and its Representatives full and
free access to Seller's personnel, properties (including access for subsurface
testing), contracts, books and records, and other documents and data, (b)
furnish Buyer and Buyer's Representatives with copies of all such Contracts,
books and records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Representatives with such additional
information as Buyer may reasonably request.
6.2 Operation of the Facility. Between the date of this Agreement and the
Closing Date, Seller shall:
(a) conduct the Facility only in the Ordinary Course of Business;
(b) use his Best Efforts to preserve intact the Facility, keep
available the services of the current employees and agents of the Facility, and
maintain the relations and good will with suppliers, residents, landlords,
creditors, employees, agents, and others having business relationships with the
Facility and Seller;
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(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the condition
and operation of the Acquisition Assets, and the operation and financial
position and results of the Facility.
6.3 Required Consent. As promptly as practicable after the date of this
Agreement, Seller shall make any filings required to be made by him under Legal
Requirements in order to consummate the transactions described in this
Agreement. Between the date of this Agreement and the Closing Date, Seller
shall, (a) cooperate with Buyer on all filings that Buyer elects to make or is
required by Legal Requirements to make in connection with the transactions
described in this Agreement, and (b) cooperate with Buyer in obtaining all
Consents required by Buyer to consummate the transaction described in this
Agreement.
6.4 Notification. Between the date of this Agreement and the Closing Date,
Seller shall promptly notify Buyer if Seller becomes aware of any fact or
condition that causes or constitutes a Breach of any of the representations and
warranties of Seller in this Agreement, or if Seller becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly described in this Agreement) cause or constitute a Breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition. During
the same period, Seller shall promptly notify Buyer of the occurrence of any
Breach of any covenant of Seller in this Agreement or of the occurrence of any
event that may make the satisfaction of the conditions in Section 7 impossible
or unlikely.
6.5 No Negotiation.
(a) Until such time, if any, as this Agreement is terminated pursuant
to Section 9, Seller shall not:
(1) negotiate, discuss or otherwise communicate with any other
potential purchaser or lessee of the Facility;
(2) solicit or encourage submission of any proposal or offer to
acquire or lease all or any portion of the Facility;
(3) participate in any discussion or negotiation regarding any
proposal or offer to sell or lease all or any portion of the Facility;
(4) furnish to any Person other than Buyer and its
Representatives any information regarding the Facility, except as required
by any Legal Requirement or in any Proceeding; or
(5) cooperate in any way with, or assist or participate in any
proposal or offer from any Person other than Buyer or its Representatives
to acquire or lease all or any portion of the Facility.
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(b) If, prior to the termination of this Agreement, Seller receives
any unsolicited offer or proposal from any Person other than Buyer to acquire or
lease all or any portion of the Facility, Seller shall promptly notify Buyer of
such offer or proposal and provide Buyer with copies of any written materials
received by Seller that relate to such offer or proposal.
6.6 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer shall make all filings required by Legal
Requirements to be made by it to consummate the transactions described in this
Agreement. Between the date of this Agreement and the Closing Date, Buyer shall
cooperate with Seller on all filings that Seller is required by Legal
Requirements to make in connection with the transactions contemplated herein,
and (ii) cooperate with Seller in obtaining all Consents required by Seller to
consummate the transactions described in this Agreement.
6.7 Transition of the Facility. Seller covenants with Buyer to cooperate
with Buyer to effect the smooth transition of the control and operation of the
Facility from Seller to Buyer. Seller shall cooperate with Buyer in providing
all information required hereunder and access thereto and whatever is required
to carry out the purposes and intent of the transactions contemplated by this
Agreement.
6.8 Seller's Employees and Employee Benefits.
(a) Prior to the Closing Date, Seller shall promptly notify all
employees employed at the Facility that Seller will terminate their employment
as of the Closing Date. Seller shall retain any and all Liability for, and shall
pay pursuant to Seller's policies, any termination pay, severance pay, sick pay
or vacation pay, any unemployment benefits, and any other benefits to which
Seller's past or current employees, their spouses and dependent children may be
entitled by virtue of their employment or termination of their employment with
Seller.
(b) Following the Closing Date, Seller shall maintain Group Health
Plans comparable to its current Group Health Plan for at least as long as
Seller's past or current employees, their spouses and dependent children are
eligible for continuation health coverage under COBRA. If Seller terminates one
or more Group Health Plans which cover past or current employees who are not
hired by Buyer, their spouses and dependent children, Seller's remaining Group
Health Plan or Plans shall be considered the successor plan or plans under COBRA
for such individuals. Buyer will waive the enrollment period and pre-existing
condition requirements of its current Group Health Plan for those employees of
Seller that Buyer hires upon consummation of the transactions described in this
Agreement so that the termination of the employment of such employees by Seller
and the hiring of such employees by Buyer will not trigger any COBRA benefits
for these employees.
(c) Buyer shall have no obligation to employ any employees of Seller
subsequent to the Closing. To the extent any of such employees are employed by
Buyer following the Closing, such employment shall be on terms and conditions
determined by Buyer and Buyer shall have no obligation to offer such employee
the same or similar wages, salaries or benefits as are paid or provided by
Seller prior to the Closing, except that Buyer shall recognize the employees'
prior services with Seller for vacation purposes.
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6.9 Survey. Promptly following the execution and delivery of this
Agreement, Seller will obtain an ALTA survey of the Real Property ("Survey")
satisfying all of the requirements set forth as Exhibit D.
6.10 Title Insurance.
(a) Promptly following the execution and delivery of this Agreement,
Seller shall deliver to Buyer a commitment (the "Title Commitment") to issue the
Title Policy from Title Company and all underlying documents related to the
exceptions described or listed in the Title Commitment (the "Title Commitment
Documents"). Within 10 days of the later of (1) the date Buyer receives a copy
of the Survey or (2) the date Buyer receives a copy of the Title Commitment and
all the Title Commitment Documents, Buyer shall notify Seller of all matters on
the Title Commitment to which Buyer objects. If Buyer fails to object to any
such exception within the 10-day period, Buyer shall be deemed to have accepted
such exceptions.
(b) Seller shall take all steps necessary to satisfy all the
requirements set forth in the Title Commitment prior to the Closing Date. Buyer
hereby objects to, and Seller shall use his Best Efforts to remove, correct or
delete prior to or at the Closing (1) all standard exceptions set forth in the
Title Commitment that are capable of being satisfied or removed, (2) any gap,
overlap, boundary dispute, hiatus or encroachment referred to in the Title
Commitment or identified on the Survey which affects the Real Property or any
adjacent properties, (3) any mortgages and other monetary liens and Encumbrances
affecting the Real Property, and (d) any matter to which Buyer has objected
under this Section 6.10.
6.11 Filing of Taxes; Payment. Seller shall, for all periods through the
Closing Date:
(a) prepare and timely file (including extensions) all Tax Returns
that he is required to file under all applicable laws;
(b) timely pay all Taxes he is required to pay;
(c) withhold and timely pay over to the applicable authorities all
Taxes that he is required to withhold and pay over; and
(d) timely pay all Taxes on any sales and the income and gain, if any,
that he realizes on the transactions contemplated by this Agreement, including
the sale of the Acquisition Assets.
6.12 Sales and Other State Taxes. Seller shall notify the taxing
authorities which require notice prior to the completion of the transactions
described in this Agreement and on the date hereof filed the required notices
with the other taxing authorities.
6.13 Development Agreement. At the Closing, Buyer and Seller shall execute
and deliver a development agreement, substantially in the form of Exhibit E
attached to this Agreement (the "Development Agreement").
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6.14 Non-Competition Agreement. At the Closing, Seller and Buyer shall
execute and deliver a non-competition agreement substantially in the form of
Exhibit H attached to this Agreement (the "Non-Competition Agreement").
6.15 Further Assurances. Each of the parties agrees that it or he will, at
any time, and from time to time, after the date hereof, upon the request and at
the expense of the appropriate party, do, execute, acknowledge and deliver, or
will cause to be done, executed, acknowledged and delivered, all such further
acts, assignments, transfers, conveyances, and such further acts, assignments,
transfers, conveyances, and assurances as may be required to complete the
transactions contemplated herein. After the date hereof, at the expense of
Buyer, Seller shall use his Best Efforts to cause any necessary third party to,
execute such documents and do such acts and things as Buyer may reasonably
require for the purpose of giving to Buyer the full benefit of all the
provisions of this Agreement and as may be reasonably required to complete the
transactions contemplated herein.
7. Conditions Precedent to Buyer's Obligation to Close. Buyer's obligation
to consummate the transactions contemplated herein, and to take the actions
required to be taken by Buyer, at the Closing, is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations. Each representation and warranty of Seller
in this Agreement must be accurate in all material respects as of the date of
this Agreement, and must be accurate in all material respects as of the Closing
Date as if made on the Closing Date.
7.2 Seller's Performance. All of the covenants and obligations that Seller
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been duly performed and complied with in all material
respects.
7.3 No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person Affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions described in this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the transactions described in this
Agreement.
7.4 Consents. Each of the Consents identified on Schedule 5.2 must have
been obtained and must be in full force and effect and Buyer has obtained all
Governmental Authorizations necessary or required for it to assume operation of
the Facility other than the authorization from the Texas DHS.
7.5 Texas DHS Authorization. Buyer has received written confirmation from
the Texas DHS that Buyer is qualified to operate the Facility and that the Texas
DHS is prepared to issue Buyer a license subject to the successful completion of
Texas DHS's survey of the Facility and Buyer's operation of the Facility.
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7.6 Other Documents. Buyer must have received such other documents as it
may reasonably request for the purpose of (a) evidencing the accuracy of any of
the representations and warranties of Seller, (b) evidencing the performance by
Seller of, or the compliance by Seller with, any covenant or obligation required
to be performed or complied with by him, (c) evidencing the satisfaction of any
condition referred to in this Section 7, or (d) otherwise facilitating the
consummation or performance of any of the transactions contemplated herein.
7.7 Title Policy. Title Company shall irrevocably commit to issue an ALTA
Owner's Policy of Title Insurance on Form B-1992, insuring fee simple title to
the Real Property in the amount of the Purchase Price (the "Title Policy"),
subject to only (a) the Encumbrances for real estate Taxes and statutory liens
for Taxes not yet due and payable, and (b) those other Encumbrances to which
Buyer has not objected in accordance with Section 6.10 (the "Permitted
Encumbrances"), and with such endorsements that Buyer has requested.
7.8 No Prohibition. Neither the consummation nor the performance of any of
the transactions contemplated herein will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person Affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
8. Conditions Precedent to Seller's Obligation to Close. Seller's
obligation to consummate the transactions contemplated herein and to take the
other actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller, in whole or in part):
8.1 Accuracy of Representations. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 Buyer's Performance. All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects.
8.3 No Injunction. There must not be in effect any Legal Requirement or any
injunction or other Order that prohibits the sale of the Acquisition Assets by
Seller to Buyer.
8.4 Consents. Each of the Consents identified on Schedule 4.1 must have
been obtained and must be in full force and effect.
8.5 Definitive Agreements for Purchase and Sale of Other Facilities.
(a) Buyer, Briarcliff Village Health Center, a Texas general
partnership ("Health Center"), and Briarcliff Village Health Center, Inc., a
Texas corporation ("Village Health") shall have entered into a definitive
agreement for the purchase by Buyer of the facility having approximately 12
units licensed as a Class B Personal Care Facility under Texas law and
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approximately 230 units licensed as a Nursing Facility under Texas law, known as
the Briarcliff Village Health Center and located at 3403 South Vine Street,
Tyler, Texas 75701, and all conditions precedent to Buyer's, Health Center's and
Village Health's obligations to close the transaction described in that
agreement, have been satisfied or waived and the parties have closed such
transaction contemporaneously with the Closing of the transactions described in
this Agreement.
(b) Buyer, Nursing Care Four, a Texas general partnership ("Nursing
Care"), and Chandler Nursing Center Inc., a Texas corporation ("Nursing Center")
shall have entered into a definitive agreement for the purchase by Buyer of the
skilled nursing facility known as the Chandler Nursing Center located at 300
Cherry Street, Chandler, Texas 75757, and all conditions precedent to Buyer's,
Nursing Care's and Nursing Center's obligations to close the transaction
described in that agreement, have been satisfied or waived and the parties have
closed such transaction contemporaneously with the Closing of the transactions
described in this Agreement.
(c) Buyer, Briarcliff Health Center of Texas, a Texas general
partnership ("Health Center of Texas") and Briarcliff Health Center, Inc. d/b/a
Village on Copeland, a Texas corporation ("Village"), shall have entered into a
definitive agreement for the purchase by, and Buyer and Health Center of Texas
shall have entered into a definitive agreement for the lease by, Buyer of the
Facility licensed as a Class B Personal Care Facility under Texas law and known
as the Village on Copeland located at 5317 New Copeland Road, Tyler, Texas 75703
("Copeland").
8.6 Other Documents. Seller must have received such other documents as
Seller may reasonably request for the purpose of (a) evidencing the accuracy of
any representation or warranty of Buyer, (b) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (c) evidencing the satisfaction of any
condition referred to in this Section 8, or (d) otherwise facilitating the
consummation of any of the transactions contemplated herein.
9. Termination.
9.1 Termination Events. By notice given to Title Agent and the other
parties to this Agreement, this Agreement may be terminated:
(a) by Buyer if any of the conditions in Section 7 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Termination Date;
(b) by Seller, if any of the conditions in Section 8 have not been
materially satisfied as of the Termination Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with his obligations under this Agreement) and Seller has not waived such
condition on or before the Termination Date;
(c) by either Buyer or Seller if a Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
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(d) by mutual consent of Buyer and Seller; or
(e) by either Buyer or Seller 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 the
Termination Date, or such later date as the parties may agree upon.
9.2 Effect of Termination.
(a) If Buyer terminates this Agreement pursuant to Section 9.1(a) or
Section 9.1(c) or if the parties terminate this Agreement pursuant to Section
9.1(d) or Section 9.1(e), Title Agent shall return to Buyer the Deposit and all
interest earned thereon.
(b) If Seller terminates this Agreement pursuant to Section 9.1(b) or
Section 9.1(c), Title Agent shall deliver the Deposit and all interest earned
thereon to Seller only if all of the conditions in Section 7 have been satisfied
and Seller is not in Breach of this Agreement. Otherwise, Title Agent shall
remit the Deposit and all interest earned thereon to Buyer.
(c) The remedies set forth in Section 9.2(b) are the exclusive
remedies of Seller for his termination of this Agreement. Buyer's right of
termination under Section 9.1 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.
(d) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 12.5 will survive; provided, however, that if
this Agreement is terminated by Buyer because of the Breach of the Agreement by
Seller or because one or more of the conditions to Buyer's obligations under
this Agreement is not satisfied as a result of Seller's failure to comply with
his obligations under this Agreement, Buyer's right to pursue all legal remedies
will survive such termination unimpaired.
10. Deliveries and Actions To Be Taken At Closing.
10.1 Deliveries by Seller. At or prior to the Closing, Seller shall deliver
to Title Agent (duly executed where appropriate) to be held by it in Escrow and
to be disbursed in accordance with the provisions of Section 3.2:
(a) A Bill of Sale for the Acquisition Assets in the form of Exhibit F
attached hereto;
(b) An assignment and assumption agreement in the form of Exhibit G
attached hereto executed in counterpart by Seller (the "Assignment and
Assumption Agreement");
(c) The Development Agreement executed in counterpart by Seller;
(d) A non-competition agreement in the form of Exhibit H (the "Non-
Competition Agreement") executed in counterpart by Seller;
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(e) General Warranty Deed acceptable to the Title Agent conveying to
Buyer the Real Property (the "Deed");
(f) Registration, title and motor vehicle transfer forms for, and
other documentation required to transfer to Buyer and enable Buyer to properly
license, each motor vehicle which is part of the Acquisition Assets;
(g) Confirmation that all of the Encumbrances other than the Permitted
Encumbrances have been removed as an Encumbrance against the Acquisition Assets;
(h) A certificate signed by Seller certifying the fulfillment of the
conditions set forth in Section 7.1 through 7.3; and
(i) Consents of the other parties to the Assumed Contracts for those
Assumed Contracts where such consent is required for the assumption of such
Assumed Contracts.
10.2 Deliveries by Buyer. At or prior to the Closing, Buyer shall deliver
to Title Agent (duly executed where appropriate) to be held by it in Escrow and
to be disbursed in accordance with the provisions of Section 3.2:
(a) Immediately available funds in the amount by which the Purchase
Price (adjusted to reflect appropriate credits and debits required by Section
2.2) exceeds the sum of the Deposit plus the accrued interest thereon;
(b) Certified copies of the Resolutions of the Board of Directors of
Buyer approving the transactions described in this Agreement;
(c) The Assignment and Assumption Agreement executed in counterpart by
Buyer;
(d) The Development Agreement executed in counterpart by Buyer;
(e) The Non-Competition Agreement executed in counterpart by Buyer;
(f) Certificates of good standing from the Secretaries of State of
Delaware and Texas;
(g) A certificate signed by an executive officer of Buyer certifying
fulfillment of the conditions set forth in Section 8.1 through 8.3; and
(h) Such other documents as may be reasonably necessary to effect the
Closing.
11. Indemnification; Remedies.
11.1 Survival; Right to Indemnification. All representations, warranties,
covenants and obligations in this Agreement, and any other certificate or
document delivered pursuant to this Agreement, shall survive the Closing. If a
party waives any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
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obligation, such party's right to indemnification, payment of Damages or other
remedy based on a Breach of such representations, warranties, covenants and
obligations is waived only to the extent of the party's Knowledge of facts and
circumstances at the time the Breach is waived.
11.2 Indemnification and Payment of Damages By Seller. Seller shall
indemnify and hold Buyer, its Affiliates and their respective successors and
assigns ("Buyer's Indemnitees") harmless from, and shall pay to Buyer's
Indemnitees the amount of, all Damages, arising, directly or indirectly, from or
in connection with:
(a) any Breach of any representation or warranty made by Seller in
this Agreement;
(b) any Breach by Seller of any covenant, agreement or obligation of
Seller in this Agreement; and
(c) any Liability of Seller, and all claims, demands and Proceedings
made or brought against Buyer by reason of Seller's ownership, use, operation or
condition of the Acquisition Assets prior to the Closing Date or any of the
transactions described in this Agreement, but excluding the Assumed Liabilities.
11.3 Indemnification By Buyer. Buyer shall indemnify and hold Seller, his
Affiliates, and their respective successors and assigns (collectively, "Seller's
Indemnitees") harmless from, and will pay to Seller's Indemnitees the amount of,
all Damages arising directly or indirectly from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement;
(b) any Breach by Buyer of any covenant, agreement or obligation of
Buyer in this Agreement; and
(c) any claim, demand or Proceeding made or brought against Seller
resulting from Buyer's operation of the Acquisition Assets after the Closing
Date.
11.4 Indemnity Claims.
(a) Notification of Claims. If any claim ("Claim") is asserted by a
party as to which such party may be entitled to indemnification hereunder, such
party (an "Indemnitee") shall notify ("Claims Notice") the party required by the
terms of this Agreement to indemnify the Indemnitee (an "Indemnifying Party")
within 10 days after (1) receipt of notice of commencement of any third-party
litigation against such Indemnitee, (2) receipt by such Indemnitee of notice of
any Claim by a third party ("Third Party Claim") pursuant to an invoice, notice
of claim or assessment, against such Indemnitee, or (3) such Indemnitee becomes
aware of the existence of any other event for which indemnification may be
sought from the Indemnifying Party. The Claims Notice shall describe the Claim
and the specific facts and circumstances in reasonable detail, shall include
copies of the notices referred to in (1) and (2), above, shall indicate the
amount, if known, or an estimate, if possible, of Damages that have been or may
be incurred or suffered.
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(b) Defense of Third Party Claim by Indemnifying Party. The
Indemnifying Party may elect to defend or compromise any Third Party Claim, at
its or his own expense and by its or his own counsel, who shall be reasonably
acceptable to the Indemnitee. The Indemnitee may participate, at its or his own
expense, in the defense of any Third Party Claim assumed by the Indemnifying
Party. Without the approval of the Indemnitee, which approval shall not be
unreasonably withheld or delayed, the Indemnifying Party shall not compromise a
Third Party Claim defended by the Indemnifying Party which would require the
Indemnitee to perform or take any action or to refrain from performing or taking
any action. If the Indemnifying Party does not acknowledge its or his obligation
to indemnify the Indemnitee for a Third Party Claim, the Indemnitee shall have
the right to oversee the defense, compromise or settlement of such Claim and to
consult with its or his own counsel regarding the actions taken by the
Indemnifying Party, all at the expense of the Indemnifying Party.
(c) Assumption of Defense by Indemnitee. Notwithstanding anything in
this Section 11.4 to the contrary, if an Indemnitee determines in good faith
that there is a reasonable probability that a Proceeding may adversely affect
the Indemnitee or the Indemnitee's Affiliates other than as a result of monetary
Damages for which it or he would be entitled to indemnification under this
Agreement, the Indemnitee may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
Indemnifying Party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its Consent (which may
not be unreasonably withheld or delayed).
(d) Defense of Claim by Indemnitee. If, within 20 days of the
Indemnifying Party's receipt of a Claim Notice involving a Third Party Claim,
the Indemnifying Party shall not have notified the Indemnitee of its or his
election to assume the defense, the Indemnitee shall have the right to assume
control of the defense or compromise of such Claim, and the costs and expenses
of such defense, including costs of investigation and reasonable attorneys'
fees, shall be added to the Claim. The Indemnitee shall have the right to
compromise such Claim without the Consent of the Indemnifying Party.
(e) Cooperation of Parties. The party assuming the defense of any
Claim shall keep the other party reasonably informed at all times of the
progress and development of the party's defense of and compromise efforts
related to such Claim and shall furnish the other party with copies of all
relevant pleading, correspondence and other papers. In addition, the parties
shall cooperate with each other, and make available to each other and their
representatives all available relevant records or other materials required by
them for their use in defending, compromising or contesting any Claim. The
failure to notify the Indemnifying Party timely of the commencement of such
actions in accordance with Section 11.4(a) shall relieve the Indemnifying Party
from the obligation to indemnify under Section 11.2 or 11.3, as the case may be,
but only to the extent the Indemnifying Party establishes by competent evidence
that it or he is or has been materially and adversely prejudiced by such
untimely Claims Notice.
11.5 Remedies; Right of Set-Off. The remedies provided in this Section 11
shall not be deemed exclusive of or limit any other remedies that may be
available to an Indemnitee. If a Buyer's Indemnitee is entitled to
indemnification as provided in Section 11.2, Buyer shall have the right to
set-off the entire amount thereof against the amounts, if any, that Buyer may
owe
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Seller, provided, it shall be a condition to the exercise of the right of set-
off that Buyer gives Seller notice specifying in reasonable detail the basis for
such set-off. Neither the exercise of, nor the failure to exercise, such right
of set-off will constitute an election of remedies or limit Buyer in any manner
in the enforcement of any other remedies that may be available to it.
12. Miscellaneous Provisions.
12.1 Amendment; Waiver. This Agreement may be amended, modified or
superseded only by a written instrument signed by all of the parties to this
Agreement. No party shall be deemed to have waived compliance by another party
of any provision of this Agreement unless such waiver is contained in a written
instrument signed by the waiving party and no waiver that may be given by a
party will be applicable except in the specific instance for which it is given.
The failure of any party to enforce at any time any of the provisions of this
Agreement or to exercise any right or option contained in this Agreement or to
require at any time performance of any of the provisions of this Agreement, by
any of the other parties shall not be construed to be a waiver of such
provisions and shall not affect the validity of this Agreement or any of its
provisions or the right of such party thereafter to enforce each provision of
this Agreement. No course of dealing shall operate as a waiver or modification
of any provision of this Agreement or otherwise prejudice such party's rights,
powers and remedies.
12.2 Limited Assignment; Binding Effect. No party shall assign any of
its or his rights or obligations under this Agreement without obtaining the
prior consent of the other parties to this Agreement; provided, however, that
Buyer may assign any of its rights and obligations under this Agreement without
the prior consent of Seller to any Affiliate of Buyer if Buyer remains
responsible for its obligations under this Agreement under the terms of such
assignment. Subject to the foregoing, all the provisions of this Agreement shall
be binding upon and shall inure to the benefit of and be enforceable by the
parties to this Agreement and their respective heirs, legal representatives,
successors and assigns.
12.3 Construction and Interpretation of Agreement.
(a) Section titles or 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 of its provisions. All references in this
Agreement to Sections shall refer to Sections of this Agreement unless the
context clearly otherwise requires.
(b) When used in this Agreement, the word "including" shall have its
normal common meaning and any list of items that may follow such word shall not
be deemed to represent a complete list of the contents of the referent of the
subject.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. If any ambiguity or question of intent or
interpretation arises, no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
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(d) Unless the context otherwise requires, when used in this
Agreement, 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.
(e) The parties do not intend that this Agreement shall confer on any
third party any right, remedy or benefit or that any third party shall have any
right to enforce any provision of this Agreement.
12.4 Severability of Provisions. If a court in any proceeding holds any
provision of this Agreement or its application to any person or circumstance
invalid, illegal 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, illegal or unenforceable, shall not be
affected, and shall be valid, legal 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 in this Agreement. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties intend that the court add to this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be valid and enforceable, so as to effect the original intent
of the parties to the greatest extent possible.
12.5 Confidentiality of Certain Information.
(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 "Confidential Information")
which any of them may receive from any other party concerning such other party.
Failure to mark any of the Confidential Information as non-public, proprietary
or confidential shall not affect its status as Confidential Information under
the terms of this Agreement. Confidential Information shall not include any
information in the possession of the receiving party (a) that is developed by
such party without reference to and independent of any Confidential Information,
(b) is learned from a third party not under any duty of confidence to the
disclosing party, or (c) becomes part of the public domain through no fault of
the receiving party.
(b) None of the parties nor their respective agents or employees
shall, without the prior consent of the disclosing party, disclose or use any
such Confidential Information, in whole or in part, except in connection with
the performance of the transactions described in this Agreement. Unless
otherwise required by law, none of the parties shall disclose any Confidential
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, all of whom must agree
to keep the Confidential Information confidential. If the Closing does not
occur, each party will destroy or return to the disclosing party all copies of
documents that contain that party's Confidential Information.
12.6 Confidentiality of Agreement. Unless otherwise required by law, no
party shall disclose either the terms or existence of this Agreement to any
person other than a party's counsel
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<PAGE>
and its other representatives or such other third parties with whom it must
communicate to consummate the transactions described in this Agreement.
12.7 Exhibits and Schedules. All Exhibits and Schedules to this
Agreement, if any, shall constitute part of this Agreement and shall be deemed
to be incorporated in this Agreement by reference and made a part of this
Agreement as if set out in full at the point where first mentioned. Nothing in
the Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made in this Agreement unless the Schedule identifies
the exception with particularity and describes the relevant facts in detail. If
any inconsistency between the statements in the body of this Agreement and those
in the Schedules (other than an exception expressly set forth as such in the
Schedules to a specifically identified representation or warranty), the
statements in the body of this Agreement shall control. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made in this Agreement (unless the representation
or warranty has to do with the existence of the document or other item itself).
The parties intend that each representation, warranty, covenant and obligation
contained in this Agreement shall have independent significance. If any party
has breached any representation, warranty, covenant or obligation contained in
this Agreement in any respect, merely because there exists another
representation, warranty, covenant or obligation relating to the same subject
matter (regardless of the relative levels of specificity) which the party has
not breached shall not detract from or mitigate the party's breach of the first
representation, warranty, covenant or obligation.
12.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
12.9 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties related to its subject matter and supersedes all
prior proposals, understandings, agreements, correspondence, arrangements and
contemporaneous oral agreements relating to subject matter of this Agreement. No
representation, promise, inducement or statement of intention has been made by
any party which has not been embodied in this Agreement.
12.10 Expenses. Seller shall pay (a) all transfer taxes, intangible taxes
and similar Taxes and all sales, use transfer and similar Taxes, relating to the
transfer of the Acquisition Assets to Buyer, (b) the cost of the Survey, and (c)
the cost of his legal counsel. Buyer shall pay (a) the cost of its legal
counsel, (b) the cost of any environmental assessment of the Real Property (c)
the cost of DevCon's sales commission, (d) the cost of any recordation fees to
put the Deed of record with the appropriate Governmental Body, and (e) the cost
of premiums on the Title Policy. Except as otherwise expressly provided for in
this Agreement, each party will bear its or his own expenses incurred in
connection with the preparation, execution and performance of its obligations
under this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.
12.11 Further Assurances. Each party shall execute and deliver such
additional documents or take such additional actions as may be requested by
another party to this Agreement if such
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<PAGE>
requested document or action is reasonably necessary to effect the transactions
described in this Agreement.
12.12 Governing Law. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Texas,
without giving effect to any conflict of law rule or principle of such state.
12.13 No Public Announcement. No party shall make any press release or
other public announcement regarding this Agreement or the transactions described
in this Agreement, unless such party is obligated by law or the rules of any
stock exchange upon which its shares are traded to make such a disclosure. When
a party determines that it is obligated by law or the rules of a stock exchange
to make such a disclosure, it shall notify all of the other parties prior to
such disclosure and all of the parties shall cooperate to cause a mutually
agreeable release or announcement to be issued.
12.14 Notices. All notices, requests, consents, approvals, waivers, demands
and other communications required or permitted to be given or made under this
Agreement shall be in writing and shall be deemed delivered to the parties (a)
on the date of personal delivery or transmission by facsimile transmission, (b)
on the first business day following the date of delivery to a nationally
recognized overnight courier service, or (d) or the third business day following
the date of deposit in the United States Mail, postage prepaid, by certified
mail, in each case, addressed as follows, or to such other address, person or
entity as any party may designate by notice to the others in accordance
herewith:
If to Buyer: Atria Communities, Inc.
515 W. Market Street, Suite 200
Louisville, KY 40202
Attn: J. Timothy Wesley, Chief Financial
Officer and Audra J. Eckerle,
General Counsel
Facsimile Number: (502) 596-4160
With Copy to: Carmin D. Grandinetti, Esq.
Greenebaum Doll & McDonald pllc
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202
Facsimile Number: (502) 540-2129
If to Seller: Larry S. Parker
8215 Cambridge Road
Tyler, TX 75703
Facsimile Number: (903) 593-0484
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With Copy to: James B. Gillen, Jr., Esq.
Conner, Gillen, Yarbrough & Anderson, P.C.
613 Shelley Park Plaza
Tyler, TX 75701
Facsimile Number: (903) 581-8790
12.15 Recovery of Expenses by Prevailing Party. The party prevailing in
any civil action, arbitration or other proceeding shall be entitled to recover
from the nonprevailing party, in addition to any damages the prevailing party
may have been awarded, all reasonable expenses that the prevailing party may
have incurred in connection with such proceeding, including accounting fees,
attorneys' fees and expert witnesses' fees.
12.16 Sellers Knowledge. For purposes of this Agreement, all references
to Seller's Knowledge shall include the Knowledge of Larry S. Parker and the
Knowledge of Don Steele.
12.17 Cumulative Remedies; Specific Performance. No right or remedy
conferred upon or reserved to any of the parties under the terms of this
Agreement is intended to be, nor shall it be deemed, exclusive of any other
right or remedy provided in this Agreement or by law or equity, but each shall
be cumulative of every other right or remedy. The parties understand and
acknowledge that a party may be damaged irreparably by reason of a failure of
another party to perform any obligation under this Agreement. Accordingly, if
any party attempts to enforce the provisions of this Agreement by specific
performance (including preliminary or permanent injunctive relief), the party
against whom such action or proceeding is brought waives the claim or defense
that the other party has an adequate remedy at law.
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
ATRIA COMMUNITIES, INC.
By: /s/ J. Timothy Wesley
----------------------------------
Title: Chief Financial Officer
-------------------------------
("Buyer")
/s/ Larry S. Parker
--------------------------------------
Larry S. Parker
("Seller")
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Exhibit 10.1
================================================================================
MASTER PARTICIPATION AGREEMENT
Dated as of January 30, 1998
among
ASSET XVIII HOLDINGS COMPANY, L.L.C., as Lessor
ATRIA COMMUNITIES, INC., as Lessee
and
BANK ONE, KENTUCKY, N.A., as Lender
______________________________________
Lease Financing
for Atria Communities, Inc.
Assisted Living Centers
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS; INTERPRETATION..................................... 1
SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; LOANS;
NATURE OF TRANSACTION........................................... 1
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease........... 1
SECTION 2.2 Funding of Development Costs; Loans and Contribution...... 2
SECTION 2.3 Nature of Transaction..................................... 4
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan
Agreement......................................................... 4
SECTION 2.5 Controlling Agreements.................................... 5
SECTION 2.6 Permitted Applications of Loan Advances and
Contribution Advances............................................. 5
SECTION 2.7 Covenants Concerning Construction......................... 6
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS................................. 8
SECTION 3.1 Conditions to the Obligations of the Lessor and the
Lender on the Closing Date........................................ 8
SECTION 3.2 Conditions to the Obligations of the Lessor and the
Lender on each Parcel Closing Date................................ 11
SECTION 3.3 Conditions to Subsequent Fundings......................... 15
SECTION 3.4 Completion Date Conditions................................ 19
SECTION 3.5 Conditions to the Obligations of the Lessee............... 21
SECTION 3.6 Appraisal................................................. 21
SECTION 4 REPRESENTATIONS AND COVENANTS................................... 21
SECTION 4.1 Representations of the Lessee............................. 21
SECTION 4.2 Representations and Covenants of the Lessor............... 24
SECTION 4.3 Covenant of Lender........................................ 25
SECTION 4.4 Tax Treatment............................................. 25
SECTION 5 COVENANTS OF THE LESSEE......................................... 26
SECTION 5.1 Qualification as to Corporate Status...................... 26
SECTION 5.2 Further Assurances........................................ 26
SECTION 5.3 Reporting................................................. 27
SECTION 5.4 Affirmative Covenants of Lessee........................... 28
SECTION 5.5 Financial Covenants of Lessee............................. 29
SECTION 6 TRANSFERS BY LESSOR AND LENDER.................................. 29
SECTION 6.1 Lessor Transfers.......................................... 29
SECTION 6.2 Lender Transfers.......................................... 30
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Page
----
SECTION 7 INDEMNIFICATION................................................. 30
SECTION 7.1 General Indemnification................................... 30
SECTION 7.2 Environmental Indemnity................................... 32
SECTION 7.3 Proceedings in Respect of Claims.......................... 33
SECTION 7.4 General Tax Indemnity..................................... 35
SECTION 7.5 Increased Costs, Etc...................................... 40
SECTION 7.6 End of Term Indemnity..................................... 41
SECTION 7.7 Exculpation............................................... 42
SECTION 7.8 Role of Lender............................................ 43
SECTION 7.9 Lender's Benefits......................................... 43
SECTION 7.10 Lessor's Benefits......................................... 43
SECTION 8 MISCELLANEOUS................................................... 44
SECTION 8.1 Survival of Agreements.................................... 44
SECTION 8.2 Notices................................................... 44
SECTION 8.3 Counterparts.............................................. 45
SECTION 8.4 Amendments................................................ 45
SECTION 8.5 Headings, Etc............................................. 45
SECTION 8.6 Parties in Interest....................................... 45
SECTION 8.7 Governing Law............................................. 46
SECTION 8.8 No Recourse............................................... 46
SECTION 8.9 Expenses.................................................. 46
SECTION 8.10 Severability............................................. 46
SECTION 8.11 Submission to Jurisdiction; Waivers...................... 46
SECTION 8.12 Limitation on Interest................................... 47
SECTION 8.14 Waiver of Consumer Rights................................ 48
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Funding Requisition
APPENDIX III Financial Covenants
EXHIBIT A Form of Lease
EXHIBIT B Form of Loan Agreement
EXHIBIT C Form of Assignment of Lease and Rents
EXHIBIT D Form of Opinion of Counsel to the Lessee (Closing Date)
EXHIBIT E Form of Opinion of Counsel to the Lessor (Closing Date)
EXHIBIT F Form of Mortgage
EXHIBIT G Form of Non-Disturbance and Attornment Agreement
EXHIBIT H Form of Security Agreement and Assignment
EXHIBIT I Form of Opinion of Counsel to the Lessee (Parcel Closing Date)
EXHIBIT J Form of Opinion of Counsel to the Lessor (Parcel Closing Date)
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EXHIBIT K Form of Architect's Certificate
EXHIBIT L-1 Form of Investment Property Security Agreement
EXHIBIT L-2 Form of Account Control Agreement
EXHIBIT M Form of Limited Guaranty Agreement
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<PAGE>
MASTER PARTICIPATION AGREEMENT
THIS MASTER PARTICIPATION AGREEMENT (this "Participation Agreement"), dated
as of January 30, 1998, is among ASSET XVIII HOLDINGS COMPANY, L.L.C., a
Massachusetts limited liability company, as Lessor, ATRIA COMMUNITIES, INC., a
Delaware corporation, as Lessee, and BANK ONE, KENTUCKY, N.A., a national
banking association, as Lender.
W I T N E S S E T H:
WHEREAS, in accordance with the terms and provisions of this Participation
Agreement, the Lease, the Loan Agreement, the Notes and the other Operative
Documents, (i) the Lessor intends to acquire certain Properties and has agreed
to lease the Properties to the Lessee, (ii) the Lessor and the Lessee wish to
obtain, and the Lender has agreed to provide, funding pursuant to loans in the
aggregate amount of up to $431,992,500 for the acquisition of the Properties ,
and (iii) Lessor has agreed to make Contribution Advances from its own equity
resources in an aggregate sum not to exceed $1,507,500 to pay a portion of the
cost of acquisition of the Properties and the development and construction of
Improvements thereon;
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Participation Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in Appendix I hereto for
all purposes hereof and the rules of interpretation set forth in Appendix I
hereto shall apply to this Participation Agreement.
SECTION 2
ACQUISITION, CONSTRUCTION AND LEASE; LOANS;
NATURE OF TRANSACTION
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.
(a) Property. Subject to the terms and conditions of this
Participation Agreement, on each Parcel Closing Date, (i) the Lessor shall
acquire an interest in the related Parcel of Land and all Improvements thereon,
(ii) the Lessor shall lease such Property to the Lessee pursuant to the Lease
and the related Parcel Lease Supplement and (iii) the Lessee shall lease such
Property from the Lessor pursuant to the Lease and the related Parcel Lease
Supplement.
<PAGE>
(b) Additional Improvements. Subject to the terms and conditions of
this Participation Agreement and the other Operative Documents, (i) the Lessee
has agreed, pursuant to the terms of the Lease, to construct and install
Improvements on the Land for the Lessor, (ii) the Lessor has agreed to obtain
funding for all or a portion of the Development Costs of the Leased Property,
(iii) the Lessor has agreed to lease the Improvements as part of the Leased
Property to the Lessee pursuant to the Lease and (iv) the Lessee has agreed to
lease the Improvements from the Lessor pursuant to the Lease.
SECTION 2.2 Funding of Development Costs; Loans and Contribution.
(a) Subject to the terms and conditions of this Participation
Agreement and the Loan Agreement, the Lender has agreed to make two loans to the
Lessor up to the amount of its Loan Commitment in order finance a portion of the
Development Costs of the Leased Property. One loan shall be in an aggregate
principal amount of up to $28,475,000 ("Loan A") and the second loan shall be in
an aggregate principal amount of up to $3,517,500 ("Loan B"). Loan A and Loan B
are hereinafter referred to together as the "Loans."
Subject to the terms and conditions of this Participation Agreement, the
Lessor has agreed to make available to the Lessee Contribution Advances up to
the amount of its Equity Commitment for the payment of Development Costs from
and after the Closing Date through the Commitment Deadline. As provided in
subsection (b) below, the Lender shall from time to time, upon the receipt of a
Funding Requisition from the Lessee, make Loan Advances as requested in such
Funding Requisition, and the Lessor shall from time to time, make Contribution
Advances as requested in such Funding Requisition. Lessor hereby directs the
Lender to make disbursements of each Loan Advance and each Contribution Advance
directly to the Lessee or as otherwise directed in the applicable Funding
Requisition. Lessor will only direct the Lender otherwise if an Event of
Default has occurred and is continuing.
Each Loan Advance shall be allocated between Loan A and Loan B in the same
proportion which the Loan A Commitment or the Loan B Commitment, as the case may
be, bears to the Loan Commitment. Loan A shall (i) be a term loan, (ii) bear
interest as to Loan A Advance from the date such Loan Advance is made in
accordance with Section 2.4 of the Loan Agreement, payable on each Loan Payment
Date, (iii) bear interest as to overdue amounts at the Overdue Rate, (iv) be
repayable as to principal as provided in the Loan Agreement with a final
scheduled Loan Payment Date on the Scheduled Termination Date, (v) be evidenced
by a promissory note ("Note A"), and (vi) have the other terms and conditions as
provided in the Loan Agreement and Note A. Loan B shall (i) be a term loan,
(ii) bear interest as to each Loan B Advance from the date such Loan Advance is
made in accordance with Section 2.4 of the Loan Agreement, payable on each Loan
Payment Date, (iii) bear interest as to overdue amounts at the Overdue Rate,
(iv) be repayable as to principal as provided in the Loan Agreement with a final
scheduled Loan Payment Date on the Scheduled Termination Date, (v) be evidenced
by a promissory note ("Note B"), and (vi) have the other terms and conditions as
provided in the Loan Agreement and Note B. The Contribution shall (i) be in an
amount not to exceed the Equity Commitment, (ii) be repayable in full (subject
to the provisions of Section 15.6 of the
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<PAGE>
Lease) on the Scheduled Termination Date, (iii) bear a pre-tax cumulative return
equal to the Contribution Return, and (iv) be subject to such other terms and
conditions as the Lessor and the Lessee shall agree. Under the Lease, the Lessee
agrees to pay the Facility Rent for each Parcel to the Lender as agent and
assignee of the Lessor in respect of the Contribution Return on each Rent
Payment Date after the related Parcel Closing Date.
(b) On the Closing Date, upon the Lessee's satisfaction of the
conditions set forth in Section 3.1 hereof, Lender agrees to make a Loan A
Advance and a Loan B Advance, as the case may be, in the respective amounts
equal to 95.5%, and 4.5% of the amount described in Section 3.1 (g) hereof. On
the Closing Date, the Lessee, acting for itself and on behalf of the Lessor,
shall submit to the Lessor and the Lender one or more Funding Requisitions in
support of a Funding for the Initial Contribution Advance and the Initial Loan
Advance. Each of such Funding Requisitions shall request a Loan Advance and a
Contribution Advance (together a "Funding") for the acquisition cost of one or
more of the Closing Date Properties. The Fundings for the Closing Date
Properties shall occur simultaneously with the Parcel Closing Dates for the
Closing Date Properties, all of which shall occur on the Closing Date.
Beginning with a date at least three Business Days prior to the Parcel Closing
Date for each Property (other than a Closing Date Property), and on any date
thereafter to and including the third Business Day next preceding the Commitment
Deadline, the Lessee, acting for itself and on behalf of the Lessor, shall have
the right to submit to the Lessor and the Lender a Funding Requisition
requesting a Funding for Development Costs related to such Property; provided,
however, that neither the Lender nor the Lessor shall be obligated to honor any
Funding Requisition with respect to any Property as to which the Parcel Closing
Date did not occur prior to January 30, 1999. Each Funding Requisition shall be
addressed jointly to the Lessor and the Lender and be substantially in the form
attached hereto as Appendix II. Each Funding Requisition shall (i) request that
the Lender make a Loan Advance and that the Lessor make a Contribution Advance,
as the case may be, for Development Costs with respect to a Property incurred
and not previously reimbursed or paid, (ii) specify the Property to which it
relates (provided that no Funding shall be made in respect of a Property before
its related Parcel Closing Date), (iii) specify the date not less than three
Business Days later than the delivery of the Funding Requisition on which the
Funding is to be made (the "Funding Date") (provided that if a Funding
Requisition requests a Loan Advance for a Base Rate Loan and the stated Funding
Date therein is not a Loan Payment Date, the Funding Date for the related
Contribution Advance shall be deferred until the next Loan Payment Date), (iv)
specify the respective amounts of the Loan A Advance, Loan B Advance and
Contribution Advance to be made with respect to such Funding, (v) be
irrevocable, and (vi) request a Funding of at least $100,000 or such lesser
amount as shall be equal to the difference between the Total Commitments and the
sum of the outstanding principal balance of the Notes and the Contribution (the
"Remaining Commitments"). Each Funding Requisition shall constitute a
representation and warranty by the Lessee to the Lender and the Lessor that all
the conditions precedent to such Funding have been satisfied, including but not
limited to those contained in Section 3.3 hereof. Notwithstanding anything to
the contrary contained herein, the Funding Date with respect to any Funding
Requisition shall be a Loan Payment Date except that a Funding Requisition which
requests a Loan Advance for a Base Rate Loan may request a Funding Date with
respect to such Loan
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Advance on any Business Day. The Lender and the Lessor hereby severally (but not
jointly) promise and agree that, to the extent of the Remaining Commitments, (i)
upon the receipt by the Lender of a properly completed Funding Requisition and
so long as all conditions precedent to the Lender's obligation to make Loan
Advances shall have been satisfied or waived by the Lender, the Lender shall, on
the Funding Date, make a Loan Advance in an amount equal to the product of the
Funding requested therein multiplied by the Lender Ratio, each in immediately
available funds (for the account of the Lessor) to the Lessee or to such other
Person or Persons as may be specified in such written Funding Requisition, and
(ii) upon the receipt by the Lessor of a properly completed Funding Requisition
and so long as all conditions precedent to the Lessor's obligation to make
Contribution Advances shall have been satisfied or waived by the Lessor, the
Lessor shall, on the Funding Date, make a Contribution Advance in an amount
equal to the product of the Funding requested therein, multiplied by the Equity
Ratio, plus any deferred and unfunded Contribution Advances related to a Funding
which included a Loan Advance for a Base Rate Loan borrowed since the
immediately preceding Loan Payment Date, all in immediately available funds to
Lessee or to such other Person or Persons as may be specified in the applicable
Funding Requisition.
(c) Notwithstanding the foregoing, neither the Lender nor the Lessor
shall be obligated to make an Advance with respect to any Property if the sum of
all Advances made, or deemed to have been made, with respect to such Property
exceeds the appraised value of such Property stated in the appraisal therefor
delivered pursuant to Section 3.2 hereof; provided, however, that,
notwithstanding any other provision hereof, the Lessee shall have up to sixty
(60) days after the Closing Date to deliver to the Lender the required
appraisals for the Closing Date Properties and that, on the Rent Payment Date
immediately following the delivery of said appraisals, the Lessee shall pay to
the Lender, as a prepayment of the Loans, the amount, if any, by which the
aggregate principal amount of the Loans related to the Closing Date Parcels
exceeds 142% of the aggregate Fair Market Sales Value of the Closing Date
Properties as determined in the appraisals but not in any event more than the
Recourse Deficiency Amount for the Leased Property. Furthermore, in no event
shall the aggregate of all Loan Advances in respect of the Loan at any time
outstanding exceed the Loan Commitment, nor shall the Contribution at any time
outstanding exceed the Equity Commitment.
SECTION 2.3 Nature of Transaction. Notwithstanding the provisions of
Section 4.4 and Section 7.4 hereof, each party hereto acknowledges and agrees
that none of the Lessee, the Lender, the Lessor, the Financial Advisor nor any
other Person has made any representations or warranties to such party concerning
the tax, financial, accounting or legal characteristics or treatment of the
Operative Documents and that each party has obtained and relied solely upon the
advice of its own tax, accounting and legal advisors concerning the Operative
Documents and the accounting, tax, financial and legal consequences of the
transactions contemplated therein.
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan Agreement.
Anything else herein, in the Loan Agreement or elsewhere to the contrary
notwithstanding, it is the intention of the Lessee, the Lessor and the Lender
that, (i) from and after the Parcel
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Closing Date for each Property, the Lessee shall be obligated, pursuant to the
terms of the Lease, to pay Basic Rent in respect of such Property on each Rent
Payment Date in respect of principal, if any, and interest due on the principal
amount of the Loans related to such Property and the Contribution Return on the
amount of the Contribution Advances related to such Property, (ii) if the Lessee
becomes obligated to purchase the Leased Property under the Lease, the sum of
(A) the principal amount of the Notes, all interest thereon and Breakage Costs,
if any, with respect thereto and all other obligations of the Lessee owing to
the Lender under the Operative Documents plus (B) the outstanding Contribution,
all accrued and unpaid Contribution Return prorated to the date of payment,
Lessor's Breakage Costs, if any, and all other obligations of the Lessee owing
to the Lessor under the Operative Documents, shall be paid in full by the
Lessee, (iii) if the Lessee elects to exercise the Purchase Option with respect
to the Leased Property, Lessee shall be obligated to pay the Lease Balance for
the Leased Property in full in accordance with Sections 15.1, 15.3 15.4 and 15.5
of the Lease, (iv) upon an Event of Default resulting in an acceleration of the
Lessee's obligation to purchase the Leased Property under the Lease, the amounts
then due and payable by the Lessee under the Lease shall include the sum of (A)
all amounts necessary to pay in full the Loans, accrued interest and Breakage
Costs, if any, and all other obligations of the Lessee owing to the Lender under
the Operative Documents plus (B) the outstanding Contribution, all accrued and
unpaid Contribution Return prorated to the date of payment, Lessor's Breakage
Costs, if any, and all other obligations of the Lessee owing to the Lessor under
the Operative Documents, provided that (v) in the event Lessee effectively
exercises the Remarketing Option pursuant to the provisions of Section 15.6 of
the Lease and duly and timely fulfills the provisions of clauses (i) through
(xiii) of Section 15.6 of the Lease, Lessee's obligations shall be limited as
provided in Section 15.6 of the Lease. The foregoing notwithstanding, the
parties hereto acknowledge and agree that the obligations of the Lessor
(including its members, incorporators, stockholders, directors, officers,
employees and agents) hereunder, under the Loan Agreement, the Lease and the
other Operative Documents are non-recourse as provided in Section 4.2 of the
Loan Agreement and Section 18.12 of the Lease.
SECTION 2.5 Controlling Agreements. In the event of any conflict between
this Participation Agreement and any other Operative Document, this
Participation Agreement shall control. In the event of any conflict between the
Lease and any other Operative Document to which the Lessee is not a party, the
Lease shall control.
SECTION 2.6 Permitted Applications of Loan Advances and Contribution
Advances. The parties hereto agree that the Lessee may apply the proceeds of
Loan Advances and Contribution Advances for the payment (or the reimbursement by
the Lessee of itself for the payment) of any or all of the following items (any
combination or all of the items together, the "Development Costs"): (i) the
purchase price of any Parcel or Property and all related costs of development
and acquisition of such Parcel or Property, (ii) costs of Construction of
Improvements for any Property (as approved by the Lender), including costs
related to letters of credit, surety bonds, security deposits or other security
in connection with the Construction, each Construction Contract, any municipal
sewer or utility contract, any permit or consent for any Governmental Authority
or other Person, or any other obligation or requirement relating to
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the Construction, and (iii) "soft costs" related to the foregoing, including
architect's fees, engineering fees, permit and license fees and charges,
testing, survey costs, title charges and attorneys' fees and other related costs
and expenses properly attributable to any of the foregoing Development Costs.
The Lessee covenants not to use any Loan Advances or Contribution Advances to
pay, or reimburse itself for paying, for trade fixtures, personal property or
equipment which does not constitute part of the Improvements or to use the
proceeds of Loan Advances or Contribution Advances for working capital.
SECTION 2.7 Covenants Concerning Construction.
(a) Changes in Construction Documents. No change will be made in any Plans
and Specifications, the terms and conditions of any Construction Contract, or
the identity of any General Contractor without the prior written consent of the
Lender; provided, however, that so long as no Default or Event of Default shall
have occurred and is then continuing, no such consent relating to Improvements
to a Property, the Development Costs of which are reasonably estimated by the
Lessee to cost in the aggregate less than $100,000, shall be required. The
Lender's approval of the Plans and Specifications shall be for lending purposes
only and shall not constitute an assumption of liability by the Lender with
respect to the Lessee, any General Contractor, or any other present or future
tenant, occupant or purchaser of the Leased Property.
(b) Conduct of the Construction. If Improvements are to be constructed on
any Parcel, such Construction shall commence within thirty (30) days after the
Parcel Closing Date therefor. All Improvements shall be completed prior to the
Completion Deadline for such Property. In the event of a Construction Force
Majeure Event, the Completion Deadline therefor shall be extended by a period of
time equal to the Construction Force Majeure Event, but in no event to a date
later than January 29, 2000. All Improvements will be constructed substantially
in accordance with the related Plans and Specifications and in compliance with
all Applicable Laws. All Improvements to a Parcel will be located entirely upon
the related Parcel. Title to each Property will, during the Construction and on
the related Parcel Completion Date, be free from all liens, claims, and
encumbrances, except for those created by or arising under the Operative
Documents, taxes and assessments which are a lien but not yet due and payable,
liens that are bonded off in accordance with Applicable Law within thirty (30)
days of the filing of such lien, and in any event prior to the commencement of
an action to foreclose on such lien, and any other liens or exceptions which are
approved in writing by the Lender.
(c) Inspections of Construction Records. During normal business hours and
at any time an Event of Default has occurred as is continuing, the Lessee will
make available for inspection by a duly authorized representative of the Lender
any of the Lessee's and each General Contractor's books and records insofar as
they relate to the Leased Property at such times as requested by the Lender when
requested to do so and will furnish to the Lender any information regarding its
business affairs and its financial condition.
(d) Reimbursements. The Lessee will reimburse the Lender promptly for all
construction loan costs paid by the Lender in accordance with the Operative
Documents,
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including but not limited to the costs of title insurance policies, title
examinations, recording fees, surveys, fees of counsel for services rendered and
out-of-pocket expenses for which the Lender is entitled to be reimbursed
pursuant to the Operative Documents, all of which the Lender is authorized to
deduct from the proceeds of disbursements hereunder.
(e) Fixtures and Equipment. No personal property of any kind intended to
be part of the Improvements or paid for with the proceeds of Advances will be
purchased or acquired by the Lessee under any conditional sales contract or
security agreement or any lease agreement, and all such personal property will
be fully paid for before payment therefor becomes past due or in any event
within 30 days after delivery thereof; provided, however, that the foregoing
shall not apply to amounts withheld and unpaid on account of bona fide disputes
with the suppliers thereof.
(f) Inspections of the Construction. The Lessee shall allow the Lender and
its agents, at all times during normal business hours and at any time that an
Event of Default has occurred and is continuing, (i) the right of entry and free
access to the site of the Improvements and the right to inspect all work done,
labor performed and materials furnished in and about the Improvements; and (ii)
to require to be replaced or otherwise corrected any material or work that does
not comply with the Plans and Specifications therefor.
(g) Insurance Prior to the Parcel Completion Date. The Lessee shall submit
to the Lender for its review and approval evidence of builder's risk insurance
coverage or permanent insurance coverage appropriate and satisfactory to the
Lender, on the Leased Property. All insurance policies shall name the Lessee
and the Lender as an additional insured and shall be issued by carriers with a
Best's Insurance Reports policy holder's rating of A+ and a financial size
category acceptable to the Lender and shall include a standard mortgagee clause
(without contribution) in favor of and acceptable to the Lender. The policies
shall provide for the following coverages and any other coverages that the
Lender may from time to time reasonably require:
(1) Builder's "all risk" hazard coverage in the amount of the replacement
cost of the Improvements and all other improvements and personality on
the Leased Property. If the policy is written on a coinsurance basis,
the policy must contain an agreed amount endorsement as evidence that
the coverage is in an amount sufficient to insure the full amount of
the Loan. Such insurance shall be 100% non-reporting policies;
(2) Public liability insurance in such amounts (at least $5,000,000 for
personal injury, death or property damage arising out of any one
accident) and with a deductible satisfactory to the Lender any portion
of which may be provided by umbrella coverage;
(3) Flood hazard coverage, if appropriate, in an amount acceptable to the
Lender and with a deductible acceptable to the Lender; and
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(4) Worker's compensation insurance (including employer's liability
insurance, if available and requested by the Lender) for all
employees, if any, of the Lessee and for all employees, if any, of the
Lessee's managing agent(s) and contractor(s) engaged on or with
respect to the Leased Property or the Construction in such amounts as
are satisfactory to the Lender, or, if such limits are established by
law, in such amounts. The Lessee may satisfy the requirements of this
clause (4) with respect to employees of the Lessee's agents and
contractors through separate policies provided by each agent or
contractor.
The initial policies for each Property shall be prepaid and the Lessee shall
deliver to the Lender and the Lessee prior to the Parcel Closing Date therefor
copies of all such policies, together with original certificates therefor.
Copies of all renewal policies and original certificates therefor shall be
deposited with the Lender as evidence of such insurance. All policies shall
contain provisions for thirty days' written notice to the Lender prior to
expiration or cancellation. The Lessee expressly agrees to permit the Lender to
maintain insurance in force by payment of premiums from undisbursed Loan
proceeds. The Lender hereby agrees that the insurance coverages required to be
obtained and maintained by the Lessee hereunder may be obtained and maintained
in the form of blanket insurance policies, covering both the Leased Property and
other properties and projects owned by the Lessee. Written evidence
satisfactory to the Lender of the existence and coverage of such blanket
policies shall be delivered to the Lender prior to each Parcel Closing Date.
(h) Notice of Default. The Lessee shall notify the Lender in writing
within three (3) days of the occurrence thereof of any Default or Event of
Default.
(i) Construction Bank Account. The Lessee may, at its option, maintain
with the Lender a commercial operating account. All Loan Advances made by the
Lender and all Contribution Advances issued by the Lender on behalf of the
Lessor may be made by depositing the amount thereof directly into such operating
account.
SECTION 3
CONDITIONS PRECEDENT; DOCUMENTS
SECTION 3.1 Conditions to the Obligations of the Lessor and the Lender on
the Closing Date. The obligations of the Lessor and the Lender to carry out
their respective obligations under Section 2 of this Participation Agreement to
be performed on the Closing Date shall be subject to the fulfillment to the
satisfaction of, or waiver by, each such party (acting directly or through its
counsel) on or prior to the Closing Date of the following conditions precedent:
(a) Documents. The following documents shall have been executed and
delivered by the respective parties thereto:
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(i) Participation Agreement. Counterparts of this Participation
Agreement, duly executed by the parties hereto, shall have been
delivered to each of the parties hereto.
(ii) Lease. Counterparts of the Lease (substantially in the form
of Exhibit A), duly executed by the Lessee and the Lessor, shall have
been delivered to the Lender.
(iii) Loan Agreement. Counterparts of the Loan Agreement
(substantially in the form of Exhibit B), duly executed by the Lessor
and the Lender, shall have been delivered to each of the Lessor and
the Lender.
(iv) Notes. The Notes (substantially in the forms attached as
exhibits to the Loan Agreement) payable to the order of the Lender,
duly executed by the Lessor, shall have been delivered to the Lender.
(v) Assignment of Lease and Rents. Counterparts of the
Assignment of Lease and Rents (substantially in the form of Exhibit
C), duly executed by the Lessor, consented to by the Lessee, shall
have been delivered to the Lender;
(vi) Securities Account. Counterparts of the Investment Property
Security Agreement (substantially in the form of Exhibit L-1) duly
executed by the Lessee and Lender and the Account Control Agreement
(substantially in the form of Exhibit L-2) shall have been delivered
to the Lender;
(vii) Guaranty. The Limited Guaranty (substantially in the form
of Exhibit M), duly executed by the Lessee, shall have been delivered
to the Lender.
(viii) Lessee's Resolutions and Incumbency Certificate, Etc.
Each of the Lender and the Lessor shall have received a certificate of
the Secretary or an Assistant Secretary of the Lessee attaching and
certifying as to (1) the resolution of the Lessee's Board of Directors
(or an appropriate committee of such Board) duly authorizing the
execution, delivery and performance by the Lessee of each Operative
Document to which the Lessee is or will be a party, (2) the incumbency
and signatures of Persons authorized to execute and deliver Operative
Documents on the Lessee's behalf, (3) the Lessee's certificate of
incorporation, certified as of a recent date by the Secretary of State
of the state of the Lessee's incorporation and (4) the Lessee's by-
laws.
(ix) Opinion of Lessee's Counsel. The opinion of Greenebaum,
Doll & McDonald, PLLC, Lessee's counsel, dated the Closing Date, and
being substantially in the form set forth in Exhibit D and containing
such other matters as the parties to whom such opinion is addressed
shall reasonably request, shall have been delivered and addressed to
each of the Lessor and the Lender.
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(x) Lessor's Resolution and Incumbency Certificate. The Lender
shall have received a certificate of the managing member of the Lessor
attaching and certifying as to (A) the managing member's resolution
authorizing the execution, delivery and performance by it of each
Operative Document to which the Lessor is or will be a party and (B)
the incumbency and signatures of Person(s) authorized to execute and
deliver such documents on the Lessor's behalf.
(xi) Opinion of Lessor's Counsel. The Opinion of Ropes and Gray,
Boston, Massachusetts dated the Closing Date, substantially is the
form of Exhibit E shall have been delivered and addressed to each of
the Lessee and the Lender.
(b) Litigation. No action or proceeding shall have been instituted
or, to the Lessee's knowledge, threatened nor shall any governmental action,
suit, proceeding or investigation be instituted or, to the Lessee's knowledge,
threatened before any Governmental Authority, nor shall any order, judgment or
decree have been issued or proposed to be issued by any Governmental Authority,
to set aside, restrain, enjoin or prevent the performance of this Participation
Agreement or any of the other Operative Documents or any transaction
contemplated hereby or thereby or which would materially adversely affect the
Leased Property or any transaction contemplated by the Operative Documents or
which would result in a Material Adverse Effect.
(c) Legality. In the opinion of the Lender, the Lessor or their
respective counsel, the transactions contemplated by the Operative Documents
shall not violate any Applicable Law, and no change shall have occurred or been
proposed in Applicable Law that would make it illegal for the Lender or the
Lessor to participate in any of the transactions contemplated by the Operative
Documents.
(d) No Events. (i) No Default, Event of Default, Event of Loss or
Event of Taking shall have occurred and be continuing and (ii) no action shall
be pending or, to the Lessee's knowledge, threatened by a Governmental Authority
to initiate a Condemnation or an Event of Taking.
(e) Representations. Each representation and warranty of the parties
hereto or to any other Operative Document contained herein or in any other
Operative Document shall be true and correct in all material respects as though
made on and as of the Closing Date.
(f) No Material Adverse Effect. There shall not have occurred any
event having a Material Adverse Effect since December 31, 1997.
(g) Fees and Transaction Expenses. The Lessee shall have paid, or
caused to be paid the reasonable fees and expenses of the Lessor, the Lender and
their respective counsel.
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SECTION 3.2 Conditions to the Obligations of the Lessor and the Lender on
each Parcel Closing Date. The obligations of the Lessor and the Lender to
carry out their respective obligations under Section 2 of this Participation
Agreement to be performed on each Parcel Closing Date shall be subject to the
fulfillment to the satisfaction of, or waiver by, each such party (acting
directly or through its counsel) on or prior to such Parcel Closing Date of the
following conditions precedent (together, the "Parcel Conditions"):
(a) Documents. The following documents shall have been executed and
delivered by the respective parties thereto:
(i) Deed. The Deed concerning the Parcel to the Lessor from the
Person conveying such interest (fee simple or leasehold, as the case
may be) shall have been delivered to the Lessor in recordable form;
(ii) Lease. A Parcel Lease Supplement (substantially in the form
of Appendix II to the Lease), together with a Memorandum of Lease
(substantially in the form of Appendix III to the Lease, each duly
executed by the Lessee and the Lessor, provided that the Memorandum of
Lease shall be executed in recordable form, shall have been delivered
to the Lender;
(iii) Mortgage. Counterparts of the Mortgage (substantially in
the form of Exhibit F), duly executed by the Lessee and in recordable
form, shall have been delivered to each of the Lessor and the Lender;
(iv) Notice of Assignment of Lease and Rents. Counterparts of a
Notice of the Assignment of Lease and Rents (substantially in the form
of Exhibit A to the Assignment of Lease and Rents), duly executed by
the Lessor, consented to by the Lessee and in recordable form, shall
have been delivered to the Lender;
(v) Non-Disturbance and Attornment Agreement. Counterparts of
the Non-Disturbance and Attornment Agreement (substantially in the
form of Exhibit G) duly executed by the Lessee, Lessor and Lender and
in recordable form shall have been delivered to the Lender, the Lessor
and the Lessee;
(vi) Title and Title Insurance. The Lessor and the Lender shall
receive from the Title Insurance Company, a ALTA form of Owner's
Policy in the amount of the Parcel Estimated Development Costs (an
"Owner's Title Policy") and an ALTA form of Loan Policy of title
insurance in the amount of 97% of the Parcel Estimated Development
Costs (a "Lender's Title Policy"), each issued by the Title Insurance
Company, in each case, each acceptable in form and substance to Lessee
and the Lender (each Owner's Title Policy and the Lender's Title
Policy, collectively the "Title Policies"). The Title Policies (A)
shall be dated as
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of the Parcel Closing Date, (B) to the extent permitted under
Applicable Law, shall include coverage over the general exceptions to
such Title Policy and shall contain such affirmative endorsements as
to easements and rights-of-way, encroachments, the nonviolation of
covenants and restrictions, survey matters and other matters as the
Lender and the Lessor shall reasonably request and (C) shall not
contain a "pending disbursements" exception except as to mechanics'
lien claims and except as to limiting coverage to the amount of Loan
Advances actually disbursed from time to time.
(vii) Security Agreement and Assignment. The Security Agreement
and Assignment (substantially in the form of Exhibit H), duly executed
by the Lessee, with an acknowledgement and consent thereto
satisfactory to the Lessor and the Lender duly executed by the General
Contractor therefor and complete copy of the Construction Contract,
certified by the Lessee, shall have been delivered to the Lender.
(viii) Survey. The Lessee shall have delivered, or shall have
caused to be delivered, to the Lessor and the Lender, at the Lessee's
expense, an accurate survey of the Parcel (and any Improvements
thereon) certified to the Lessor and the Lender in a form satisfactory
to the Lessor and the Lender and showing no state of facts
unsatisfactory to the Lessor or the Lender and prepared within sixty
(60) days of the Parcel Closing Date by a licensed surveyor selected
by Lessee and reasonably satisfactory to Lender. Such survey shall (A)
be acceptable to the Title Insurance Company, (B) show no
encroachments on the Parcel by structures owned by others, and no
encroachments from any part of the Parcel onto any land owned by
others, except for such encroachments which, in the judgment of the
Lender and its counsel, do not impair in any material respect the
value of the Leased Property or the suitability of the Leased Property
for its intended use, and (C) disclose no state of facts objectionable
to the Lessor, the Lender or the Title Insurance Company.
(ix) Evidence of Insurance. The Lessor and the Lender have
received from the Lessee certificates of insurance evidencing
compliance with the provisions of both Section 2.7 hereof and Article
IX of the Lease (including the naming of the Lessor and/or the Lender
as additional insured or loss payees with respect to such insurance),
in form and substance reasonably satisfactory to the Lessor and the
Lender.
(x) Lessee's Resolutions and Incumbency Certificate, Etc. Each
of the Lender and the Lessor shall have received (A) a certificate of
the Secretary or an Assistant Secretary of the Lessee attaching and
certifying as to (1) the resolution of the Lessee's Board of Directors
(or an appropriate committee of such Board) duly authorizing the
execution, delivery and performance by the Lessee of each Operative
Document to which the Lessee is or will be a party, (2) the incumbency
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and signatures of Persons authorized to execute and deliver Operative
Documents on the Lessee's behalf, (3) the Lessee's certificate of
incorporation, certified as of a recent date by the Secretary of State
of the state of the Lessee's incorporation and (4) the Lessee's by-
laws and (B) a good standing certificate for the Lessee from the
appropriate officer of the state in which the Parcel is located.
(xi) Recording Fees; Transfer Taxes. To the extent not covered
by the Lender's Title Policy, the Lender shall have received
satisfactory evidence of the payment by the Lessee of all recording
and filing fees and taxes with respect to any recordings or filings
made of the Memorandum of Lease, the Mortgage, the Notice of
Assignment of Lease and Rents and the Subordination and Nondisturbance
Agreement for such Parcel.
(xii) Opinions of Lessee's Counsel. (a) The opinion of
Greenebaum, Doll & McDonald, PLLC, Lessee's counsel, dated the Parcel
Closing Date, and being substantially in the form set forth in Exhibit
I and containing such other matters as the parties to whom such
opinion is addressed shall reasonably request, shall have been
delivered and addressed to each of the Lessor and the Lender; and (b)
in the event the Parcel shall be located in a State other than
Kentucky, an opinion of counsel authorized to practice law in such
state, satisfactory to the Lender, dated the Parcel Closing Date,
containing such matters as the parties to whom such opinion is
addressed shall reasonably request, shall have been delivered and
addressed to each of the Lessor and Lender.
(xiii) Lessor's Resolution and Incumbency Certificate. The
Lender shall have received a certificate of the managing member of the
Lessor attaching and certifying as to (A) the managing member's
resolution authorizing the execution, delivery and performance by it
of each Operative Document to which the Lessor is or will be a party
and (B) the incumbency and signatures of Person(s) authorized to
execute and deliver such documents on the Lessor's behalf.
(xiv) Opinion of Lessor's Counsel. The Opinion of Ropes and
Gray, Boston, Massachusetts dated the Parcel Closing Date,
substantially is the form of Exhibit J shall have been delivered and
addressed to each of the Lessee and the Lender.
(xv) Soil Analysis and Environmental Report. The Lender and the
Lessor shall have received and approved (i) a soil analysis report
relating to the Parcel in form and content satisfactory to the Lender
and (ii) an environmental report which shall certify results related
to toxic and other hazardous substances on the Parcel.
(xvi) Plans and Specifications. Copies of the Plans and
Specifications, either "as built" in the event the Improvement for
such Property have been
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previously completed, or in final form for use in the Construction of
such Improvements, as the case may be, in either such case in form
satisfactory to the Lender.
(xvii) Architect Certificate. Certification from an Architect
approved by the Lender, substantially is the form of Exhibit K shall
have been delivered to each of the Lessor and the Lender.
(xviii) Utilities. Evidence that all utility services necessary
for construction, if applicable, and use of the Improvements
(including without limitation, electric, gas, telephone, water and
sewer service) are available to the Parcel, and the Lessee has the
right to connect to and use all utility services without restriction;
and that all necessary easements to provide such utility services to
the Improvements thereon have been obtained.
(xix) Zoning. Evidence of compliance with applicable zoning
ordinances or similar land use restrictions with respect to the
Parcel.
(xx) Governmental Authorizations. All authorizations, if any,
required by an governmental authority for the operation of the Parcel
and the Improvements for the purposes contemplated by the Plans and
Specifications therefor, which are presently procurable.
(xxi) Appraisal. An appraisal report for the Parcel and the
Improvements (as constructed or to be constructed thereon), which
appraisal report shall be prepared by an independent appraising firm,
and be in form and substance, acceptable to the Lender in its sole and
absolute discretion, whether in relation to all applicable regulatory
requirements imposed by The Financial Institutions Reform, Recovery
and Enforcement Act of 1989 and the regulations thereunder, or
otherwise, shall have been delivered to the Lender. Such appraisal
shall state the Fair Market Sales Value of the Property upon
completion of any Construction, which amount shall be at least equal
to 70% of the Estimated Parcel Development Costs. The cost of such
appraisal shall be borne solely by the Lessee.
(xxii) Estimated Parcel Development Costs; Approved Budget. The
Lessee shall deliver an Officer's Certificate certifying Lessee's best
estimate of the Estimated Parcel Development Costs for such Property,
presented in reasonable detail, in form and substance acceptable to
the Lender, and in the case of any Construction of Improvements
contemplated for the Property, setting forth the Approved Budget for
such Construction.
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(xxiii) Fees of the Financial Advisor. On or prior to the first
Parcel Closing Date, the Lessee shall have paid all fees of the
Financial Advisor in connection with the transactions contemplated
hereunder.
(xxiv) Reaffirmation of Guaranty. A reaffirmation of the
Guaranty duly executed by the Lessee.
(b) Litigation. No action or proceeding shall have been instituted
or, to the Lessee's knowledge, threatened nor shall any governmental action,
suit, proceeding or investigation be instituted or, to the Lessee's knowledge,
threatened before any Governmental Authority, nor shall any order, judgment or
decree have been issued or proposed to be issued by any Governmental Authority,
to set aside, restrain, enjoin or prevent the performance of this Participation
Agreement or any of the other Operative Documents or any transaction
contemplated hereby or thereby or which would materially adversely affect the
Leased Property or any transaction contemplated by the Operative Documents or
which would result in a Material Adverse Effect.
(c) Legality. In the opinion of the Lender, the Lessor or their
respective counsel, the transactions contemplated by the Operative Documents
shall not violate any Applicable Law, and no change shall have occurred or been
proposed in Applicable Law that would make it illegal for the Lender or the
Lessor to participate in any of the transactions contemplated by the Operative
Documents.
(d) No Events. (i) No Default, Event of Default, Event of Loss or
Event of Taking shall have occurred and be continuing and (ii) no action shall
be pending or, to the Lessee's knowledge, threatened by a Governmental Authority
to initiate a Condemnation or an Event of Taking.
(e) Representations. Each representation and warranty of the parties
hereto or to any other Operative Document contained herein or in any other
Operative Document shall be true and correct in all material respects as though
made on and as of the Parcel Closing Date.
(f) No Material Adverse Effect. There shall not have occurred any
event having a Material Adverse Effect since the most recent to occur of (i) the
Closing Date or (ii) a Parcel Closing Date.
(g) Location of Parcel. If the Parcel is located other than in Tyler,
Texas or Chandler, Texas, then the Lessee shall have obtained the Lender's prior
written consent as to the location of the Parcel (it being understood that the
Lender may grant or withhold such consent in its sole and absolute discretion).
SECTION 3.3 Conditions to Subsequent Fundings. Notwithstanding anything
to the contrary contained herein, or in any other Operative Document, neither
the Lender nor the Lessor shall have any obligation to make any Loan Advance or
Contribution Advance, as the
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case may be, pursuant to a Funding Requisition for Development Costs following
the Loan Advance for the acquisition of a Parcel on the Parcel Closing Date,
unless each of the following conditions shall have been satisfied or waived by
the Lender with respect to such Funding:
(a) Deliveries. On or prior to each Funding subsequent to the
Initial Loan Advance, the Lessee shall deliver, or cause to be delivered, the
following:
(i) Plans and Specifications. Detailed architectural,
structural, mechanical, and electrical Plans and Specifications for
all Improvements to be constructed, to the extent not already
delivered, to the Lender, provided, however, that no Advance shall be
required to be made for any portion of Construction of the
Improvements until the Plans and Specifications for such portion of
the Improvements shall have been delivered to and approved by the
Lender;
(ii) Title Policy Endorsement. If applicable, a endorsement to
the Title Policies for each Parcel (A) indicating that since the last
Funding Date as to which a Funding was made in respect of such Parcel
there has been no change in the state of title and no survey
exceptions not theretofore approved by the Lessor and the Lender and
(B) increasing the coverage of the Title Policies by an amount equal
to the Funding with respect to such Parcel then being made so that the
total amount insured equals, in the case of the Lender's Title Policy,
the total amount of Loan Advances disbursed by the Lender with respect
to such Parcel, and in the case of Lessor's Title Policy, a like
amount plus in addition, the amount of the Contribution with respect
to such Parcel, and, in each case, changing the effective date of the
Title Policies to the Funding Date. At the Lender's discretion, any
Funding may be made through the Title Insurance Company. Prior to each
Funding Date, the Lessee shall furnish the Title Insurance Company
with lien waivers as required by the Title Insurance Company through
the time of the Funding. No title indemnities for purposes of insuring
around any objection to or condition of title shall be issued or
provided by the Lessee or the Lessor to the Title Insurance Company
without the prior written consent of the Lender;
(iii) Engineer's Certificate. If applicable, a certification
from the Architect or from an engineer approved by the Lender that the
Improvements have been or are being erected within the property
boundaries of the Land and in accordance with all applicable set back
requirements and the approved site plan; and
(iv) Improvements Permit. All building permits or other
authorizations required by any Governmental Authority for the
Construction to the extent not previously obtained;
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(b) No Events. (i) No Default, Event of Default, Event of Loss or
Event of Taking shall have occurred and be continuing and (ii) no action shall
be pending or threatened by a Governmental Authority to initiate a Condemnation
or an Event of Taking;
(c) Requisition. Together with the Funding Requisition, the Lessee
shall submit to the Lender a requisition using AIA Form G702 and 703 accompanied
by a cost breakdown, the accuracy of which shall be certified by the Lessee, the
Architect and the General Contractor, and such other information and
documentation required hereunder. The Approved Budget shall serve as the
disbursement control for each line item. Neither the Lender nor the Lessor
shall be required to make a Funding for any line item in excess of the amount
shown in the Approved Budget for such line item; provided, however, that the
Lender shall not unreasonably withhold its consent to a reallocation of amounts
within line items in the Approved Budget (other than the line item for interest
reserve) as long as the total cost of the Construction does not increase;
(d) Timing. Funding Requisitions after the Initial Loan Advance shall
not be made more often than once a month and the total amount of all Fundings in
respect of Construction shall not at any time exceed an amount equal to the sum
of the hard costs of the work completed to date as certified by the Architect on
the aforesaid AIA draw request forms and the soft costs incurred. The Lender
reserves the right to review and approve invoices for all hard and soft costs.
Prior to each Advance, the Lender or its agents may inspect the Leased Property
to verify that the related Funding Requisition accurately reflects the amount of
the Construction with respect thereto;
(e) Loan Out of Balance. If, in the sole judgment of the Lender, and
determined at any time while the Loans are outstanding, the cost of the
Construction increases, the Lessee shall be required to invest the increased
amount in the Construction or deposit such increased amount with the Lender in
an account pledged to the Lessor as security for the Lease and other Operative
Documents in a manner reasonably satisfactory to the Lender or to provide the
Lender such other assurances as to the availability of the funds as subject to
the Lender's approval prior to any Loan Advance;
(f) Completion Deadline. If at any time the Lender shall, in its sole
judgment, estimate and give notice to the Lessee that substantial completion of
any Construction will not occur on or before the Completion Deadline, then
neither the Lender nor the Lessor shall have any obligation to make further
Advances until such time as the Lessee shall have delivered to the Lender
evidence satisfactory to Lender that substantial completion of all Improvements
will occur on or before the Completion Deadline;
(g) Approval of Contracts. Neither the Lender nor the Lessor shall
have any obligation to make any Advances for any Development Costs due from the
Lessee under a contract or subcontract for the Construction if such contract or
subcontract is required to be, but has not been, approved by the Lender and such
approval by the Lender has not been unreasonably withheld or delayed. Although
the Lessee shall not be required to provide to the
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Lender the subcontracts for the Construction as a condition precedent to making
the Initial Funding, the Lender reserves the right, upon written notice to the
Lessee, to require the Lessee to provide such subcontracts for subsequent
Advances;
(h) Compliance with Plans and Specifications. If the Lender or the
Lessor should at any time determine that any part of the work performed on, or
materials incorporated into, any Improvements does not comply in any material
respect with the related Plans and Specifications, whether or not the
Development Cost of any such work or materials shall have been included in a
Funding Requisition theretofore made, then neither the Lender nor the Lessor
shall have any obligation to make any further Advances until such work is
corrected, or material is changed, to comply with such Plans and Specifications
and the Lender and the Lessor have received satisfactory evidence to them of
such change and compliance, and Lender and the Lessor shall respectively have
the right to offset against the amount of any subsequent Advance the cost of the
nonconforming work or materials included in prior Fundings. Notwithstanding the
foregoing, the Lender and the Lessor shall continue to make Advances for other
work and materials if, prior to the determination by the Lender or the Lessor of
such nonconformance, the Lessee and/or the Architect therefor have previously
made a similar determination, and the Lessee has delivered to the Lender and the
Lessor evidence reasonably satisfactory to the Lender and the Lessor that the
General Contractor therefor has agreed to correct such work or to change such
materials without requesting an Advance for the cost thereof, and the General
Contractor diligently pursues such work and changes to completion within 90 days
after the determination of the need for corrective action;
(i) Defects in Construction. If the Lender or the Lessor should at
any time reasonably determine that any part of the work performed on any
Improvements has not been performed in a good and workmanlike manner, whether or
not the Development Cost of any such work shall have been included in a Funding
Requisition theretofore made, neither the Lender nor the Lessor shall have any
obligation to make any further Advances until such work is corrected so as to
have been performed in a good and workmanlike manner and the Lender and the
Lessor have received satisfactory evidence of such correction, and Lender and
the Lessor shall have the right to offset against the amount of any subsequent
Advances by the cost of the nonconforming work or materials included in prior
Fundings. Notwithstanding the foregoing, the Lender and the Lessor shall
continue to make Advances for other work and materials if, prior to the
determination by the Lender or the Lessor of such nonconformance, the Lessee
and/or the Architect therefor have previously made a similar determination, and
the Lessee has delivered to the Lender and the Lessor evidence reasonably
satisfactory to the Lender and the Lessor that the General Contractor therefor
has agreed to correct such work or to change such materials without requesting
an Advance for the cost thereof, and the General Contractor diligently pursues
such work and changes to completion within 90 days after the determination of
the need for corrective action; and
(j) Compliance with Codes. If the Lender or the Lessor should at any
time determine that any part of the work performed on, or materials incorporated
into, any Improvements does not comply with all applicable building codes or
other Applicable Law,
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whether or not the Development Cost of any such work or materials shall have
been included in a Funding Requisition theretofore made, then neither the Lender
nor the Lessor shall have any obligation to make any further Advances until such
work is corrected, or material is changed, to cause the same to comply with all
applicable building codes or other Applicable Law and the Lender and the Lessor
have received satisfactory evidence of such correction or change and of such
compliance, and the Lender and the Lessor shall have the right to offset against
the amount of any subsequent Advances for other work and materials by the cost
of the nonconforming work as materials included in prior Fundings.
Notwithstanding the foregoing, the Lender and the Lessor shall continue to make
Advances for other work and materials if, prior to the determination by the
Lender or the Lessor of such nonconformance, the Lessee and/or the Architect
have previously made a similar determination, and the Lessee has delivered to
the Lender and the Lessor evidence reasonably satisfactory to the Lender and the
Lessor that the General Contractor therefor has agreed to correct such work or
to change such materials without requesting an Advance for the cost thereof, and
the General Contractor diligently pursues such work and changes to completion
within 90 days after the determination of the need for corrective action.
(k) Securities Account. To the extent that the Margin Value of the
securities held in the Securities Account (together with any other funds held
therein, hereinafter called the "Account Balance") shall be less than the Lease
Balance on the date five (5) Business Days immediately prior to the first
Advance made after delivery of the appraisal pursuant to Section 3.2(a)(xxi)
hereof, the Lessee shall have delivered to the Securities Intermediary funds in
amount not less than the amount by which the Lease Balance exceeds the Margin
Value of the securities held in the Securities Account on such fifth Business
Day prior to the aforesaid Advance, which funds shall be held in the Securities
Account and invested, all pursuant to the Investment Property Security
Agreement.
SECTION 3.4 Completion Date Conditions. If Improvements have been
constructed on a Parcel pursuant hereto, the occurrence of the Parcel Completion
Date therefor shall be subject to the fulfillment or satisfaction of, or waiver
by, each party hereto (acting directly or through its counsel) of the following
conditions precedent (the "Completion Date Conditions"):
(a) Title Policy Endorsements. The Lessee shall have furnished to the
Lender the following endorsements to its related Title Policy (to the extent
available under the Texas Insurance Code and the Basic Manual for Rates, Rules
and Forms for Title Insurance in Texas, with respect to Properties located in
the State of Texas) (each of which shall be subject to no exceptions other than
those set forth in Schedule B to its Title Policy): (i) a date-down endorsement
(redating and confirming the coverage provided under the related Title Policy
and each endorsement thereto) and (ii) a comprehensive endorsement, in each
case, effective as of a date not earlier than the date of completion of the
Construction.
(b) Construction Complete. The Construction on the Parcel shall have
been completed substantially in accordance with the Plans and Specifications
therefor and all Applicable Laws, and the Improvements therein are ready for
occupancy and operation in the
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ordinary course of Lessee's business. All fixtures, equipment, materials and
other property contemplated under the Plans and Specifications thereof to be
incorporated or installed in the Property shall have been incorporated or
installed free and clear of all liens except for Permitted Liens.
(c) Lessee Certification. The Lessee shall have furnished the Lessor
and the Lender with both (i) a certification of the Lessee that:
(A) all amounts owing to third parties for the Construction
therefor have been paid in full (other than contingent obligations for
which the Lessee has made adequate reserves or claims being defended
in good faith), and to Lessee's knowledge no litigation or proceedings
are pending, or to the best of the Lessee's knowledge are threatened,
against the Property or the Lessee which would materially adversely
affect (1) the enforceability or priority of this Participation
Agreement or the other Operative Documents and (2) the ability of the
Lessee to fully perform its obligations pursuant to and as
contemplated by the terms and provisions of this Participation
Agreement and the other Operative Documents;
(B) all consents, licenses and permits and other governmental
authorizations or approvals required for the Construction and
operation of the Property have been obtained;
(C) the Property has available all services of public facilities
and other utilities necessary for use and operation of the Property
for its intended purposes including, without limitation, adequate
water, gas and electrical supply, storm and sanitary sewerage
facilities, telephone and other required public utilities and means of
access between the Improvements and public highways for pedestrians
and motor vehicles;
(D) all agreements, easements and other rights, public or
private, which are necessary to permit the lawful use and operation of
the Property as the Lessee intends to use the Property under the Lease
and which are necessary to permit the lawful intended use and
operation of all then intended utilities, driveways, roads and other
means of egress and ingress to and from the same have been obtained
and are in full force and effect and the Lessee has no knowledge of
any pending modification or cancellation of any of the same, and the
use of the Property does not depend on any variance, special exception
or other municipal approval, permit or consent that has not been
obtained for its continuing legal use;
(E) the Construction has been completed substantially in
accordance with the Plans and Specifications and all Applicable Laws
and the Property is ready for occupancy and operation; and
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(F) the Property is in compliance with all applicable zoning laws
and regulations; and
(ii) copies of (A) all final lien waivers regarding the Construction
thereof, together with sworn statements from contractors, subcontractors and
material suppliers and (B) true and complete copies of an "as built" or "record"
set of the Plans and Specifications therefor, and a plat of survey of the
Property "as built" showing all paving, driveways, fences and exterior
improvements and copies of all licenses and permits required by any Governmental
Authority having jurisdiction over the use and occupancy of the Property and for
the operation thereof, including copies of a certificate or certificates of
occupancy for the Property or other legally equivalent permission to occupy the
Property from the Governmental Authority having jurisdiction.
(d) Cutoff Date. The Parcel Completion Date shall occur on or prior to the
Completion Deadline.
SECTION 3.5 Conditions to the Obligations of the Lessee. The obligations
of the Lessee hereunder are subject to the fulfillment on the Closing Date to
the satisfaction of, or waiver by the Lessee of, conditions set forth in this
Sections 3 that require fulfillment by the Lessor and the Lender shall have been
satisfied.
SECTION 3.6 Appraisal. If Improvements have been constructed on a
Parcel after the related Parcel Closing Date, the Lessee agrees to supply the
Lender at its request made, within sixty (60) days of the Parcel Completion Date
therefor, with an appraisal report for such Property, which appraisal report
shall be prepared by an independent appraising firm, and be in form and
substance, reasonably acceptable to the Lender. In the event that the appraised
Fair Market Sales Value of such Property is less than the amount of the Loan
Advances and the Contribution Advances previously made (or deemed made) in
respect thereof, Lessee agrees to promptly pay to the Lender an amount equal to
the sum of amount by which such Loan Advances exceed the aforesaid appraised
value, which amount shall be applied in accordance with Section 3 of the Loan
Agreement. Any such payment of a portion of the Loan under the circumstances
described in this Section 3.5 shall be without any premium or penalty to Lessee,
but Lessee shall pay Supplemental Rent in an amount of the Breakage Costs, if
any.
SECTION 4
REPRESENTATIONS AND COVENANTS
SECTION 4.1 Representations of the Lessee. Effective as of the date of
execution hereof, as of the Closing Date, and as of each Parcel Closing Date,
the Lessee represents and warrants to each of the other parties hereto as
follows:
(a) Organization; Corporate Powers. The Lessee (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each other
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jurisdiction where such qualification is required and where the failure to be
duly qualified and in good standing would have a Material Adverse Effect and
(iii) has all requisite corporate power and authority to own, operate and
encumber its property and assets and to conduct its business as presently
conducted and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by the Operative Documents.
(b) Authority. The Lessee has the requisite corporate power and
authority to execute, deliver and perform the Operative Documents executed or to
be executed by it. The execution, delivery and performance (or recording or
filing, as the case may be) of the Operative Documents, and the consummation of
the transactions contemplated on the part of the Lessee thereby, have been duly
approved by the Board of Directors of the Lessee and no other corporate
proceedings on the part of the Lessee are necessary to consummate the
transactions so contemplated.
(c) Due Execution and Delivery of Operative Documents. The Operative
Documents executed by the Lessee have been duly executed and delivered (or
recorded or filed, as the case may be) by the Lessee, and, in each case,
constitute its legal, valid and binding obligation, enforceable against it in
accordance with each such Operative Document of its respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or limiting creditors' rights generally or by
equitable principles generally.
(d) No Conflict. The execution, delivery and performance of each
Operative Document to which it is a party by the Lessee and each of the
transactions contemplated thereby do not and will not (i) violate any Applicable
Law or Contractual Obligation of the Lessee the consequences of which violation,
singly or in the aggregate, would have a Material Adverse Effect, (ii) result in
or require the creation or imposition of any Lien whatsoever on the Leased
Property (other than Permitted Liens) or (iii) require any approval of
stockholders which has not been obtained.
(e) Governmental Consents. Except as have been made, obtained or
given, no filing or registration with, consent or approval of, notice to, with
or by any Governmental Authority is required to authorize, or is required in
connection with, the execution, delivery and performance by the Lessee of the
Operative Documents, the use of the proceeds of the Loans made to effect the
acquisition of the interests in the Land and the Construction of the
Improvements, or the legality, validity, binding effect or enforceability of any
Operative Document.
(f) Governmental Regulation. The Lessee is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
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(g) Requirements of Law. The Lessee is in compliance with all
Requirements of Law applicable to Lessee and its business, in each case where
the failure to so comply would have a Material Adverse Effect, either
individually or together with other such cases.
(h) Rights in Respect of the Leased Property. The Lessee is not a
party to any contract or agreement to sell any interest in the Leased Property
or any part thereof other than pursuant to the Participation Agreement and the
Lease.
(i) Hazardous Materials.
(i) Except in full compliance with all Applicable Law, there are
no Hazardous Materials present at, upon, under or within the Leased Property or
released or transported to or from the Leased Property.
(ii) No Governmental Actions have been taken, or are in process
or have been threatened, which could reasonably be expected to subject the
Leased Property, the Lender or the Lessor to any Claims or Liens under any
Environmental Law which would have a materially adverse effect on the Lessor,
the Lender or the Leased Property.
(iii) The Lessee has all Environmental Permits necessary to
operate the Leased Property in accordance with Environmental Laws and is
complying with and has at all times complied with all such Environmental
Permits.
(iv) With respect to the Leased Property, no notice,
notification, demand, request for information, citations, summons, complaint or
order has been issued or filed to or with respect to the Lessee, and no penalty
has been assessed on the Lessee and no investigation or review is pending or
threatened by any Governmental Authority or other Person with respect to any
alleged violation or liability of the Lessee under any Environmental Law. No
material notice, notification, demand, request for information, citation,
summons, complaint or order has been issued or filed to or with respect to any
other Person, no material penalty has been assessed on any other Person and no
investigation or review is pending or threatened by any Governmental Authority
or other Person relating to the Leased Property with respect to any alleged
material violation or liability under any Environmental Law by any other Person.
(v) The Leased Property and each portion thereof are presently in
compliance with all Environmental Laws, and there are no present or past facts,
circumstances, activities, events, conditions or occurrences regarding the
Leased Property (including, without limitation, the release or presence of
Hazardous Materials) that could reasonably be anticipated to (A) form the basis
of a Claim against the Leased Property, the Lender, the Lender or the Lessee,
(B) cause the Leased Property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law, (C) require the
filing or recording of any notice or restriction relating to the presence of
Hazardous Materials in the real estate records in the county or other
appropriate municipality in which the Leased Property is located or (D)
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prevent or interfere with the continued operation and maintenance of the Leased
Property as contemplated by the Operative Documents.
(j) Leased Property. The present condition and use of the Leased
Property conforms with all conditions or requirements of all existing permits
and approvals issued with respect to the Leased Property, and the present use of
the Leased Property and the Lessee's future intended use of the Leased Property
under the Lease does not violate any Applicable Law. No notices, complaints or
orders of violation or non-compliance have been issued or threatened or
contemplated by any Governmental Authority with respect to the Leased Property
or any present or intended future use thereof. All agreements, easements and
other rights, public or private, which are necessary to permit the lawful use
and operation of the Leased Property as the Lessee intends to use the Leased
Property under the Lease and which are necessary to permit the lawful intended
use and operation of all presently intended utilities, driveways, roads and
other means of egress and ingress to and from the same have been, or in the
reasonable judgment of the Lessee will be, obtained and are in full force and
effect and the Lessee has no actual knowledge of any pending modification or
cancellation of any of the same.
(k) Qualification of Lessee Representations. The representations of
the Lessee set forth in this Section are qualified by the conditions that (i)
all representations are made and given to the best of the Lessee's knowledge
after due inquiry, (ii) where a representation involves compliance by the Lessee
with an Applicable Law or an Environmental Law such representation is deemed to
be compliance by the Lessee in all material respects with any such law and (iii)
where a representation involves conduct on the part of the Lessee that does not
violate an Applicable Law or an Environmental Law such representation is deemed
to exclude Lessee's non-material violations of any such law.
SECTION 4.2 Representations and Covenants of the Lessor. Effective as of
the date of execution hereof, as of the Closing Date, and as of each Parcel
Closing Date, the Lessor represents and warrants to the Lender and the Lessee as
follows:
(a) Due Organization; Limited Purpose. The Lessor is a limited
liability company duly organized and validly existing in good standing under the
laws of the State of Massachusetts; is duly qualified as a foreign limited
liability company and in good standing under the laws of the State of Texas and
each other state in which a Parcel of the Land is located; and has full power,
authority and legal right as a limited liability company to execute, deliver and
perform its obligations under this Participation Agreement and each other
Operative Document to which it is or will be a party. The Lessor further
represents, covenants and warrants that (i) it has been formed and exists for
the sole purpose of, and will not engage in any business or other activity
except as necessary in connection with, acquiring and owning the Leased Property
and taking the actions contemplated on the Lessor's part under the Operative
Documents and (ii) except for obligations and indebtedness of the Lessor
represented by and set forth in the Operative Documents and except for
obligations or indebtedness of the Lessor arising directly or indirectly from
the Lessee's failure to discharge the Lessee's obligations under
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the Operative Documents, the Lessor will not create, incur, suffer to be created
or incurred, or guarantee any obligation or indebtedness.
(b) Due Authorization; Enforceability, Etc. This Participation
Agreement and each other Operative Document to which the Lessor is or will be a
party have been or will be duly authorized, executed and delivered by or on
behalf of the Lessor and are, or upon execution and delivery will be, legal,
valid and binding obligations of the Lessor enforceable against it in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by general equitable principles.
(c) No Conflict. The execution and delivery by the Lessor of this
Participation Agreement and each other Operative Document to which the Lessor is
or will be a party are not or will not, and the performance by the Lessor of its
obligations under each and will not, violate its certificate of formation or
Operating Agreement, do not and will not contravene any Applicable Law and do
not and will not contravene any provision of, or constitute a default under, any
Contractual Obligation of the Lessor, and the Lessor possesses all requisite
regulatory authority to undertake and perform its obligations under the
Operative Documents.
(d) Litigation. There are no pending or threatened actions or
proceedings against the Lessor before any court, arbitrator or administrative
agency that would have a material adverse effect upon the ability of the Lessor
to perform its obligations under this Participation Agreement or any other
Operative Documents to which it is or will be a party.
(e) Lessor Liens. No Lessor Liens or other Liens created by acts or
omissions of the Lessor (other than Liens created by the Operative Documents)
exist on the Parcel Closing Date on the related Parcel, or any portion thereof,
and the execution, delivery and performance by the Lessor of this Participation
Agreement or any other Operative Document to which it is or will be a party will
not subject the Leased Property, or any portion thereof, to any Lessor Liens or
other Liens created by the Lessor (other than by the Operative Documents).
Except for Liens against the Leased Property created by the Operative Documents,
Permitted Liens (other than Lessor Liens), Liens (including Lessor Liens)
arising directly or indirectly from the Lessee's failure to discharge the
Lessee's obligations under the Operative Documents, the Lessor further
represents and warrants that it will not create, suffer to be created or permit
any Liens on the Leased Property.
(f) Employee Benefit Plans. The Lessor is not and will not be making
its Contribution Advances hereunder, and is not performing its obligations under
the Operative Documents, with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
"plan" (as defined in Section 4975(e)(1) of the Code).
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SECTION 4.3 Covenant of Lender. Upon payment by Lessee of the purchase
price for the Leased Property pursuant to Article XV of the Lease, Lender will
release the lien of the Operative Documents against the Leased Property.
SECTION 4.4 Tax Treatment. (a) The parties hereto agree that it is the
Lessee's intention that for Federal, state and local income Tax purposes (i) the
Lease be treated as the repayment and security provisions of a loan to the
Lessee, all rights to the principal and interest of which have been assigned by
the Lessor to the Lender, (ii) the Lessee be treated as the legal and beneficial
owner entitled to any and all benefits of ownership of the Property or any part
thereof and (iii) all payments of Basic Rent during the Lease Term be treated as
payments of interest and principal, as the case may be, to the Lender.
(b) The Lessee agrees that neither it nor any member of any affiliated
group of which it is or may become a member (whether or not consolidated or
combined returns are filed for such affiliated group for Federal, state or local
income Tax purposes) will at any time take any action, directly or indirectly,
or file any return or other document inconsistent with the intended income Tax
treatment set forth in Section 4.4 (a) hereof, and the Lessee agrees that the
Lessee and any such Affiliates will file such returns, maintain such records,
take such actions and execute such documents as may be appropriate to facilitate
the realization of such intended income Tax treatment.
(c) The Lessor and the Lender each agree that, except to the extent
required by law, neither it nor any member of any affiliated group of which it
is or may become a member (whether or not consolidated or combined returns are
filed for such affiliated group for Federal, state or local income Tax purposes)
will at any time take any action, directly or indirectly, or file any return or
other document claiming, or asserting that it is entitled to the income Tax
benefits, deductions and/or credits which, pursuant to the intended income Tax
treatment set forth in Section 4.4 (a) hereof, would otherwise be claimed or
claimable by the Lessee, and that it and any such Affiliates will at the expense
of the Lessee file such returns, maintain such records, take such actions, and
execute such documents (as reasonably requested by the Lessee from time to time)
as may be appropriate to facilitate the realization of, and as shall be
consistent with, such intended income Tax treatment, other than engaging in any
contest of such treatment with any taxing authority, and if any such filing,
maintenance, action or execution requested by the Lessee would result in any
additional income Tax liability or expense payable by it or any Affiliate, or
could reasonably be expected to result in liability or expense payable by it or
any Affiliate, then the Lessee will provide an indemnity against such income Tax
liability or other liability satisfactory to the Lessor or the Lender, as the
case may be, in the Lessor's or the Lender's sole opinion, as the case may be.
SECTION 5
COVENANTS OF THE LESSEE
SECTION 5.1 Qualification as to Corporate Status. The Lessee shall
remain a validly existing corporation organized under the laws of the State of
Delaware or any other state of the
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United States of America and shall remain qualified to do business in all such
states where the failure to do so would have a Material Adverse Effect.
SECTION 5.2 Further Assurances. Upon the written request of the Lessor
or the Lender, the Lessee, at its own cost and expense, will cause all financing
statements (including precautionary financing statements), fixture filings and
other similar documents to be recorded or filed at such places and times in such
manner as may be necessary to preserve, protect and perfect the interest of the
Lessor and the Lender in the Leased Property as contemplated by the Operative
Documents.
SECTION 5.3 Reporting.
(a) Financial Statements. The Lessee shall deliver or cause to be
delivered to the Lender:
(i) As soon as practicable, and in any event within forty-five (45)
days after the close of each of the first three quarterly accounting
periods in each Fiscal Year, the consolidated condensed balance sheet of
the Lessee and its Subsidiaries as at the end of such quarterly period and
the related consolidated condensed statements of operations for such
quarterly period and for the elapsed portion of the current Fiscal Year
ended with the last day of such quarterly period, and setting forth
comparative consolidated figures for the related period in the prior Fiscal
Year, which financial statements shall be certified by a duly authorized
officer of the Lessee that they fairly present the consolidated financial
condition of the Lessee and its Subsidiaries as at the dates indicated,
subject to changes resulting from audit and normal year-end adjustments;
(ii) As soon as practicable, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, consolidated balance
sheets of the Lessee and its Subsidiaries as at the end of such Fiscal Year
and the related consolidated statements of earnings, stockholders' equity
and changes in cash-flows of the Lessee and its Subsidiaries for such
Fiscal Year, setting forth in comparative form the consolidated figures for
the Lessee and its Subsidiaries for the previous Fiscal Year, all in
reasonable detail and accompanied by a report thereon of independent public
accountants of recognized national standing selected by the Lessee which
report shall be unqualified as to the scope of audit and as to the status
of the Lessee and its Subsidiaries as a going concern and shall state that
such consolidated financial statements present fairly the financial
position of the Lessee and its Subsidiaries as at the dates indicated and
the results of their operations and changes in their financial position for
the periods indicated in conformity with GAAP applied on a basis consistent
with prior years (or, in the event of a change in accounting principles,
such accountants' concurrence with such change) and that the examination by
such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards;
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(iii) Together with each delivery of any financial statements
pursuant to clauses (i) and (ii) of this subsection, an officer's
certificate of the Lessee, executed by a duly authorized officer of the
Lessee, stating (A) that the signer has instituted procedures for the
review of the terms of this Participation Agreement and the principal
Operative Documents and the review in reasonable detail of the transactions
and conditions of the Lessee and its Subsidiaries taken as a whole during
the accounting period covered by such financial statements, and that such
review has not disclosed the existence during or at the end of such
accounting period, (B) that the signer does not have knowledge of the
existence as at the date of such officer's certificate, of any condition or
event which constitutes an Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action the Lessee has taken, is taking and proposes to
take with respect thereto, (C) that, to the best of such officer's
knowledge, the financial statements delivered pursuant to clause (i) of
this subsection present fairly the financial position of the Lessee and its
Subsidiaries as at the dates indicated and the results of their operations
and changes in their financial position for the periods indicated in
conformity with GAAP consistently applied, and (D) that the Lessee is in
compliance with each of the covenants contained in Section 5.4 hereof, and
setting out in reasonable detail the data and calculations upon which the
Officer bases such statement;
(iv) Promptly, and in any event within five (5) Business Days after
the Lessee obtains knowledge thereof, notice of (A) the occurrence of any
event which constitutes an Event of Default which notice shall specify the
nature thereof, the period of existence thereof and what action the Lessee
propose to take with respect thereto and (B) any litigation or governmental
proceedings pending against the Lessee which the Lessee determines it will
disclose in the Lessee's reports filed on Forms 10-K or 10-Q with the SEC
(notice being due within five Business Days of such determination); and
(v) With reasonable promptness, such information with respect to the
financial condition of the Lessee or the Leased Property as from time to
time may be reasonably requested by the Lender; provided, however, that the
Lender shall keep such information confidential, except in connection with
enforcement or exercise of the Lender's rights under this Participation
Agreement or otherwise available at law or in equity and provided, further,
that the Lender may disclose such information to the extent necessary to
respond to inquiries of bank regulatory authorities or to comply with legal
process or any other legal disclosure obligations, or to the extent such
information has been made publicly available by parties other than the
Lender.
(b) Other Reports. Promptly after the same are available to it, the
Lessee shall deliver to the Lessor copies of all regular and periodic reports
and other reports and filings (if any) made by the Lessee with the SEC, and
promptly upon transmission thereof, copies of all proxy statements, financial
statements, notices and reports as the Company shall send to its shareholders.
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SECTION 5.4 Affirmative Covenants of Lessee.
(a) Compliance with Law. The Lessee will, and will cause each of its
Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Payment of Taxes and Claims. The Lessee will, and will cause each of
its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Lessee or any
Subsidiary, provided that neither the Lessee nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Lessee or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Lessee or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Lessee or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(c) Corporate Existence. The Lessee will at all times preserve and keep in
full force and effect its corporate existence. The Lessee will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged into the Lessee or a Subsidiary) and all rights
and franchises of the Lessee and its Subsidiaries unless, in the good faith
judgment of the Lessee, the termination of or failure to preserve and keep in
full force and effect such corporate existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
(d) Maintenance of Properties. The Lessee will and will cause each of its
Subsidiaries to maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith
may be properly conducted at all times, provided that this Section 5.4(d) shall
not prevent the Lessee or any Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Lessee has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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SECTION 5.5 Financial Covenants of Lessee. The Lessee shall at all times
comply with the financial covenants set forth in Appendix III hereof.
SECTION 6
TRANSFERS BY LESSOR AND LENDER
SECTION 6.1 Lessor Transfers. The Lessor shall not assign, convey,
encumber or otherwise transfer all or any portion of its right, title or
interest in, to or under the Leased Property or the Lease (except pursuant to
the Mortgages, the Assignment of Lease and Rents or pursuant to Article VI of
the Lease) or any of the Operative Documents without obtaining the prior written
consent of the Lender and the Lessee.
SECTION 6.2 Lender Transfers. The Lender shall not assign, convey or
otherwise transfer all or any portion of its right, title or interest in, to or
under any of the Operative Documents without the prior written consent of the
Lessee and the Lessor (such consent not to be unreasonably withheld); provided,
however, that without the prior written consent of or notice to the Lessor or
the Lessee, the Lender may sell participating interests in the Loans to such
banks and other financial institutions as the Lender shall, in its sole
discretion, determine.
SECTION 7
INDEMNIFICATION
SECTION 7.1 General Indemnification. The Lessee agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After-Tax Basis, from and against, any and all Claims by any
third-party that may be imposed on, incurred by or asserted against such
Indemnitee, whether or not such Indemnitee shall also be indemnified as to any
such Claim by any other Person (except to the extent such claim is covered by
the insurance required by the Lease) and in any way relating to or arising out
of:
(i) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof;
(ii) the Land or any part thereof or interest therein;
(iii) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition or substitution,
storage, transfer or title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any
sale pursuant to the Lease), return or other disposition of all or any part
or any interest in the Leased Property or the imposition of any Lien (or
incurring of any liability to refund or pay over any amount as a result of
any Lien) thereon, including without limitation (A) Claims or penalties
arising from any violation of law or in tort
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(strict liability or otherwise), (B) latent or other defects, whether or
not discoverable, (C) any Claim based upon a violation or alleged violation
of the terms of any restriction, easement, condition or covenant or other
matter affecting title to the Leased Property, (D) the making of any
Alterations in violation of any standards imposed by any insurance policies
required to be maintained by the Lessee pursuant to the Lease which are in
effect at any time with respect to the Leased Property or any part thereof,
(E) any Claim for patent, trademark or copyright infringement and (F)
Claims arising from any public improvements with respect to the Leased
Property resulting in any change or special assessments being levied
against the Leased Property or any Claim for utility "tap-in" fees;
(iv) the breach or alleged breach by the Lessee of any representation
or warranty made by it or deemed made by it in any Operative Document or
any certificate required to be delivered under any Operative Document;
(v) the retaining or employment of any broker, finder or financial
advisor by the Lessee to act on its behalf in connection with this
Participation Agreement, or the authorization of any broker or financial
adviser retained or employed by any other Person who or which acts on
Lessee's behalf, or the incurring of any fees or commissions to which the
Lessor or the Lender might be subjected by virtue of their entering into
the transactions contemplated by this Participation Agreement;
(vi) the existence of any Lien on or with respect to the Leased
Property, the Construction, any Basic Rent or Supplemental Rent, including
any Liens which arise out of the possession, use, occupancy, construction,
repair or rebuilding of or title to or interest of any Person in the Leased
Property or by reason of labor or materials furnished or claimed to have
been furnished to the Lessee or any of its contractors or agents or by
reason of the financing of any personalty or equipment purchased or leased
by the Lessee or Alterations constructed by the Lessee, except in all cases
the Liens listed as items (i) and (ii) in the definition of Permitted
Liens;
(vii) any breach of any requirement, condition, restriction or
limitation in any Deed; or
(viii) to the extent not insured by the Title Policies, (A) any
failure of title (except with respect to Permitted Liens) to any part of
the Leased Property or failure (including the failure to create), lack of
perfection, recordation, or loss of priority of the lien of any Mortgage or
the security interests in personal property created thereby, or (B) the
unenforceability, as a matter of law or equity, in whole or in part, of the
Assignment of Lease and Rents of any Mortgage or, with respect to the
obligations of the Lessee, any other Operative Document to which it is a
party, except to the extent that the enforceability of such documents shall
be affected by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting the enforcement of
creditors' rights generally, (ii) equitable principles limiting the
availability
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of equitable remedies, or (iii) limits on enforceability of any provision
calling for the payment of attorneys' fees;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for (x) any Claim to the extent that such Claim
results from the willful misconduct or gross negligence of such Indemnitee
(provided that the exception set forth in this clause (x) shall not apply to
Lessor Indemnitees, which the Lessee shall, in any event, be obligated to
indemnify, except as provided in Section 18.12 of the Lease), (y) any Claim
resulting from Lessor Liens which the Lessor is responsible for discharging
under the Operative Documents or (z) any Claim which occurs or arises out of a
time when the Lessee was not an owner, lessee or otherwise using or in
possession of the Leased Property or any part thereof. It is expressly
understood and agreed that the indemnity provided for herein shall survive the
expiration or termination of and shall be separate and independent from any
remedy under the Lease or any other Operative Document.
SECTION 7.2 Environmental Indemnity. Without limitation of Section 7.1,
the Lessee agrees to indemnify, hold harmless and defend each Indemnitee from
and against any and all Claims (including without limitation third party Claims
for personal injury or real or personal property damage), losses (including but
not limited to any loss of value of the Leased Property), damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings (including
informal proceedings) and orders, judgments, remedial action, requirements,
enforcement actions of any kind, and all reasonable and documented costs and
expenses incurred in connection therewith (including but not limited to
reasonable and documented attorneys' and/or paralegals' fees and expenses),
including, but not limited to, all costs incurred in connection with any
investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any Governmental Authority, arising directly or
indirectly, in whole or in part, out of:
(i) the presence on or under the Land of any Hazardous Materials, or
any releases or discharges of any Hazardous Materials on, under, from or
onto the Land;
(ii) any activity, including, without limitation, construction,
carried on or undertaken on or off the Land, and whether by the Lessee, or
any predecessor in title or any employees, agents, contractors or
subcontractors of the Lessee, or any predecessor in title, or any other
Persons (including such Indemnitee), in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Materials that at any time are located or present
on or under or that at any time migrate, flow, percolate, diffuse or in any
way move onto or under the Land;
(iii) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs, remediation
and removal costs, cost of corrective action, costs of financial assurance,
fines and penalties and natural resource damages), or death or injury to
any Person, and all expenses associated with the protection of wildlife,
aquatic species, vegetation, flora and fauna, and any mitigative action
required by or under Environmental Laws;
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(iv) any claim concerning lack of compliance with Environmental Laws,
or any act or omission causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a lien or
encumbrance on the land records; or
(v) any residual contamination on or under the Land, or affecting any
natural resources, and any contamination of any property or natural
resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Materials, and
irrespective of whether any of such activities were or will be undertaken
in accordance with applicable laws, regulations, codes and ordinances;
in any case arising or occurring (y) prior to or during the Lease Term or (z) at
any time during which the Lessee or any Affiliate thereof owns any interest in
or otherwise occupies or possesses the Leased Property or any portion thereof;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for any Claim to the extent that such Claim
results from the willful misconduct or gross negligence of such Indemnitee
(except that the exception set forth in the immediately preceding proviso shall
not apply to Lessor Indemnitees, which the Lessee shall, in any event, be
obligated to indemnify, except as provided in Section 18.12 of the Lease). It
is expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under the Lease or any other Operative Document.
SECTION 7.3 Proceedings in Respect of Claims. The obligations and
liabilities of the Lessee with respect to any Claims for which, if valid, Lessee
is obligated to provide indemnification pursuant to the provisions of Section
7.1 and Section 7.2 ("Indemnified Claims"), shall be subject to the following
terms and conditions:
(a) Whenever an Indemnitee shall have received notice that an
Indemnified Claim has been asserted or threatened against such Indemnitee, the
Indemnitee shall promptly notify the Lessee of such Claim, together with
supporting facts and data within the possession or knowledge of the Indemnitee
related thereto, provided that the failure to deliver such notice shall not
relieve the Lessee of its indemnification obligations hereunder except to the
extent that such failure prejudices the Lessee. With respect to any amount that
the Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or 7.2,
such Indemnitee shall, if so requested by the Lessee and prior to any payment,
submit such additional information to the Lessee as the Lessee may reasonably
request and which is in the possession of such Indemnitee to substantiate
properly the requested payment.
(b) Lessee shall defend, at its expense, such Indemnified Claim with
counsel of its choice reasonably satisfactory to the Indemnitee, provided,
however, that if an Event of Default has occurred and is continuing, the
Indemnitee shall have the right, upon notice to and at the expense of Lessee, to
undertake the defense of such Claim during the continuance of such Event of
Default. The Indemnitee shall promptly notify the Lessee of any compromise or
settlement proposal with respect to any such Claim and shall not unreasonably
refuse to accept
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any such proposal if the same is acceptable to the Lessee. The Indemnitee may
participate in a reasonable manner at its own expense and with its own counsel
in any proceeding conducted by the Lessee in accordance with the foregoing. The
Lessee shall not enter into any settlement or other compromise with respect to
any Claim which is entitled to be indemnified under Section 7.1 or 7.2 without
the prior written consent of the Lender acting individually and on behalf of the
affected Indemnitee (and Lessor hereby irrevocably so authorizes Lender to grant
such consent on behalf of Lessor and the Lessor Indemnitees), which consent
shall not be unreasonably withheld. The Lessee and each Indemnitee are and shall
be bound to cooperate with each other in good faith in connection with the
defense of any such action, suit or proceeding in providing any information and
bear witness or give testimony which may be requested by counsel for any of such
parties.
(c) Unless an Event of Default shall have occurred and be continuing,
no Indemnitee shall enter into any settlement or other compromise with respect
to any Claim which is entitled to be indemnified under Section 7.1 or 7.2
without the prior written consent of the Lessee, which consent shall not be
unreasonably withheld (it being agreed that it will not be unreasonable for the
Lessee to withhold consent if such compromise or settlement adversely affects a
material right or property interest of the Lessee, including, without
limitation, Lessee's use, title or possession of the Leased Property), unless
such Indemnitee waives its right to be indemnified under Section 7.1 or 7.2 with
respect to such Claim, provided that no Indemnitee shall enter into any
settlement which would adversely affect Lessee's use, title to or possession of
the Leased Property without Lessee's prior written consent.
(d) Upon payment in full of any Claim by the Lessee pursuant to
Section 7.1 or 7.2 to or on behalf of an Indemnitee, the Lessee, without any
further action, shall be subrogated to any and all claims that such Indemnitee
may have relating thereto (other than claims in respect of insurance policies
maintained by such Indemnitee at its own expense) including claims (subject to
the provisions of this Section 7 and Section 18.12 of the Lease) against another
Indemnitee and such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents, instruments
and agreements as may be necessary to preserve any such Claims and otherwise
cooperate with the Lessee and give such further assurances as are necessary or
advisable to enable the Lessee vigorously to pursue such Claims.
(e) Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2
shall be paid to such Indemnitee promptly upon receipt of a written demand
therefor from such Indemnitee, accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable, and if requested by the Lessee, such determination shall be verified
by a nationally recognized independent accounting firm mutually acceptable to
the Lessee and the Indemnitee at the expense of the Lessee.
(f) If Lessee fails to assume the defense of an Indemnified Claim
within a reasonable time (and in any event not more than 30 days) after receipt
of notice thereof from the Indemnitee, the Indemnitee will (upon delivering
notice to such effect to the Lessee) have
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the right to undertake, at the Lessee's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the Lessee, subject to the right of the Lessee (provided no Event of Default
shall have occurred and remained outstanding) to assume the defense of such
Claim at any time prior to the settlement, compromise or final determination
thereof, and provided however, that the Indemnitee shall not enter into any such
compromise or settlement without the written consent of the Lessee, which shall
not be unreasonably withheld, as aforesaid, and provided further that no
Indemnitee shall enter into any such settlement which would adversely affect
Lessee's use, title to or possession of the Leased Property without Lessee's
prior written consent. In the event the Indemnitee assumes the defense of any
such Claim, the Indemnitee will cooperate with the Lessee in keeping the Lessee
reasonably informed of the progress of any such defense, compromise or
settlement.
(g) Nothing contained in this Section 7.3 shall be deemed to expand
the obligation of the Lessee to defend or be responsible for indemnification of
the Indemnitees with respect to any Claim beyond the specific indemnification
obligations set forth in Sections 7.1, 7.2, 7.4, or elsewhere in the Operative
Documents.
SECTION 7.4 General Tax Indemnity.
(a) Except as otherwise provided in this Section, the Lessee shall pay
on an After-Tax Basis, and on written demand shall indemnify and hold each Tax
Indemnitee harmless from and against, any and all fees (including, without
limitation, documentation, recording, license and registration fees), taxes
(including, without limitation, income, gross receipts, sales, rental, use,
turnover, value-added, property, excise and stamp taxes and all recapture and
other payments in connection with any agreement relating to tax abatements
granted in connection with the Leased Property), levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto (any of the foregoing
being referred to herein as "Taxes" and individually as a "Tax" (for the
purposes of this Section, the definition of "Taxes" excludes amounts imposed on,
incurred by, or asserted against each Tax Indemnitee as the result of any
prohibited transaction, within the meaning of Section 406 or 407 of ERISA or
Section 4975(c) of the Code, arising out of the transactions contemplated hereby
or by any other Operative Document as well as any penalties, fees or interest
on, or additions to taxes, caused solely by the failure of any of the Tax
Indemnitees to provide notice to Lessee of Lessee's indemnity obligations
hereunder)) imposed on or with respect to any Tax Indemnitee, the Lessee, the
Leased Property or any portion thereof or the Land, or any sublessee or user
thereof, by the United States or by any state or local government or other
taxing authority in the United States in connection with or in any way relating
to (i) the acquisition, financing, mortgaging, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance, rejection,
purchase, ownership, possession, rental, lease, sublease, maintenance, repair,
storage, transfer of title, redelivery, use, operation, condition, sale, return
or other application or disposition of all or any part of the Leased Property or
the imposition of any Lien, other than a Lessor Lien (or incurrence of any
liability to refund or pay over any amount as a result of any Lien, other than a
Lessor Lien) thereon, (ii) Basic Rent or Supplemental Rent or the receipts or
earnings arising from or received with respect to the Leased
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Property or any part thereof, or any interest therein or any applications or
dispositions thereof, (iii) the Leased Property, the Land or any part thereof or
any interest therein, (iv) all or any of the Operative Documents, any other
documents contemplated thereby and any amendments and supplements thereto and
(v) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents.
(b) Section 7.4(a) shall not apply to:
(i) Taxes on, based on, or measured by or with respect to, net
income of the Lessor and the Lender (including, without limitation, minimum
Taxes, capital gains Taxes, Taxes on or measured by items of tax preference
or alternative minimum Taxes) other than (A) any such Taxes that are, or
are in the nature of, sales, use, license, rental, ad valorem or property
Taxes, (B) withholding Taxes imposed by the United States or any state or
local taxing authority (1) on payments with respect to the Notes, to the
extent imposed by reason of a change in Applicable Law occurring after the
Closing Date or (2) on Rent, to the extent the net payment of Rent after
deduction of such withholding Taxes would be less than amounts currently
payable with respect to the Notes and (C) any increase in any franchise
taxes based on or otherwise measured by net income, estate, inheritance,
transfer, income tax or gross income or gross receipts tax in lieu of net
income over the term of the Lease, net of any decrease in such taxes
realized by such Tax Indemnitee, to the extent that such tax increase or
decrease would not have occurred if on the Closing Date the Lessor had
advanced funds to the Lessee in the form of a loan secured by the Leased
Property in an amount equal to the Loans, with debt service for such loan
equal to the portion of the Basic Rent attributable to the Loans payable on
each Rent Payment Date and a principal balance at the maturity of such loan
in an amount equal to the Loans at the end of the Lease Term;
(ii) Taxes on, based on, or in the nature of or measured by Taxes
on doing business, business privilege, capital, capital stock, net worth,
or mercantile license or similar taxes other than (A) any increase in such
Taxes imposed on such Tax Indemnitee by any state, net of any decrease in
such taxes realized by such Tax Indemnitee, to the extent that such tax
increase or decrease would not have occurred if on the Closing Date the
Lessor had advanced funds to the Lessee in the form of a loan secured by
the Leased Property in an amount equal to the Loan, with debt service for
such loan equal to the portion of the Basic Rent attributable to the Loan
payable on each Rent Payment Date and a principal balance at the maturity
of such loan in an amount equal to the Loan at the end of the Lease Term or
(B) any Taxes that are or are in the nature of sales, use, rental, license
or property Taxes;
(iii) Taxes that result from any act, event or omission, or are
attributable to any period of time, that occurs after the earliest of (A)
the expiration of the Lease Term with respect to the Leased Property and,
if the Leased Property is required to be returned to the Lessor in
accordance with the Lease, such return and (B) the discharge in full of the
Lessee's obligations to pay the Lease Balance, or any amount
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determined by reference thereto, with respect to the Leased Property and
all other amounts due under the Lease, unless such Taxes relate to acts,
events or matters occurring prior to the earliest of such times or are
imposed on or with respect to any payments due under the Operative
Documents after such expiration or discharge;
(iv) Taxes imposed on a Tax Indemnitee that result from any
voluntary sale, assignment, transfer or other disposition by such Tax
Indemnitee or any related Tax Indemnitee of any interest in the Leased
Property or any part thereof, or any interest therein or any interest or
obligation arising under the Operative Documents (including a sale of an
interest in the Note) or from any sale, assignment, transfer or other
disposition of any interest in such Tax Indemnitee or any related Tax
Indemnitee, it being understood that each of the following shall not be
considered a voluntary sale: (A) any substitution, replacement or removal
of any of the property by the Lessee shall not be treated as a voluntary
action of any Tax Indemnitee, (B) any sale or transfer resulting from the
exercise by the Lessee of any termination option, any purchase option or
sale option, (C) any sale or transfer while an Event of Default shall have
occurred and be continuing under the Lease and (D) any sale or transfer
resulting from the Lessor's exercise of remedies under the Lease;
(v) any Tax which is being contested in accordance with the
provisions of Section 7.4(c), during the pendency of such contest;
(vi) any Tax that is imposed on a Tax Indemnitee as a result of
such Tax Indemnitee's gross negligence or willful misconduct (other than
gross negligence on the part of the Lessor and the incorporators,
stockholders, directors, officers, employees and agents of the Lessor or
gross negligence or willful misconduct imputed to the Lessor or the Lender
solely by reason of their respective interests in the Leased Property);
(vii) any Tax that results from a Tax Indemnitee engaging, with
respect to the Leased Property, in transactions other than those permitted
by the Operative Documents; or
(viii) to the extent any interest, penalties or additions to tax
result in whole or in part from the failure of a Tax Indemnitee to file a
return that it is required to file in a proper and timely manner, unless
such failure (A) results from the transactions contemplated by the
Operative Documents in circumstances where the Lessee did not give timely
notice to Lessor (and the Lessor otherwise had no actual knowledge) of such
filing requirement that would have permitted a proper and timely filing of
such return or (B) results from the failure of the Lessee to supply
information necessary for the proper and timely filing of such return that
was not in the possession of the Lessor.
(c) If any claim shall be made against any Tax Indemnitee or if any
proceeding shall be commenced against any Tax Indemnitee (including a written
notice of such proceeding) for any Taxes as to which the Lessee may have an
indemnity obligation pursuant to this Section,
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or if any Tax Indemnitee shall determine that any Taxes as to which the Lessee
may have an indemnity obligation pursuant to this Section may be payable, such
Tax Indemnitee shall promptly notify the Lessee. The Lessee shall be entitled,
at its expense, to participate in and to the extent that the Lessee desires to,
assume and control the defense thereof; provided, however, that the Lessee shall
not be entitled to assume and control the defense of any such action, suit or
proceeding (but the Tax Indemnitee shall then contest, at the sole cost and
expense of the Lessee, on behalf of the Lessee) if and to the extent that (A) an
Event of Default has occurred and is continuing, (B) such action, suit or
proceeding involves matters which are unrelated to the transactions contemplated
by the Operative Documents and if determined adversely could be materially
detrimental to the interests of such Tax Indemnitee notwithstanding
indemnification by the Lessee or (C) such action, suit or proceeding involves
the federal or any state income tax liability of the Tax Indemnitee. With
respect to any contests controlled by a Tax Indemnitee, (i) if such contest
relates to the federal or any state income tax liability of such Tax Indemnitee,
such Tax Indemnitee shall be required to conduct such contest only if the Lessee
shall have provided to such Tax Indemnitee an opinion of independent tax counsel
selected by the Lessee and reasonably satisfactory to the Tax Indemnitee stating
that a reasonable basis exists to contest such claim or (ii) in the case of an
appeal of an adverse determination of any contest relating to any Taxes, an
opinion of such counsel to the effect that such appeal is more likely than not
to be successful; provided, however, such Tax Indemnitee shall in no event be
required to appeal an adverse determination to the United States Supreme Court.
The Tax Indemnitee may participate in a reasonable manner at its own expense and
with its own counsel in any proceeding conducted by the Lessee in accordance
with the foregoing. Each Tax Indemnitee shall at the Lessee's expense supply the
Lessee with such information and documents reasonably requested by the Lessee as
are necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by this Section. Unless an Event of Default
shall have occurred and be continuing, no Tax Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under this Section without the prior written consent of the Lessee,
which consent shall not be unreasonably withheld (it being agreed that it will
not be unreasonable for Lessee to withhold consent if such compromise or
settlement would adversely affect material rights or property interests of the
Lessee, including, without limitation, Lessee's use, title or possession of the
Leased Property), unless such Tax Indemnitee waives its right to be indemnified
under this Section with respect to such Claim, provided the settlement would not
adversely affect materials rights or property interests of the Lessee,
including, without limitation, Lessee's use, title or possession of the Leased
Property. Notwithstanding anything contained herein to the contrary, (i) a Tax
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a Claim with respect to the imposition of any Tax if such
Tax Indemnitee shall waive its right to indemnification under this Section with
respect to such Claim (and any related Claim with respect to other taxable years
the contest of which is precluded as a result of such waiver) and (ii) no Tax
Indemnitee shall be required to contest any Claim if the subject matter thereof
shall be of a continuing nature and shall have previously been decided
adversely, unless there has been a change in law which in the opinion of the
Lessee's counsel creates substantial authority for the success of such contest.
Each Tax Indemnitee and the Lessee shall consult in good faith with each other
regarding the conduct of such contest controlled by either.
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(d) If (i) a Tax Indemnitee shall obtain a credit or refund of any
Taxes paid by the Lessee pursuant to this Section or (ii) by reason of the
incurrence or imposition of any Tax for which a Tax Indemnitee is indemnified
hereunder or any payment made to or for the account of such Tax Indemnitee by
the Lessee pursuant to this Section, such Tax Indemnitee at any time realizes a
reduction in any Taxes for which the Lessee is not required to indemnify such
Tax Indemnitee pursuant to this Section, which reduction in Taxes was not taken
into account in computing such payment by the Lessee to or for the account of
such Tax Indemnitee, then such Tax Indemnitee shall promptly pay to the Lessee
the amount of such credit or refund, together with the amount of any interest
received by such Tax Indemnitee on account of such credit or refund or an amount
equal to such reduction in Taxes, as the case may be; provided, however, that no
such payment shall be made so long as an Event of Default shall have occurred
and be continuing; and provided, further, that the amount payable to the Lessee
by any Tax Indemnitee pursuant to this subsection shall not at any time exceed
the aggregate amount of all indemnity payments made by the Lessee under this
Section to such Tax Indemnitee and all related Tax Indemnitees with respect to
the Taxes which gave rise to a credit or refund or with respect to the Tax which
gave rise to a reduction in Taxes less the amount of all prior payments made to
the Lessee by such Tax Indemnitee and related Tax Indemnitees under this
Section. Each Tax Indemnitee agrees to act in good faith to claim such refunds
and other available Tax benefits, and take such other actions as may be
reasonable to minimize any payment due from the Lessee pursuant to this Section
and to maximize the amount of any Tax savings available to it. The disallowance
or reduction of any credit, refund or other tax savings with respect to which a
Tax Indemnitee has made a payment to the Lessee under this subsection shall be
treated as a Tax for which the Lessee is obligated to indemnify such Tax
Indemnitee hereunder.
(e) Any Tax indemnifiable under this Section shall be paid directly to
the applicable taxing authority prior to delinquency if direct payment is
practicable and permitted. If direct payment to the applicable taxing authority
is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to this Section shall be paid within thirty (30) days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made pursuant to
this Section shall be made directly to the Tax Indemnitee entitled thereto or
the Lessee, as the case may be, in immediately available funds at such bank or
to such account as specified by the payee in written directions to the payor,
or, if no such direction shall have been given, by check of the payor payable to
the order of the payee by certified mail, postage prepaid at its Address as set
forth in this Participation Agreement. Upon the request of any Tax Indemnitee
with respect to a Tax that the Lessee is required to pay, the Lessee shall
furnish to such Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(f) If the Lessee knows of any report, return or statement required to
be filed with respect to any Taxes that are subject to indemnification under
this Section, the Lessee shall, if the Lessee is permitted by Applicable Law,
timely file such report, return or statement (and, to the extent permitted by
law, show ownership of the Leased Property in the Lessee except to
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the extent contrary to financial reporting requirements); provided, however,
that if the Lessee is not permitted by Applicable Law or does not have access to
the information required to file any such report, return or statement, the
Lessee will promptly so notify the appropriate Tax Indemnitee, in which case Tax
Indemnitee will file such report. In any case in which the Tax Indemnitee will
file any such report, return or statement, Lessee shall, upon written request of
such Tax Indemnitee, provide such Tax Indemnitee with such information as is
reasonably available to the Lessee.
(g) At the Lessee's request, the amount of any indemnity payment by
the Lessee or any payment by a Tax Indemnitee to the Lessee pursuant to this
Section shall be verified and certified by an independent public accounting firm
selected by the Lessee and reasonably acceptable to the Tax Indemnitee. Unless
such verification shall disclose an error in Lessee's favor of 5% or more, the
costs of such verification shall be borne by the Lessee. In no event shall the
Lessee have the right to review the Tax Indemnitee's tax returns or receive any
other confidential information from the Tax Indemnitee in connection with such
verification. The Tax Indemnitee agrees to cooperate with the independent
public accounting firm performing the verification and to supply such firm with
all information reasonably necessary to permit it to accomplish such
verification; provided, however, that the information provided to such firm by
such Tax Indemnitee shall be for its confidential use. The parties agree that
the sole responsibility of the independent public accounting firm shall be to
verify the amount of a payment pursuant to this Participation Agreement and that
matters of interpretation of this Participation Agreement are not within the
scope of the independent accounting firm's responsibilities.
(h) It is expressly understood and agreed that the indemnity provided
for herein shall survive the expiration or termination of and shall be separate
and independent from any remedy under the Lease or any other Operative Document.
SECTION 7.5 Increased Costs, Etc.
(a) Changes; Legal Restrictions. Subject to the provisions of Section
8.12, in the event that after the date hereof (i) the adoption of or any change
in any law, treaty, rule, regulation, guideline or determination of a court or
Governmental Authority or any change in the interpretation or application
thereof by a court or Governmental Authority or (ii) compliance by the Lender
with any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority:
(A) does or will subject the Lender to any tax, duty or other charge
of any kind which the Lender determines to be applicable to the Operative
Documents or the Loans or change the basis of taxation of payments to the
Lender of principal, interest, invested amount, yield, fees or any other
amount payable hereunder, except for taxes imposed on or measured by the
overall net income of the Lender; or
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(B) does or will impose, modify, or hold applicable, in the
determination of the Lender, any reserve, special deposit, liquidity ratio,
compulsory loan, FDIC insurance or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, advances or
loans by, commitments made, or other credit extended by, or any other
acquisition of funds by, the Lender;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining the Loans or to reduce any amount receivable
thereunder and the Lender gives the Lessee notice of any of the foregoing and
the approximate amount of such cost increase within 120 days after the calendar
year in which such increased costs were incurred by the Lender, then, in any
such case, the Lessee shall promptly pay to the Lender on an After-Tax Basis,
within thirty (30) days after demand made in writing by the Lender to the
Lessee, such amount or amounts (based upon an allocation thereof by the Lender
to the financing transactions contemplated by the Operative Documents and
affected by this Section) as may be reasonably necessary to compensate the
Lender for any such additional cost incurred or reduced amount received. The
Lender shall deliver to the Lessee a written statement of the costs or
reductions claimed and the basis therefor, and the allocation made by the Lender
of such costs and reductions shall be conclusive, absent demonstrable error.
(b) Capital Adequacy. Subject to the provisions of Section 8.12, if
the Lender shall have determined that, after the date hereof, the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such Governmental Authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on the Lender's
capital as a consequence of its obligations hereunder (including, without
limitation, the Loans) to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's policies with respect to capital adequacy), then from time to time,
within thirty (30) days after demand made in writing by the Lender to the
Lessee, the Lessee shall pay to the Lender such additional amount or amounts as
will compensate the Lender for such reduction. The Lender, upon determining in
good faith that any additional amounts will be payable pursuant to this
subsection, will give prompt written notice thereof to the Lessee which notice
shall show in reasonable detail the basis for calculation of such additional
amounts. Such notice shall be conclusive absent demonstrable error.
SECTION 7.6 End of Term Indemnity. In the event that at the end of the
Lease Term (i) the Lessor elects the option set forth in Section 15.6 of the
Lease and (ii) after the Lessor receives the sales proceeds from the Leased
Property under Section 15.6 or 15.7 of the Lease together with the Lessee's
payment of the Recourse Deficiency Amount, the Lessor shall not have received
the entire Lease Balance, then the Lessor or the Lender may obtain, at the
Lessee's sole cost and expense, an appraisal report of each Property from the
appraiser who prepared the most recent approval of the Property prepared in
accordance with Section 3 hereof
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(or if such appraiser is not available, another appraiser reasonably
satisfactory to the Lessor or the Lender, as the case may be) in form and
substance satisfactory to the Lessor and the Lender to establish the reason for
any decline in value of the Leased Property from that anticipated for such date
in the appraisals delivered in accordance with Section 3 hereof. The Lessee
shall promptly reimburse the Lessor for the amount equal to such decline in
value to the extent any appraisal report delivered pursuant to the preceding
sentence concludes that any such decline was due to (i) extraordinary use,
failure to maintain, to repair, to restore, to rebuild or to replace the
Property in a manner consistent with reasonable preservation of its value,
failure to comply with all Applicable Laws, failure to use, workmanship, method
of installation or removal or maintenance, repair, rebuilding or replacement, or
any other cause or condition within the reasonable power of the Lessee to
control or effect resulting in Improvements failing to constitute a nursing home
or assisted living center facility (excepting in each case ordinary wear and
tear), (ii) any Alteration made to, or any rebuilding of, the Leased Property or
any part thereof by the Lessee, (iii) any restoration or rebuilding carried out
by the Lessee or any condemnation of any portion of the Leased Property pursuant
to Article XI of the Lease (after taking into account any Award in respect
thereof) or (iv) any use of the Leased Property or any part thereof by the
Lessee other than as permitted pursuant to Article VIII of the Lease. The
parties hereto acknowledge and agree that the obligation imposed upon the Lessee
under this Section arises from a higher standard of maintenance of the Leased
Property than that required under Article VII of the Lease and is applicable
whether or not the Lessee has failed to comply with any such other obligations
under the Operative Documents.
SECTION 7.7 Exculpation. The Lender has and shall have no liability or
obligation whatsoever or howsoever in connection with the construction,
completion or management of the Improvements, and has no obligation except to
make Loan Advances as provided in this Participation Agreement and the Loan
Agreement, and the Lender is not obligated to inspect the Improvements; nor is
the Lender liable and under no circumstances whatsoever shall the Lender be or
become liable for the performance or default of any contractor or subcontractor,
or for any failure to construct, complete, protect or insure the Improvements,
or any part thereof, or for the payment of any cost or expense incurred in
connection therewith, or for the performance or non-performance of any
obligation of the Lessor or the Lessee to the Lender or to any other person,
firm or entity without limitation; and nothing, including without limitation,
any disbursement of Loan Advances or acceptance of any document or instrument,
shall be construed as a representation or warranty, express or implied, on the
Lender's part. Further, the Lessee shall be solely responsible for all aspects
of the Lessee's business and conduct in connection with the construction,
completion and management of the Improvements including, but not limited to:
(a) The quality and suitability of the Plans and Specifications;
(b) Supervision of the work of Construction;
(c) The qualifications, financial condition and performance of all
architects, engineers, contractors, subcontractors and material
suppliers and consultants;
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(d) Conformance of the work of Construction and the Improvements to the
requirements of all Applicable Laws and public and private
restrictions and requirements and to the requirements of this
Participation Agreement;
(e) The quality and suitability of all materials and workmanship; and
(f) The accuracy of all requests for the disbursement proceeds of the
Loans and the proper application of disbursed proceeds of the Loans.
The Lender shall have no obligation to supervise, inspect or inform the
Lessee, the Lessor or any third party of any aspect of the work or construction
of the Improvements or any other matter referred to above. Any inspection or
review made by or on behalf of the Lender shall be made for the purpose of
determining whether or not the obligations of the Lessee under this
Participation Agreement are being properly discharged, and neither the Lessee,
the Lessor nor any third party shall be entitled to rely upon any such
inspection or review.
The Lender owes no duty of care to the Lessee or the Lessor or any third
person to protect against or inform the Lessee, the Lessor or any third person
of the existence of negligent, faulty, inadequate or defective design or
construction of the Improvements.
SECTION 7.8 Role of Lender. Any term or condition hereof or of any of
the other Operative Documents to the contrary notwithstanding, the Lender shall
not have, and by its execution and acceptance of this Participation Agreement
hereby expressly disclaims, any obligation or responsibility for the management,
conduct or operation of the Improvements or business and affairs of the Lessee
and any term or condition hereof, or of any of the other Operative Documents,
permitting the Lender to disburse funds, whether from the proceeds of the Loans
or otherwise, or to take or refrain from taking any action with respect to the
Lessee or the Improvements shall be deemed to be solely for the benefit of the
Lender and may not be relied upon by any other person. Further, the Lender
shall not have, has not assumed and by its execution and acceptance of this
Participation Agreement hereby expressly disclaims, any liability or
responsibility for the payment or performance of any indebtedness or obligation
of the Lessee or the Lessor and no term or condition hereof, or of any of the
other Operative Documents, shall be construed otherwise.
SECTION 7.9 Lender's Benefits. All conditions precedent to the
obligation of Lender to make any Loan Advance are imposed hereby solely for the
benefit of Lender. No party other than the Lessor may require satisfaction of
any such condition precedent. No other party (including the Lessor) shall be
entitled to assume that Lender will refuse to make any Loan Advance in the
absence of strict compliance with such conditions precedent. Any requirement of
this Participation Agreement and any requirement of the Loan Agreement may be
waived by Lender, in whole or in part, at any time. Any requirement herein or in
any other Operative Document of submission of evidence to Lender of the
existence or non-existence of a fact shall be deemed, also, to be a requirement
that the fact shall exist or not exist, as the case may be,
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and without waiving any condition or obligation of the Lessee or the Lessor,
Lender may at all times independently establish to its satisfaction such
existence or non-existence.
SECTION 7.10 Lessor's Benefits. All conditions precedent to the
obligation of Lessor to make any Contribution Advance are imposed hereby solely
for the benefit of Lessor. No party other than the Lender may require
satisfaction of any such condition precedent. No party other than the Lender
shall be entitled to direct Lessor to refuse to make any Contribution Advance in
the absence of strict compliance with such conditions precedent. Any
requirement of this Participation Agreement and any requirement of the Loan
Agreement may be waived by Lessor, in whole or in part, at any time, subject to
Lender's rights under the Assignment of Lease and Rents and the other Operative
Documents. Any requirement herein or in any other Operative Document of
submission of evidence to Lessor of the existence or non-existence of a fact
shall be deemed, also, to be a requirement that the fact shall exist or not
exist, as the case may be, and without waiving any condition or obligation of
the Lessee or the Lessor, Lender may at all times independently establish to its
satisfaction such existence or non-existence.
SECTION 8
MISCELLANEOUS
SECTION 8.1 Survival of Agreements. The indemnities of the parties
provided for in Section 7 of this Participation Agreement, shall survive the
termination or expiration of this Participation Agreement and any of the other
Operative Documents (including, without limitation, the termination of the Lease
pursuant to Section 15.7 thereof in connection with the Lessee's payment of the
Recourse Deficiency Amount), any disposition of any interest of the Lessor, or
the Lender in the Leased Property and shall be and continue in effect
notwithstanding any investigation made by any party hereto or to any of the
other Operative Documents and the fact that any such party may waive compliance
with any of the other terms, provisions or conditions of any of the Operative
Documents. The representations, warranties, covenants and agreements of the
parties provided for in the Operative Documents shall not be merged into any
Deed.
SECTION 8.2 Notices. Unless otherwise specified herein or in an
applicable Operative Document, it shall, for purposes of this Participation
Agreement and the other Operative Documents, be sufficient service or giving of
any notice, request, complaint, demand, instruction or other instrument or
document to any Person, if it is in writing to the Address set forth below. Any
notice given by telecopy or facsimile transmission shall be deemed given when
sent provided confirmed by regular U.S. mail. Any notice given by mail shall be
deemed to be given when sent by registered or certified mail, return receipt
requested. Any notice sent by any party hereto under the Operative Documents
shall also be sent to the other parties to this Participation Agreement. The
parties hereto may designate, by notice given to each of the other parties, any
further or different addresses than those set forth below to which subsequent
notices shall be sent. For purposes of the Operative Documents (but subject to
the preceding sentence), the Address of the Lessee, the Lender and the Lessor is
as follows:
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(i) Lessee Atria Communities, Inc.
515 West Market Street, Suite 200
Louisville, Kentucky 40202
Attention: J. Timothy Wesley,
Chief Financial Officer
Facsimile No.: (502) 596-7178
Telephone No.: (502) 596-4160
(ii) Lender Bank One, Kentucky, N.A.
416 West Jefferson
Louisville, Kentucky 40202-3244
Attention: Dennis P. Heishman, Senior Vice
President
Facsimile No.: (502) 566-8339
Telephone No.: (502) 566-2018
(iii) Lessor Asset XVIII Holdings Company, L.L.C.
c/o JH Management Corporation
Room 520
One International Place
Boston, Massachusetts 02110
Attention: Anne B. Brennan
Facsimile No.: (617) 951-7050
Telephone No.: (617) 951-7633
SECTION 8.3 Counterparts. This Participation Agreement may be executed
in any number of counterparts as may be convenient or necessary, and it shall
not be necessary that the signatures of all parties hereto or thereto be
contained on any one counterpart hereof or thereof. Additionally, the parties
hereto agree that for purposes of facilitating the execution of this
Participation Agreement, (a) the signature pages taken from the separate
individually executed counterparts of this Agreement may be combined to form
multiple fully executed counterparts and (b) a facsimile transmission shall be
deemed to be an original signature for all purposes. All executed counterparts
of this Participation Agreement shall be deemed to be originals, but all such
counterparts taken together or collectively, as the case may be, shall
constitute one and the same agreement.
SECTION 8.4 Amendments. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified with
respect to any party thereto except with the prior written consent of such party
thereto and, in all cases, the Lender and the Lessee. If and to the extent that
this Participation Agreement, the Loan Agreement, the Notes, the Lease, the
Assignment of Lease and Rents or the Mortgages constitutes an amendment,
supplement, termination, waiver or other modification to any Operative Document,
each of the parties hereto, by its execution of this Participation Agreement,
shall be deemed to have given its written consent to such amendment supplement,
termination, waiver or other modification.
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SECTION 8.5 Headings, Etc. The Table of Contents and headings of the
various Sections of this Participation Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 8.6 Parties in Interest. Except as expressly provided herein,
none of the provisions of this Participation Agreement is intended for the
benefit of any Person except the parties hereto, their successors and their
permitted assigns.
SECTION 8.7 Governing Law. THIS PARTICIPATION AGREEMENT HAS BEEN
DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF KENTUCKY APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 8.8 No Recourse. No recourse shall be had for any claims under
this Participation Agreement against any incorporator, shareholder, officer,
manager, member or director, past, present or future, of Lessor or of any
successor or of Lessor's constituent members or other affiliates or of JH
Management Corporation, or against JH Management Corporation, either directly or
through Lessor or any successor, whether by virtue of any constitution, statute
or rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by acceptance hereof and as part of the consideration
for the acceptance hereof, expressly waived and released.
SECTION 8.9 Expenses.
(a) Expenses of Lessor and Lender. The reasonable fees, expenses and
disbursements (including reasonable counsel fees) of the Lessor and the Lender
in connection with the Operative Documents incurred from and after the Closing
Date (including all costs associated with the release and termination of the
Operative Documents in accordance with the terms thereof) shall be paid by the
Lessee as Supplemental Rent upon demand therefor by the Lessor or the Lender.
(b) Amendments Supplements and Appraisal. The Lessee agrees to pay
all reasonable and documented out-of-pocket costs and expenses of the Lessor and
the Lender in connection with the successful amendment or supplementing of the
Operative Documents and the documents and instruments referred to therein
(including, without limitation, the fees and disbursements of counsel for the
Lessor and the Lender).
SECTION 8.10 Severability. Any provision of this Participation Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
-46-
<PAGE>
SECTION 8.11 Submission to Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally (i) submits for itself and its property
in any legal action or proceeding relating to this Participation Agreement or
any other Operative Document, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of Kentucky, the courts of the United States of America for the
Western District of Kentucky and appellate courts from any thereof, (ii)
consents that any such action or proceedings may be brought to such courts, and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the same, (iii) agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such party at its address set forth
in Section 8.2 or at such other address of which the other parties hereto shall
have been notified pursuant to Section 8.2 and (iv) agrees that nothing herein
shall affect the right to effect service of process in any other manner
permitted by law. Each party, to the extent permitted by law, hereby
irrevocably and unconditionally waives any right to have a jury participate in
resolving any dispute, whether sounding in contract, tort, or otherwise, among
or between the parties hereto arising out of, in connection with, related to, or
incidental to the relationship established among the parties in connection with
this Participation Agreement, any other Operative Document or any other document
executed or delivered in connection herewith or the transactions related hereto.
This waiver shall not in any way affect, waive, limit, amend or modify the
Lender's ability to pursue any remedies contained in this Participation
Agreement, the other Operative Documents or any other agreement or document
related thereto.
SECTION 8.12 Limitation on Interest. Any provision to the contrary
contained in this Participation Agreement or in any of the other Operative
Documents notwithstanding, it is expressly provided that in no case or event
shall the aggregate of (i) all interest payable by the Lessee or the Lessor and
(ii) the aggregate of any other amounts accrued or paid pursuant to this
Participation Agreement or any of the other Operative Documents, which under
applicable laws are or may be deemed to constitute interest, ever exceed the
maximum rate of interest which could lawfully be contracted for, charged or
received. In this connection, it is expressly stipulated and agreed that it is
the intent of the Lessee, the Lessor and the Lender to contract in strict
compliance with the applicable usury laws of the State of Texas and of the
United States (whichever permit the higher rate of interest) from time to time
in effect. In furtherance thereof, none of the terms of this Participation
Agreement or any of the other Operative Documents shall ever be construed to
create a contract to pay, as consideration for the use, forbearance or detention
of money, interest at a rate in excess of the maximum contract interest rate
permitted to be contracted for, charged or received by the applicable laws of
the United States or the State of Texas (whichever permit the higher rate of
interest). The Lessee, the Lessor and the other parties now or hereafter
becoming liable for payment of any indebtedness under this Participation
Agreement or any other Operative Documents shall never be liable for interest in
excess of the maximum rate that may be lawfully contracted for or charged under
the laws of the State of Texas and of the United States (whichever permit the
higher rate of interest). If under any circumstances the aggregate amounts paid
include amounts which by law are deemed
-47-
<PAGE>
interest which would exceed the maximum amount of interest which could lawfully
have been contracted for, charged or received, the parties stipulate that such
amounts will be deemed to have been paid as a result of an error on the part of
the parties, and the party receiving such excess payment shall promptly, upon
discovery of such error or upon notice thereof from the party making such
payment, refund the amount of such excess or at the Lender's option, credit such
excess against any unpaid principal balance owing. To the maximum extent
permitted by applicable law, all amounts contracted for, charged or received for
the use, forbearance, or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of the Loan. The provisions of this Section 8.12 shall control all of the
Operative Documents.
SECTION 8.13 Reproduction of Documents. The parties hereto agree and
stipulate that, to the extent permitted by applicable law, any reproduction of
this Participation Agreement or other Operative Documents (except the Notes)
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by you in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 8.13 shall
not prohibit the Lender or party hereto from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
SECTION 8.14 Waiver of Consumer Rights. Each of the parties hereto does
hereby represent and warrant with and to each of the other parties hereto that
(a) it is not in a significantly disparate bargaining position, (b) it is
represented by legal counsel in seeking or acquiring goods or services and such
legal counsel was not directly nor indirectly identified, suggested or selected
by another party hereto, (c) it has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of a
transaction, including the transaction evidenced by the Operative Documents, and
(d) the Operative Documents are not a result of any disparity in bargaining
position among the Lessee, the Lessor and the Lender and were negotiated on an
arms-length basis and represent the bargained-for agreement of parties. EACH
PARTY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION
ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
SELECTION, IT VOLUNTARILY CONSENTS TO THIS WAIVER.
-48-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed by their respective duly authorized officers as of the
day and year first above written.
ATRIA COMMUNITIES, INC., as Lessee
By:_____________________________________
J. Timothy Wesley,
Chief Financial Officer
ASSET XVIII HOLDINGS COMPANY,
L.L.C., as Lessor
By Asset Holdings Corporation I,
a Delaware corporation, its
managing member
By:_____________________________________
Anne Brennan, Secretary
BANK ONE, KENTUCKY, N.A., as Lender
By:_____________________________________
Dennis P. Heishman,
Senior Vice President
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<PAGE>
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT
MASTER LEASE AND DEVELOPMENT AGREEMENT AND LOAN AGREEMENT
---------------------------------------------------------
DEFINITIONS AND INTERPRETATION
[See separate text]
<PAGE>
APPENDIX II
FORM OF FUNDING REQUISITION
---------------------------
[Date]
Bank One, Kentucky, N.A.
416 West Jefferson
Louisville, Kentucky 40202-3244
Attention: Dennis P. Heishman,
Senior Vice President
Asset XVIII Holdings Company, L.L.C.
c/o JH Management Corporation
Room 520
One International Place
Boston, Massachusetts 02110
Attn: Anne Brennan
Re: Request for Loan Advances and a Contribution Advance under that
certain Master Participation Agreement, dated as of January 30, 1998
(the "Participation Agreement"), by and among Asset XVIII Holdings
Company, L.L.C., as Lessor (the "Lessor"), Atria Communities, Inc., as
Lessee (the "Lessee"), and Bank One, Kentucky, N.A. as Lender (the
"Lender")
I, [Name], [Officer] of the Lessee, [or its agent], acting for the Lessee
and as agent for the Lessor pursuant to the Participation Agreement, submit this
irrevocable Funding Requisition and certify, on behalf of the Lessee, the
following (all terms not defined herein shall have the meanings given in the
Participation Agreement):
1. The total amount of the Development Costs for which a
Funding is hereby requested is ___________ Dollars ($________). The Lender and
the Lessor are each hereby requested to make on the Funding Date of __________
[at least 3 Business Days after the submission date] a Loan Advance or
Contribution Advance, as applicable (subject to the satisfaction or waiver of
all conditions precedent thereto), which in the aggregate total the amount of
the Funding set forth in the first sentence of this paragraph and allocated in
accordance with the Participation Agreement, in the manner herein described.
2. The Funding relates to the following Properties in the
following amounts.
<TABLE>
<CAPTION>
Parcel Loan Contribution
- -------------------------------------- ------------------------------- -------------------------------
<S> <C> <C>
Property I $______________________ $______________________
Property II $______________________ $______________________
Property III $______________________ $______________________
Property IV $______________________ $______________________
</TABLE>
[add further rows, if more than four Properties comprise the Leased Property]
3. The Lessee certifies that all conditions precedent to the
requested Funding contained in the Operative Documents have been satisfied, or
waived by Lender in writing.
<PAGE>
4. The Lessee acknowledges that the [Base Rate][Applicable LIBOR
Rate] shall apply to the requested Funding for the Loans. [For LIBOR Fundings]
The duration of the Interest Period applicable to the Loan Advance and the
Contribution Advance requested hereby shall be one month. [For Base Rate
Fundings] The Lessee acknowledges that the Base Rate shall apply until the next
Loan Payment Date which is more than 3 Business Days after the submission of
this Funding Requisition, and unless the Lessee shall otherwise request, the
Applicable LIBOR Rate shall apply thereto, and the Funding Date for the
Contribution Advance requested herein shall be the next Loan Payment Date which
is more than 3 Business Days after the submission of this Funding Requisition.
5. The proceeds of the Funding requested herein shall be used
solely to pay Development Costs.
6. No part of the Development Costs paid with the funds advanced
under any previous Funding Requisition is a basis for this Funding Requisition,
and none of the Development Costs which are the subject of this Funding
Requisition was included in any prior Funding Requisition or is in respect of
interest on the Notes.
7. Attached to this Funding Requisition is a copy of each
invoice, purchase order, receipt or other such document (the "Invoices") for
Development Costs, which, individually, is in an amount in excess of $100,000,
which Invoices will be, or have been, paid with the proceeds of this Funding,
or, as applicable, the previous Fundings.
8. Construction of all Improvements to date has been performed in
a good and workmanlike manner, substantially in accordance with the Plans and
Specifications therefor, and in compliance with Applicable Law.
9. [If applicable] There has been no material change in the
estimated time of completion of construction of the Improvements and the Lessee
has no reason to believe that (i) the Completion Date cannot be achieved by the
Completion Deadline or (ii) the Total Development Costs of the Construction of
the Improvements will exceed the Total Commitments.
10. No applicable Law prohibits, and no litigation, governmental
investigation or other proceeding is pending or, to the knowledge of the Lessee,
threatened in which there is a reasonable possibility of an unfavorable
judgment, decree, order or other determination which could prevent or make
unlawful, or impose any material adverse condition upon, the Land, the
Improvement or the construction or operation thereof or any transaction
contemplated hereby or by any other Operative Document or the ability of the
Lessee to perform its obligations hereunder or thereunder or, to the Lessee's
knowledge, the Lessor's interest in the Improvements and the Land.
11. All amounts previously advanced pursuant to previous Funding
Requisitions were or will be paid to the parties entitled thereto as specified
in such Funding Requisitions.
12. All proceeds of the Loans and the Contribution have been
applied solely to Development Costs as required under the Operative Documents.
13. [Except as set forth in this item 13,] all conditions
precedent to the Funding requested herein set forth in the Participation
Agreement (as defined below) have been satisfied: [identify unfulfilled
conditions, the actions being taken by the Lessee to satisfy such conditions and
the date(s) by which the Lessee plans to satisfy such conditions].
14. All of the representations and warranties of the Lessee set
forth in the Operative Documents are true and correct on and as of the date
hereof or, as applicable, on and as of the date specified in such representation
and warranty. The Lessee is in compliance with all of its obligations under the
Operative Documents and there exists no Event of Default under the Operative
Documents.
15. The name, address and wire instructions for the disbursement
of the requested Advance is set forth in the attachment hereto, and the Lender
is hereby requested to make such disbursement of the Advance on the date set
forth above in accordance with said attachment.
Very truly yours,
ATRIA COMMUNITIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
APPENDIX III
TO
MASTER PARTICIPATION AGREEMENT
------------------------------
FINANCIAL COVENANTS
[Covenants to be inserted]
<PAGE>
EXHIBIT K
---------
ARCHITECT'S CERTIFICATE
Pursuant to Section 3.2(a)(xvii) of the Participation Agreement,
________________ ______________, a _______________ ______________ (the
"Company") DOES HEREBY CERTIFY to ASSET XVIII HOLDINGS COMPANY, L.L.C. and BANK
ONE, KENTUCKY, N.A., as follows:
1. The Company has served as architect in connection with the preparation of,
and has prepared (or will prepare) architectural plans and specifications
(collectively, the "Plans and Specifications") for a project consisting of
the construction of a warehouse and distribution facility of approximately
_________ gross square feet (the "Intended Use") located on approximately
______ acres of currently unimproved land (the "Property") more
particularly described on Exhibit A attached hereto and incorporated herein
by reference (the "Project"). The Company has performed or will perform
all related architectural design work in connection with the development of
the Project pursuant to that certain contract dated _______________ by and
between the Company and Atria Communities, Inc., a copy of which is
attached hereto as Exhibit B (the "Contract"). Pursuant to the Contract,
the Company will act as the supervising architect during the development of
the Project.
2. The Plans and Specifications provide (or will provide) for the construction
referred to above which, when completed in conformity with the Plans and
Specifications, will comply in all material respects with the requirements
of all applicable laws of governmental authorities having jurisdiction
thereof including, without limitation, The Americans with Disabilities Act
of 1990 (and applicable regulations thereunder), environmental laws,
erosion control laws, zoning and subdivision ordinances, land use and
development laws, as well as applicable codes and regulations of municipal
and city authorities. As of the date hereof, all permits required by any
applicable governmental authority, will be issued or available for issuance
in order to permit the development and construction of the Project in a
timely manner. There are no facts or issues outstanding with respect to
the construction of the Project in accordance with the Plans and
Specifications which would cause any material delay or otherwise impair the
issuance of all applicable permits for the construction of the Project in a
timely manner or which would materially impair or delay construction of the
Project in a timely manner.
3. The Plans and Specifications have been (or will be) prepared in accordance
with the standards of sound architectural practice and same will specify
that only new materials will be utilized. Upon completion in accordance
with the Plans and Specifications, the Project will be of sound structure,
free of defects, adequately constructed for its Intended Use and with its
mechanical plan in working order.
4. It is our opinion that, upon completion of the Project in conformity with
the Plans and Specifications, all applicable permits, licenses and
certificates of occupancy to permit the use and operation of the Project
for its Intended Use will be obtainable.
5. The construction of the Project in accordance with the Plans and
Specifications will not affect any "wetlands" located on the Property, as
such term is defined in Section 328.3 of Title 33 of the Code of Federal
Regulations.
6. The Plans and Specifications require the following utilities:
(a) electricity
(b) telephone
(c) water
(d) sewer
(e) natural gas
<PAGE>
7. We have confirmed that all such utilities are available to the boundaries
of the Project in proper location and in sufficient capacity to adequately
serve the Project upon completion of the construction in accordance with
the Plans and Specifications and that satisfactory commitments for
connection to and service of the Project have been obtained and that such
commitments for such utilities will not have expired at the time the
Project is completed.
8. The Plans and Specifications and Project comply with all applicable
requirements for parking and building setback lines. There is ingress and
egress to the Project from ______________________ which has been dedicated
to public use and accepted for maintenance by the
__________________________.
9. The Survey prepared by _________________ dated ____________ and last
revised ____________, has been reviewed and based on said survey and a
review of the site, there are no structures or utility lines on the site of
the Project which will materially interfere with the construction of
improvements at the site of the Project.
10. Upon completion of the Project in accordance with the Plans and
Specifications, the Project will comply with all lot area, height, floor
area and bulk, front, rear and side yard setbacks, and parking requirements
of all zoning ordinances and all other requirements of applicable
governmental authorities which apply to the Project, standing alone,
separate and distinct from any adjacent or contiguous parcel. Such
compliance is in no way dependent upon the common ownership of the Project
with any other property, and the land upon which the project will be
developed has been lawfully subdivided as a separate parcel.
11. Upon completion of the Project in accordance with the Plans and
Specifications, satisfactory methods of vehicular and pedestrian access to,
and egress from, the Project and adjoining or nearby public ways will be
available, sufficient to meet the reasonable needs of the Project's
Intended Use and all applicable requirements of public authorities. Design
conditions are such that no drainage of surface or other water across the
property of others, or over the site of the Project from land of others, is
called for or indicated by the Plans and Specifications or required for the
Project.
12. To the undersigned's best knowledge, neither the Project nor the site of
the Project contain or incorporate any asbestos, PCB's, ureaformaldehyde,
radioactive material, or other toxic or hazardous wastes, materials or
product, as defined in federal, state or local laws and regulations.
<PAGE>
Exhibit 10.2
================================================================================
MASTER LEASE AND DEVELOPMENT AGREEMENT
Dated as of January 30, 1998
between
ASSET XVIII HOLDINGS COMPANY, L.L.C., as Lessor
and
ATRIA COMMUNITIES, INC., as Lessee
_____________________________________________
Lease Financing
for Atria Communities, Inc.
Assisted Living Centers
================================================================================
<PAGE>
TABLE OF CONTENTS
(Master Lease and Development Agreement)
Page
----
PRELIMINARY STATEMENT....................................................... 1
ARTICLE I DEFINITIONS; INTERPRETATION................................. 1
ARTICLE II LEASE OF LEASED PROPERTY.................................... 1
SECTION 2.1 Lease of the Property................................. 1
SECTION 2.2 Lease of Improvements................................. 2
SECTION 2.3 Other Property........................................ 3
SECTION 2.4 Nature of Transaction................................. 3
ARTICLE III CONSTRUCTION AND EQUIPPING OF THE IMPROVEMENTS.............. 3
SECTION 3.1 Construction of Improvements.......................... 3
SECTION 3.2 Completion of Construction............................ 3
SECTION 3.3 Permits; Approvals; Storage........................... 4
SECTION 3.4 Inspection............................................ 4
ARTICLE IV RENT........................................................ 4
SECTION 4.1 Basic Rent............................................ 4
SECTION 4.2 Supplemental Rent..................................... 5
SECTION 4.3 Method of Payment..................................... 5
SECTION 4.4 Late Payment.......................................... 6
SECTION 4.5 Net Lease; No Setoff, Etc............................. 6
SECTION 4.6 Lessee to Cooperate with Lessor....................... 7
ARTICLE V CONDITION AND USE OF LEASED PROPERTY........................ 7
ARTICLE VI LIENS; EASEMENTS; PARTIAL CONVEYANCES....................... 8
SECTION 6.1 No Liens.............................................. 8
SECTION 6.2 Easements and Related Conveyances..................... 8
ARTICLE VII MAINTENANCE AND REPAIR; ALTERATIONS;
MODIFICATIONS AND ADDITIONS................................. 9
SECTION 7.1 Maintenance and Repair; Compliance With Law........... 9
SECTION 7.2 Alterations........................................... 10
SECTION 7.3 Title to Alterations.................................. 11
ARTICLE VIII USE......................................................... 11
-i-
<PAGE>
Page
----
ARTICLE IX INSURANCE................................................... 11
SECTION 9.1 Insurance Coverages................................... 11
SECTION 9.2 Liability Insurance................................... 12
SECTION 9.3 Policies.............................................. 12
SECTION 9.4 Loss Payee Provisions................................. 13
SECTION 9.5 Other Insurance....................................... 13
SECTION 9.6 Loss Deductibles...................................... 14
SECTION 9.7 Failure to Maintain Insurance......................... 14
ARTICLE X ASSIGNMENT AND SUBLEASING................................... 14
ARTICLE XI LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................... 14
SECTION 11.1 Event of Loss......................................... 14
SECTION 11.2 Event of Taking....................................... 15
SECTION 11.3 Casualty.............................................. 16
SECTION 11.4 Condemnation.......................................... 16
SECTION 11.5 Verification of Restoration and Rebuilding............ 17
SECTION 11.6 Application of Payments............................... 17
SECTION 11.7 Prosecution of Awards................................. 18
SECTION 11.8 Application of Certain Payments Not Relating to an
Event of Taking....................................... 19
SECTION 11.9 Other Dispositions.................................... 19
SECTION 11.10 No Rent Abatement..................................... 19
ARTICLE XII INTEREST CONVEYED TO LESSEE................................. 19
ARTICLE XIII EVENTS OF DEFAULT........................................... 20
ARTICLE XIV ENFORCEMENT................................................. 21
SECTION 14.1 Remedies.............................................. 21
SECTION 14.2 Remedies Cumulative; No Waiver; Consents.............. 24
ARTICLE XV SALE, RETURN OR PURCHASE OF LEASED PROPERTY................. 24
SECTION 15.1 Lessee's Option to Purchase........................... 24
SECTION 15.2 Purchase Obligation................................... 25
SECTION 15.3 Acceleration of Purchase Obligation................... 25
SECTION 15.4 Determination of Purchase Price....................... 25
SECTION 15.5 Purchase Procedure.................................... 26
SECTION 15.6 Option to Remarket.................................... 27
SECTION 15.7 Rejection of Sale..................................... 30
-ii-
<PAGE>
Page
----
SECTION 15.8 Return of Leased Property............................. 31
SECTION 15.9 Effect of Conveyance to Lessee........................ 31
ARTICLE XVI LESSEE'S EQUIPMENT.......................................... 32
ARTICLE XVII RIGHT TO PERFORM FOR LESSEE................................. 32
ARTICLE XVIII MISCELLANEOUS............................................... 33
SECTION 18.1 Reports............................................... 33
SECTION 18.2 Binding Effect; Successors and Assigns................ 33
SECTION 18.3 Quiet Enjoyment....................................... 33
SECTION 18.4 Notices............................................... 33
SECTION 18.5 Severability.......................................... 33
SECTION 18.6 Amendment; Complete Agreements........................ 33
SECTION 18.7 Construction.......................................... 34
SECTION 18.8 Headings.............................................. 34
SECTION 18.9 Counterparts.......................................... 34
SECTION 18.10 Governing Law......................................... 34
SECTION 18.11 Discharge of Lessee's Obligations by its Affiliates... 34
SECTION 18.12 Liability of Lessor Limited........................... 35
SECTION 18.13 Estoppel Certificates................................. 35
SECTION 18.14 No Joint Venture...................................... 35
SECTION 18.15 No Accord and Satisfaction............................ 35
SECTION 18.16 No Merger............................................. 36
SECTION 18.17 Survival.............................................. 36
SECTION 18.18 Chattel Paper......................................... 36
SECTION 18.19 Time of Essence....................................... 36
SECTION 18.20 Recordation of Lease.................................. 36
SECTION 18.21 Investment of Security Funds.......................... 36
SECTION 18.22 No Illegal Interest to be Charged..................... 37
SECTION 18.23 Submission to Jurisdiction; Waivers................... 37
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Parcel Lease Supplement
APPENDIX III Form of Memorandum of Lease
-iii-
<PAGE>
MASTER LEASE AND DEVELOPMENT AGREEMENT
THIS MASTER LEASE AND DEVELOPMENT AGREEMENT (this "Lease"), dated as of
January 30, 1998, is between ASSET XVIII HOLDINGS COMPANY, L.L.C., a
Massachusetts limited liability company, as Lessor, and ATRIA COMMUNITIES, INC.,
a Delaware corporation, as Lessee.
PRELIMINARY STATEMENT
In accordance with and subject to the terms and provisions of this Lease
and the other Operative Documents, (i) the Lessor intends to acquire Properties
pursuant to Parcel Lease Supplements as hereinafter provided, (ii) the Lessor
has agreed to lease Properties to the Lessee, (iii) the Lessee has agreed to
develop and construct for the Lessor all Improvements on the Parcels in
accordance with the terms of the Operative Documents, (iv) the Lessor has agreed
to lease and demise the Improvements to the Lessee and the Lessee has agreed to
rent and hire the Improvements from the Lessor as part of the Leased Property,
(v) the Lessor and the Lessee wish to obtain, and the Lender has agreed to
provide, two Loans in an aggregate amount of up to the Loan Commitments for the
payment of Development Costs in connection with the acquisition of the
Properties and the Construction of Improvements thereon, and (vi) Lessor has
agreed to make Contribution Advances from its own equity resources in an amount
up to the Equity Commitment to pay a portion of the Development Costs in
connection with the acquisition of the Properties and the Construction of
Improvements thereon.
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Lease and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in Appendix I hereto for
all purposes hereof and the rules of interpretation set forth in Appendix I
hereto shall apply to this Lease.
ARTICLE II
LEASE OF LEASED PROPERTY
SECTION 2.1 Lease of the Property. Prior to the Completion Deadline,
Lessee, as agent for the Lessor, shall identify, purchase and acquire on behalf
and in the name of Lessor, title in fee simple, in and to each Property which
will constitute part of the Leased Property, subject only to Permitted Liens, as
follows:
<PAGE>
(a) Lessee shall prepare and submit to the Lessor and the Lender
counterparts of an appropriately completed Parcel Lease Supplement substantially
in the form of Appendix II hereto, with all blanks appropriately completed, for
each such Property, and counterparts of the related Operative Documents or
supplemental Operative Documents for each such Property the execution and
delivery of which are required to satisfy the Parcel Conditions, each duly
signed and acknowledged, where appropriate, by the Lessee, ready for execution.
(b) Lessee shall simultaneously deliver to the Lessor and the Lender
evidence of the satisfaction of (or ability to satisfy) the Parcel Conditions
for such Property in Section 3.2 of the Participation Agreement.
(c) Lessor and the Lender, respectively, shall thereupon cause the Parcel
Lease Supplement and the related Operative Documents and supplemental Operative
Documents for such Property, to which the Lessor or the Lender, are a party, to
be signed by their respective duly authorized officers and, where requested by
the Lessee, to cause such documents to be acknowledged, signed by subscribing
witnesses, or otherwise executed with the formalities necessary for such
documents to be duly recorded in the appropriate land records of the County or
other municipality where such Property is located.
(d) Not less than three Business Days prior to the related Parcel Closing
Date for such Property, Lessee shall submit a Funding Requisition to the Lessor
and the Lender with respect to a Funding to pay for the purchase price and other
costs of acquisition of each such Property, including without limitation, the
cost of recording in the name and on behalf of Lessor the Deed therefor.
(e) Pursuant to each Parcel Lease Supplement, the Lessor shall and hereby
does demise and lease its interest in and to each such Property to the Lessee,
and the Lessee shall, and hereby does, rent and lease each such Property from
the Lessor, upon and subject to the terms and conditions of this Lease, the
Participation Agreement and each of the Operative Documents, including the
supplements thereto.
SECTION 2.2 Lease of Improvements. Lessor hereby demises and leases
Lessor's interest in all Improvements (whether or not the Construction thereof
has been completed) to Lessee, and Lessee hereby rents and leases Lessor's
interest in the Improvements (whether or not the Construction thereof has been
completed) from Lessor, for the Lease Term. The demise and lease of the
Improvements pursuant to this Section shall include any additional right, title
or interest in the Improvements which may at any time be acquired by Lessor,
whether in connection with the Construction of such Improvement on an additional
Parcel of the Land, as the result of an Alteration, or otherwise, the intent
being that all right, title and interest of Lessor in and to all of the
Improvements whenever constructed, and wherever located, shall at all times be
demised and leased hereunder.
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SECTION 2.3 Other Property. Lessee may from time to time own or hold
under lease from Persons other than Lessor furniture, trade fixtures and
equipment located on or about the Leased Property which is not subject to this
Lease.
SECTION 2.4 Nature of Transaction. It is the intent of the parties
hereto that: (a) for Federal, State and local income tax purposes, this Lease
shall be treated as the repayment and security provisions of a loan by Lessor to
Lessee, and that Lessee shall be treated as the legal and beneficial owner
entitled to any and all benefits of ownership of the Leased Property or any part
thereof; and that all payments of Basic Rent during the Lease Term shall be
treated as payments of interest and principal, as the case may be, in respect of
such loan; (b) if a bankruptcy court or other court of competent jurisdiction
shall at any time determine that the transactions represented by this Lease and
the other Operative Documents either (i) do not constitute a true leasing
transaction or (ii) shall be treated as a financing or other transaction, then
in any such event, this Lease shall be treated as a deed of trust and security
agreement, mortgage and security agreement or other similar instrument with a
power of sale from Lessee, as mortgagor to Lessor for the benefit of the Lender,
as mortgagee, encumbering the Leased Property, and the payment by Lessee of the
Basic Rent shall be treated as payments of interest and the payment of Lessee of
any other amounts in respect of the Lease Balance shall be treated as repayments
of principal (all such payments are obligatory and shall, to the fullest extent
permitted by law, have priority over any and all mechanics' liens and other
liens and encumbrances arising after the respective Memorandum of Lease (in the
form attached hereto as Appendix III) is recorded); and (c) the Mortgages upon
each Property, and the Assignment of Lease and Rents will create a lien and
security interest in the Collateral (as defined in the Mortgages) and this
Lease, subject to certain limited exceptions.
ARTICLE III
CONSTRUCTION AND EQUIPPING OF THE IMPROVEMENTS
SECTION 3.1 Construction of Improvements. In the event that
Improvements are to be constructed on a Parcel, Lessee shall, for the benefit of
Lessor, cause the Construction of the Improvements to be commenced on each
Parcel following the Parcel Closing Date, and to cause such Construction to be
performed and completed by the General Contractor therefor pursuant to the
Construction Contract therefor. Until the Construction is completed, the
portions of the Improvements under construction shall, and upon completion of
Construction the completed Improvements shall, be a part of the Leased Property.
SECTION 3.2 Completion of Construction. Lessee shall endeavor to
achieve satisfactory performance from each General Contractor under each
Construction Contract. Lessee shall cause the Construction of all Improvements
to occur on or prior to the Completion Deadline. Lessee may make changes to the
Plans and Specifications, shall review requests for changes, shall negotiate
proposals for changes made by the General Contractor and shall prepare and sign
change orders. Lessee shall develop and implement procedures for the review and
processing of applications by the General Contractor, subcontractors,
materialmen and other
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Persons involved in the Construction for progress and final payments, and shall
provide to Lessor such certifications for payment as are required under the
Participation Agreement. Lessee's obligations under this Section shall not be
diminished or affected by any insufficiency of the proceeds of the Loan, or the
amount of the Contribution, or as the result of the costs of acquisition of the
Land or the Construction of the Improvements or any part thereof exceeding
amounts received as Loan Advances or Contribution Advances from the Lender or
the Lessor. In the event that Development Costs which are due and payable exceed
the aggregate amount of Loan Advances and Contribution Advances, such excess
shall be paid by Lessee from Lessee's own funds.
SECTION 3.3 Permits; Approvals; Storage. Lessee shall be responsible
for obtaining or causing each General Contractor to obtain all applicable
zoning, wetlands, subdivision, building and other permits for the Construction,
and shall also be responsible for obtaining or causing each General Contractor
to obtain all other approvals from authorities having jurisdiction over the
Construction, the Land or the Improvements. Lessee shall monitor the progress
of the Construction. Lessee shall arrange for the delivery and storage,
protection and security of materials, systems and equipment which are to be
incorporated into the Improvements until such items are incorporated into the
Improvements.
SECTION 3.4 Inspection. At any time upon three (3) Business Days prior
notice to Lessee, Lessor, the Lender and their authorized representatives may
inspect the Leased Property and the books and records of Lessee relating to the
Leased Property and make copies and abstracts therefrom. All reasonable and
documented out-of-pocket costs of such inspection incurred by Lessor or Lender
shall be paid by Lessee promptly after receipt by Lessee of a written request
for such payment. No inspection shall unreasonably interfere with Lessee's
operations or the operations of any other occupant of the Leased Property. None
of the inspecting parties shall have any duty to make any such inspection or
inquiry and none of the inspecting parties shall incur any liability or
obligation by reason of not making any such inspection or inquiry. None of the
inspecting parties shall incur any liability or obligation by reason of making
any such inspection or inquiry unless and to the extent such inspecting party,
during the course of such inspection, causes damage to either the Leased
Property, any property of Lessee or any property of any other Person or to a
Person.
ARTICLE IV
RENT
SECTION 4.1 Basic Rent.
(a) Basic Rent. The first Rent Payment Date shall be the first Loan
Payment Date which next follows the first Parcel Closing Date, and beginning on
that date, Lessee shall commence making payments of Basic Rent to Lessor in
installments payable in arrears on each Rent Payment Date and on any date (if
not a Rent Payment Date) which is the Lease Termination Date. On each Rent
Payment Date, Lessee shall pay the installment of Basic Rent
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then due and payable pursuant to this Lease and all Parcel Lease Supplements
then in force. Basic Rent shall equal the sum of all installments of the
Facility Rent and the Index Rent for all Parcel Lease Supplements and shall be
payable in the respective amounts set forth below and therein.
(b) Facility Rent. On each Rent Payment Date, the Lessee shall, until
(i) the Lease Balance shall be paid in full on the Lease Termination Date, or
(ii) the payment by Lessee of the Recourse Deficiency Amount on the Scheduled
Termination Date and the fulfillment of the provisions of clauses (i) through
(xiii) of Section 15.6, pay installments of Facility Rent in arrears with
respect to the period elapsed since, in the case of the first Rent Payment Date,
the initial Closing Date, and in the case of each subsequent Rent Payment Date,
the immediately preceding Rent Payment Date, and each such installment shall be
in an amount which equals the Contribution Return then accrued and unpaid. In
addition, the Lessee shall pay as Facility Rent an amount equal to the Lessor's
Breakage Costs, if any, which at any time shall be payable pursuant to this
Lease or the Operative Documents.
(c) Index Rent. On each Rent Payment Date on which Basic Rent is payable,
the Lessee shall pay as Index Rent an amount equal to the sum of all interest
accrued and unpaid with respect to the Loans and the Notes.
SECTION 4.2 Supplemental Rent. Lessee shall pay to Lessor, or to
whomever shall be entitled thereto as expressly provided herein or in any other
Operative Document or in the Facilitation Agreement dated the date hereof
between the Lessee, the Lessor and JH Management Corporation (the "Facilitation
Agreement"), any and all Supplemental Rent promptly as the same shall become due
and payable. In particular, the Lessee agrees to pay to the Lessor or its
designee as Supplemental Rent (i) on the initial Closing Date and on [May 1st]
of each succeeding year during the Lease Term, the annual Facilitation Fee in
the sum of $5,000, (ii) amounts necessary to reimburse Lessor and Lender for all
legal fees and expenses incurred by them in connection with the transaction
contemplated by the Operative Documents; and (iii) such other amounts as Lessor
and Lessee shall mutually agree upon. In the event of any failure on the part
of Lessee to pay any Supplemental Rent, which failure constitutes an Event of
Default, Lessor shall have all rights, powers and remedies provided for herein
or by law or in equity or otherwise in the case of nonpayment of Basic Rent.
All Supplemental Rent to be paid pursuant to this Section shall be payable in
the type of funds and in the manner set forth in Section 4.3.
SECTION 4.3 Method of Payment. All Basic Rent shall be paid by the
Lessee directly to the Lender. Supplemental Rent (including amounts due under
Article XV hereof) shall be paid to Lessor (or to such Person as may be entitled
thereto) or, in each case, to such Person as Lessor (or such other Person) shall
specify in writing to Lessee, and at such place as Lessor (or such other Person)
shall specify in writing to Lessee, which specifications by Lessor shall be
given by Lessor at least ten (10) Business Days prior to the due date therefor.
Each payment of Rent (including all payments under Article XV hereof) shall be
made by Lessee prior to
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10:00 a.m. Louisville, Kentucky time on the date due, at the place of payment in
funds consisting of lawful currency of the United States of America which shall
be immediately available on the scheduled date when such payment shall be due,
unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next succeeding Business Day.
SECTION 4.4 Late Payment. If any Rent (other than Supplemental Rent
payable by reason of this Section) shall not be paid when due, Lessee shall pay
to Lessor, as Supplemental Rent, interest (to the maximum extent permitted by
law) on such overdue amount from and including the due date thereof to but
excluding the Business Day of payment thereof at the Overdue Rate.
SECTION 4.5 Net Lease; No Setoff, Etc. This Lease is a net lease and,
notwithstanding any other provision of this Lease, Lessee shall pay all Basic
Rent and Supplemental Rent, and all costs, charges, taxes, assessments and other
expenses (foreseen or unforeseen) for which Lessee or any Indemnitee is or shall
become liable by reason of Lessee's or such Indemnitee's estate, right, title or
interest in the Leased Property, or that are connected with or arise out of the
acquisition, installation, possession, use, occupancy, maintenance, ownership,
leasing, repairs and rebuilding of, or addition to, the Leased Property or any
portion thereof, including, without limitation, the Construction or the
financing of the Construction and any other amounts payable hereunder shall be
paid, without counterclaim, setoff, deduction or defense and without abatement,
suspension, deferment, diminution or reduction, and Lessee's obligation to pay
all such amounts throughout the Lease Term is absolute and unconditional. The
obligations and liabilities of Lessee hereunder shall in no way be released,
discharged or otherwise affected for any reason, including without limitation
(i) any defect in the condition, merchantability, design, quality or fitness for
use of the Leased Property or any part thereof, or the failure of the Leased
Property to comply with all Applicable Law, including any inability to occupy or
use the Leased Property by reason of such non-compliance, (ii) any damage to,
removal, abandonment, salvage, loss, contamination of or Release from, scrapping
or destruction of or any requisition or taking of the Leased Property or any
part thereof, (iii) any restriction, prevention or curtailment of or
interference with any use of the Leased Property or any part thereof including
eviction, (iv) any defect in title to or rights to the Leased Property or any
Lien on such title or rights or on the Leased Property, (v) any change, waiver,
extension, indulgence or other action or omission or breach in respect of any
obligation or liability of any Person requested or consented to by Lessee, (vi)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceedings relating to Lessee, Lessor,
the Lender or any other Person, or any action taken with respect to this Lease
by any trustee or receiver of Lessee, Lessor, the Lender or any other Person, or
by any court, in any such proceeding, (vii) any failure on the part of the
Lessor to perform or comply with any of the terms of this Lease, any other
Operative Document or of any other agreement where such failure was caused by
Lessee's failure to perform its obligations under the Operative Documents,
(viii) any disaffirmance of this Lease or any provision hereof or any of the
other Operative Documents or any provision of any thereof by Lessee, (ix) any
action by any court,
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administrative agency or other Governmental Authority, (x) any restriction,
prevention or curtailment of or interference with the Construction or any use of
the Leased Property or any part thereof or (xi) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not either Lessee
shall have notice or knowledge of any of the foregoing. Except as specifically
set forth in Articles XV or XI of this Lease, this Lease shall be noncancellable
by Lessee for any reason whatsoever and Lessee, to the extent permitted by
Applicable Law, waives all rights now or hereafter conferred by statute or
otherwise to quit, terminate or surrender this Lease, or to any diminution,
abatement or reduction of Rent payable by Lessee hereunder. Lessee assumes the
sole responsibility for the condition, use, operation, maintenance, and
management of the Leased Property and Lessor shall have no responsibility in
respect thereof and shall have no liability for damage to the property of either
Lessee or any subtenant of Lessee on any account or for any reason whatsoever
other than by reason of Lessor's willful misconduct or breach of any of its
express obligations under any Operative Document.
SECTION 4.6 Lessee to Cooperate with Lessor. The Lessee hereby agrees
to use its best efforts to supply Lessor with all such information necessary in
order for Lessor to maintain its books and accounts and prepare all required
federal, state and local tax returns.
ARTICLE V
CONDITION AND USE OF LEASED PROPERTY
During the Lease Term, Lessor's interest in the Improvements (whether or
not completed) and the Land is demised and let by Lessor "AS IS" and that
Lessor's interest is subject to, among other things, (i) the rights of any
parties in possession thereof, (ii) the state of the title thereto existing at
the time Lessor acquired its interest in the Leased Property, (iii) any state of
facts which an accurate survey or physical inspection might show (including each
survey delivered on each Parcel Closing Date), (iv) all Applicable Law and (v)
any violations of Applicable Law which may exist upon or subsequent to the
commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL
OWN AND HOLD TITLE TO THE LEASED PROPERTY, LESSEE IS SOLELY RESPONSIBLE FOR THE
DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE IMPROVEMENTS AND ANY
ALTERATIONS. NEITHER LESSOR NOR THE LENDER HAVE MADE OR SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO
HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE,
HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED
PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY (OR ANY PART
THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR NOR
THE LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR
THE FAILURE OF THE LEASED PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY
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APPLICABLE LAW except that Lessor hereby represents and warrants that the Leased
Property shall at all times remain free of Lessor Liens. As between Lessor and
Lessee, Lessee shall be afforded full opportunity to inspect the related Parcel
prior to each Parcel Closing Date, and shall enter into each Parcel Lease
Supplement solely on the basis of the results of its own inspections and all
risks incident to the matters discussed in the two preceding sentences, as
between Lessor or the Lender, on the one hand, and Lessee, on the other, are to
be borne by Lessee. The provisions of this Article have been negotiated and,
except to the extent otherwise expressly stated, the foregoing provisions are
intended to be a complete exclusion and negation of any representations or
warranties by Lessor or the Lender, express or implied, with respect to the
Leased Property that may arise pursuant to any law now or hereafter in effect or
otherwise.
ARTICLE VI
LIENS; EASEMENTS; PARTIAL CONVEYANCES
SECTION 6.1 No Liens. Commencing on the later of (i) each Parcel Closing
Date or (ii) in the event that Improvements are to be Constructed on a Parcel of
Land, each Parcel Completion Date, and continuing thereafter, Lessee shall not
directly or indirectly create, incur or assume, any Lien on or with respect to
the related Parcel of the Leased Property, the Construction, title thereto, or
any interest therein, including any Liens which arise out of the possession,
use, occupancy, construction, repair or rebuilding of the Leased Property or by
reason of labor or materials furnished or claimed to have been furnished to
Lessee, or any of its contractors or agents or by reason of the financing of any
personalty or equipment purchased or leased by Lessee or Alterations constructed
by Lessee, except in all cases Permitted Liens.
SECTION 6.2 Easements and Related Conveyances. Notwithstanding Section
6.1, at the request of Lessee, Lessor shall, from time to time during the Lease
Term and upon reasonable advance written notice from Lessee and receipt of the
materials specified in the next succeeding sentence, consent to and join in any
(i) grant of easements, licenses, rights of way and other rights in the nature
of easements, including, without limitation, utility easements to facilitate
Lessee's use, development and construction of the Leased Property, (ii) release
or termination of easements, licenses, rights of way or other rights in the
nature of easements which are for the benefit of the Land, the Improvements or
any portion thereof, (iii) dedication or transfer of portions of the Land, not
improved with a building, for road, highway or other public purposes, (iv)
execution of agreements for ingress and egress and amendments to any covenants
and restrictions affecting the Land, the Improvements or any portion thereof and
(v) request to any Governmental Authority for platting or subdivision or
replatting or resubdivision approval with respect to the Land or any portion
thereof or any parcel of land of which the Land or any portion thereof forms a
part or a request for any variance from zoning or other governmental
requirements. Lessor's obligations pursuant to the preceding sentence shall be
subject to the requirements that:
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(a) any such action shall be at the sole cost and expense of Lessee,
and Lessee shall pay all reasonable and documented out-of-pocket costs of Lessor
in connection therewith (including, without limitation, the reasonable and
documented fees of attorneys, architects, engineers, planners, appraisers and
other professionals reasonably retained by Lessor in connection with any such
action);
(b) Lessee shall have delivered to Lessor a certificate of a
Responsible Officer of Lessee stating that (1) such action will not cause the
Land, the Improvements or any portion thereof to fail to comply in any respect
with the provisions of this Lease or any other Operative Documents or in any
respect with Applicable Law and (2) such action will not materially reduce the
Fair Market Sales Value of the Land or the Improvements nor Lessor's interest
therein;
(c) all consideration received in connection with such action (net of
all reasonable out-of-pocket expenses incurred by Lessee in connection
therewith) shall be paid to Lender within ten (10) Business Days following
receipt thereof and shall constitute a Qualified Payment (to the extent
consistent with the definition thereof) and be applied to reduce the Loans; and
(d) in the case of any release or conveyance, if Lessor so requests
and to the extent available without undue expense, Lessee will cause to be
issued and delivered to Lessor by the Title Insurance Company an endorsement to
the related Title Policy pursuant to which the Title Insurance Company agrees
that its liability for the payment of any loss or damage under the terms and
provisions of the related Title Policy will not be affected by reason of the
fact that a portion of the real property referred to in Schedule A of the
related Title Policy has been released or conveyed by Lessor.
ARTICLE VII
MAINTENANCE AND REPAIR;
ALTERATIONS; MODIFICATIONS AND ADDITIONS
SECTION 7.1 Maintenance and Repair; Compliance With Law. Lessee, at its
own expense, shall after each Parcel Closing Date with respect to each Parcel
(i) maintain the Leased Property in good repair and condition (subject to
ordinary wear and tear), in accordance with prudent industry standards and, in
any event, in no less a manner as other similar facilities owned or leased by
Lessee, (ii) make all Alterations in accordance with, and maintain (whether or
not such maintenance requires structural modifications or Alterations) and
operate and otherwise keep the Leased Property in material compliance with, all
Applicable Laws and (iii) make all material repairs, replacements and renewals
of the Leased Property or any part thereof which may be required to keep the
Leased Property in the condition required by the preceding clauses (i) and (ii).
Lessee shall perform the foregoing maintenance obligations regardless of whether
the Leased Property is occupied or unoccupied. Lessee waives any right that it
may now have or hereafter acquire to (i) require Lessor to maintain, repair,
replace, alter, remove
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or rebuild all or any part of the Leased Property or (ii) make repairs at the
expense of Lessor pursuant to any Applicable Law or other agreements or
otherwise. Lessor shall not be liable to Lessee or to any contractors,
subcontractors, laborers, materialmen, suppliers or vendors for services
performed or material provided on or in connection with the Leased Property or
any part thereof. Lessor shall not be required to maintain, alter, repair,
rebuild or replace the Leased Property in any way.
SECTION 7.2 Alterations. The Lessee shall have the right, at any time and
from time to time, to make such Alterations, structural or otherwise, to the
Leased Property as the Lessee shall deem necessary or desirable, subject to the
following conditions:
(a) No Alterations shall be undertaken until the Lessee shall have
procured and paid for, so far as the same may be required from time to
time, all required municipal and other governmental permits and
authorizations of the various municipal departments and governmental
subdivisions having jurisdiction, and the Lessor, at the Lessee's expense,
shall join in the application for such permits or authorizations whenever
such action is necessary;
(b) Any structural Alterations, or any Alterations undertaken as a
single project and involving an estimated cost aggregating more than
$100,000, shall, if requested by the Lender, be conducted under the
supervision of an architect or engineer licensed as such in the State where
the applicable Parcel is located; selected by the Lessee and reasonably
acceptable to the Lender, and no such work shall be undertaken until
preliminary plans and outline specifications and budget estimates therefor,
prepared and approved in writing by such architect or engineer, stating
that the same comply with the provisions of this Article, shall have been
submitted to and approved by the Lessor and the Lender;
(c) All Alterations will comply in all respects with the provisions of
the Operative Documents and shall be of such a character that, when
completed, the Fair Market Sales Value of the Improvements shall be not
less than the Fair Market Sales Value of the Improvements immediately
before any such Alterations.
(d) All work done in connection with any Alterations shall be done in
a good and workmanlike manner and in compliance with applicable building
and zoning laws and with all other Applicable Laws; the cost of any such
Alterations shall be paid in cash or its equivalent, so that the Leased
Property shall at all times be free of Liens for labor and materials
supplied or claimed to have been supplied (other than inchoate liens or
liens bonded off in accordance with Applicable Law and with Lender's
consent); and the work of any Alterations shall be prosecuted with
reasonable dispatch, unavoidable delays excepted; and
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(e) Worker's compensation insurance covering all persons employed in
connection therewith and with respect to whom death or bodily injury claims
could be asserted against the Lessor, the Lender or the Lessee or the
Leased Property and general liability and property damage insurance (which
may be effected by indorsement, if obtainable, on the insurance required to
be carried pursuant to Section 9.2) for the mutual benefit of the Lessor,
the Lender or the Lessee with limits of not less than those required to be
carried pursuant to said Section 9.2 shall be maintained by the Lessee at
all times when any work is in process in connection with any Alterations.
SECTION 7.3 Title to Alterations. Title to all Alterations shall
without further act vest in Lessor (subject to Lessee's right to remove trade
fixtures, personal property and equipment which were not acquired with funds
advanced by Lessor or Lender) and shall be deemed to constitute a part of the
Leased Property and be subject to this Lease.
ARTICLE VIII
USE
Lessee shall use the Leased Property or any part thereof only for the
purpose of operating nursing homes and assisted living centers and uses
ancillary thereto.
ARTICLE IX
INSURANCE
SECTION 9.1 Insurance Coverages. At all times (except as otherwise
indicated) the Lessee, at its sole cost and expense, shall keep the Improvements
insured for the mutual benefit of the Lender, Lessor and Lessee against:
(a) loss or damage by fire, and such other risks as may be included in
the so-called "All Risk" form of insurance providing coverage against all
risks of physical loss, in an amount satisfactory to Lender, but in any
event not less than the then Full Replacement Cost of the Improvements;
(b) loss or damage from leakage of sprinkler systems now or hereafter
installed in the Improvements, in such amount as Lender may reasonably
require;
(c) loss of rental from the Improvements, under a rental value
insurance policy covering risk of loss due to any of the hazards described
in clauses (a) and (b) of this Section 9.1 in an amount not less than the
aggregate requirements for the period of 12 months following the occurrence
of the insured casualty for Basic Rent and Supplemental Rent;
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(d) loss or damage by explosion of high pressure steam boilers, air
conditioning equipment, pressure vessels, motors or similar apparatus, now
or hereafter installed in the Improvements in such limits with respect to
any one accident as may reasonably be required by Lender from time to time,
but not less than $100,000;
(e) flood hazard coverage, if available under any applicable federal
flood insurance program, in an amount reasonably satisfactory to Lender;
(f) during the Construction and at any time during which any part of
the Improvements or any Alteration are under construction, and as to any
part of the Improvements or any Alteration under construction, builder's
risk coverage under a so-called "all risk" non-reporting completed value
form of policy; and
(g) such other hazards and in such amounts as Lender may reasonably
require provided that such insurance is then customarily maintained with
respect to similar properties in the State in which such Improvements are
located.
The term "Full Replacement Cost" shall mean the actual replacement cost of the
Improvements (excluding foundation and excavation costs) without physical
depreciation. Full Replacement Cost shall be determined at the request of
Lender by an architect, appraiser, appraisal company or one of the insurers,
selected and paid by the Lessee and reasonably acceptable to Lender, but such
determination shall not be required to be made more frequently than once every
24 months.
SECTION 9.2 Liability Insurance. The Lessee shall also maintain insurance
for the mutual benefit of the Lessor, the Lender, each other Indemnitee, and the
Lessee against claims for bodily injury or property damage, under a policy of
general public liability insurance, with such limits as may reasonably be
required by the Lessor or the Lender from time to time, but not less than
$3,000,000 combined single limit, with excess umbrella liability coverage of not
less than $10,000,000.
SECTION 9.3 Policies. All insurance provided for under this Lease shall
be effected under valid enforceable policies issued by insurers of recognized
responsibility and acceptable to the Lessor and the Lender. Upon the execution
of this Lease, the Lessee shall deliver to the Lender and the Lessor original
certificates of such insurance and copies of such policies in form reasonably
satisfactory to the Lender. At least thirty (30) days prior to the expiration
date of any policy, a copy of the renewal policy for such insurance shall be
delivered by the Lessee to the Lessor and the Lender, and certificates thereof
in form reasonably satisfactory to the Lender shall be delivered as aforesaid,
together with satisfactory evidence of payment of the premium thereon. All
policies referred to in Section 9.1 shall contain agreements by the insurers
that (i) any loss shall be payable to the Lessor and the Lender, notwithstanding
any act or negligence of the Lessee which might otherwise result in forfeiture
of said insurance, (ii) such policies shall not be canceled except upon thirty
(30) days' prior written notice to each named insured and loss
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payee, (iii) the coverage afforded thereby shall not be affected by the
performance of any work in or about the Leased Property and (iv) waiving all
rights of subrogation against the Lessor, Lender, Lessee and their respective
officers, employees, directors, incorporators, shareholders and agents.
SECTION 9.4 Loss Payee Provisions. The rental value policy referred to in
Section 9.1 (c) shall name Lender as the loss-payee thereunder. Upon the
receipt of same, the Lender shall apply the proceeds of such rental value
insurance paid to it first to the payment of Basic Rent and then to the payment
of taxes, insurance premiums and other items of Supplemental Rent becoming due
during the rebuilding and restoration of the Leased Property, and any balance of
such proceeds after the completion of such rebuilding and restoration shall be
paid to Lessee. Except as provided above in this Section 9.4, all policies of
insurance required herein shall name the Lender, Lessor, and Lessee as the
insureds as their respective interests may appear. Subject to the provisions
and limitations of this Section, all policies referred to in Section 9.1 shall
also provide for any loss to be payable to Lender as its interest may appear,
pursuant to a standard mortgagee clause or endorsement. The loss, if any, under
the policies referred to in Section 9.1 shall be adjusted with the insurance
companies by the Lessee except that no loss shall be adjusted without the prior
written approval of the Lender. The loss, if any, under all policies referred
to in Section 9.1 shall be payable to the Lender. All such policies shall
expressly provide that loss thereunder shall be adjusted and paid as provided in
this Section. Any loss paid to the Lessee under any insurance policy referred
to in Section 9.1 shall be held by the Lessee in trust for application to the
cost of restoring, repairing, replacing or rebuilding the Improvements. Any
loss paid to the Lender shall be disbursed by it in accordance with the
provisions of Section 11.6 of this Lease.
SECTION 9.5 Other Insurance. Nothing in this Article shall prevent the
Lessee from taking out insurance of the kind and in the amounts provided for
under Section 9.1 and 9.2 under a blanket insurance policy or policies which can
cover other properties owned or operated by the Lessee as well as the Leased
Property; provided, however, that any such policy of insurance provided for
under Section 9.1 shall (a) specify therein, or the Lessee shall furnish the
Lessor and the Lender with a written statement from the insurers under such
policies specifying, the amount of the total insurance allocated to the
Improvements, which amount shall be not less than the amount required by said
Section 9.1 to be carried, and (b) not contain any clause which would result in
the insured thereunder being required to carry insurance with respect to the
property covered thereby in an amount equal to a minimum specific percentage of
the value of such property in order to prevent the insured therein named from
becoming a co-insurer of any loss with the insurer under such policy. The
Lessee shall furnish to the Lessor and the Lender, within 30 days after the
filing thereof with any insurance rate-making body, copies of the schedule or
make-up of all property covered by every such policy of blanket insurance.
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SECTION 9.6 Loss Deductibles. All insurance provided for under this
Agreement may contain loss deductible clauses in such maximum amounts as the
Lender shall approve from time to time.
SECTION 9.7 Failure to Maintain Insurance. If Lessee shall fail to
maintain any insurance required to be maintained herein or in any other
Operative Document, then without limiting the application of the provisions of
Article XIII(c) hereof, Lessor or the Lender may, but shall not be required to,
obtain such insurance on behalf of the Lessee. In the event Lessor or Lender
shall obtain such insurance, (a) the Lessee shall pay the costs of obtaining
such insurance as Supplemental Rent within five (5) Business Days of demand
therefor, and (b) the Lessee may provide other insurance conforming to the
requirements of this Lease, in which instance any insurance obtained by the
Lender or the Lessor shall be cancelled at its request. The rights of the
Lessee and Lender under this Section 9.7 shall be in addition to, and not in
place of, any other rights such parties may have under this Lease and the other
Operative Documents.
ARTICLE X
ASSIGNMENT AND SUBLEASING
Except as provided in the next following sentence, Lessee may not assign
any of its right, title or interest in, to or under this Lease. Lessee may
assign or sublease all or any portion of the Leased Property; provided, however,
that (i) all obligations of Lessee (or, in the case of a merger, consolidation
or sale of all or substantially all of Lessee's assets, Lessee's successor if
(A) such successor has a net worth, determined in accordance with GAAP, at least
equal to that of Lessee as of the end of the most recent fiscal quarter of
Lessee, (B) such successor assumes in writing all of Lessee's obligations under
the Operative Documents without qualification or reservation and (C) immediately
after giving effect to such merger, consolidation or sale, no Event of Default
exists) shall continue in full effect as obligations of a principal and not of a
guarantor or surety, as though no assignment or sublease had been made, (ii) any
such sublease shall be expressly subject and subordinate to this Lease, the Loan
Agreement, the Mortgages and the other Operative Documents except to the extent
the Lease remains effective under the applicable Non-Disturbance and Attornment
Agreement and (iii) each such sublease shall terminate on or before the Lease
Termination Date. Lessee may sublet any of the Properties to Atria Health
Centers, Inc., a Delaware corporation and the wholly-owned subsidiary of Lessee
for so long as such corporation shall remain a wholly-owned subsidiary of the
Lessee.
ARTICLE XI
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
SECTION 11.1 Event of Loss. Any event (i) which would otherwise
constitute a Casualty during the Lease Term, (ii) which, in the good-faith
judgement of Lessee, renders repair and restoration of any Property impractical
or uneconomical and (iii) as to which Lessee, within thirty (30) days after the
occurrence of such event, delivers to Lessor and the Lender an
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Officer's Certificate notifying Lessor and the Lender of such event and of such
judgement, shall constitute an "Event of Loss". In the case of any other event
which constitutes a Casualty, Lessee shall restore and rebuild the affected
Property pursuant to Section 11.3. If an Event of Loss other than an Event of
Taking shall occur, Lessee shall pay to Lessor on the next Rent Payment Date
following delivery of the Officer's Certificate pursuant to clause (iii) of the
preceding sentence, in addition to all Basic Rent and Supplement Rent otherwise
due on such date, an amount equal to the sum of the Total Development Cost of
the affected Property, plus the Breakage Costs, if any, applicable to the
consequent prepayment of the Notes pursuant to the Loan Agreement. Upon Lessor's
receipt of such amount on such date, Lessor shall cause Lessor's interest in the
affected Property to be conveyed to Lessee in accordance with and subject to the
provisions of Section 15.5 ("Purchase Procedure") hereof, provided, however,
that (A) such conveyance may be by special warranty deed, but free and clear of
Lessor's Liens and the lien of the related Mortgage, (B) Lessor shall have no
obligation to remove title defects other than Lessor Liens and the lien of the
related Mortgage affecting such Property and (C) Lessee's ability to obtain a
title insurance policy shall not affect Lessee's obligation to purchase Lessor's
interest in the affected Property. Upon completion of such purchase, but not
prior thereto, the affected Property shall be deemed released from this Lease
and all obligations of the Lessee and Lessor with respect to such Property shall
terminate, except with respect to obligations and liabilities hereunder, actual
or contingent, that have arisen or relate to events occurring on or prior to
such date of purchase, or which are expressly stated herein to survive
termination of this Lease. Upon the consummation of the purchase of the Leased
Property pursuant to this Section, any proceeds derived from insurance required
to be maintained by Lessee pursuant to this Lease for Leased Property remaining
after payment of such purchase price shall be paid over to, or retained by,
Lessee or as it may direct, and Lessor shall assign to Lessee, without warranty,
all of Lessor's rights to and interest in insurance required to be maintained by
Lessee pursuant to this Lease.
SECTION 11.2 Event of Taking. Any event (a) which constitutes a taking
of title to any Property or (b) (i) which would otherwise constitute a
Condemnation, (ii) which, in the good-faith judgement of Lessee, renders
restoration and rebuilding of such Property impossible, impractical or
uneconomical and (iii) as to which Lessee, within thirty (30) days after the
occurrence of such event, delivers to Lessor and Lender an Officer's Certificate
notifying Lessor and the Lender of such event, of such judgement and of the date
(or Lessee's best estimate thereof) on which Lessee shall be required to
relinquish possession of the affected Property (or the affected portion
thereof), shall constitute an "Event of Taking". In the case of any other event
which constitutes a Condemnation, Lessee shall restore and rebuild the affected
Property pursuant to Section 11.4. If an Event of Taking shall occur, Lessee
shall pay to the Lender for the account of the Lessor (i) on the next Rent
Payment Date following the occurrence of such Event of Taking, in the case of an
Event of Taking described in clause (a) of the second preceding sentence or (ii)
on the Rent Payment Date next preceding the date on which Lessee is required to
relinquish possession of the Leased Property (or the affected portion thereof),
in the case of an Event of Taking described in clause (b) of the second
preceding sentence, in addition to all Basic Rent and Supplemental Rent
otherwise due on such date, an amount equal
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to the sum of the Total Development Cost of the affected Property plus the
Breakage Costs, if any, applicable to the consequent prepayment of the Notes.
Upon the Lessor's receipt of such amount on such date, the Lessor shall cause
the Lessor's interest in the affected Property to be conveyed to Lessee in
accordance with and subject to the provisions of Section 15.5 ("Purchase
Procedure") hereof; provided, however, that (A) such conveyance may be by
special warranty deed, but free and clear of Lessor's Liens and the lien of the
related Mortgage, (B) such conveyance shall be subject to all rights of the
condemning authority, (C) Lessor shall have no obligation to remove title
defects other than Lessor Liens and the lien of the related Mortgage affecting
such Property and (D) Lessee's ability to obtain a title insurance policy shall
not affect Lessee's obligation to purchase Lessor's interest in the affected
Property. Upon completion of such purchase, but not prior thereto, the affected
Property shall be deemed released from this Lease and all obligations of the
Lessee and the Lessor under this Lease with respect to such Property shall
terminate, except with respect to obligations and liabilities hereunder, actual
or contingent, that have arisen or relate to events occurring on or prior to the
date of such purchase, or which are expressly stated herein to survive
termination of this Lease. Upon the consummation of the purchase of the affected
Property pursuant to this Section, all Awards received by Lessor, after
deducting any reasonable and documented costs incurred by Lessor in collecting
such Awards, received or payable on account of an Event of Taking during the
Lease Term shall be paid to Lessee, and all rights of Lessor in Awards not then
received shall be assigned to Lessee by Lessor. If no Event of Default has
occurred and is then continuing, Lessee shall have the right to negotiate with
the condemning authority and receive all Awards, subject to the terms of this
Lease.
SECTION 11.3 Casualty. If a Casualty shall occur, Lessee shall rebuild
and restore the affected Property, will complete the same prior to the Lease
Termination Date and will cause the conditions set forth in Section 3.3 of the
Participation Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date; provided, however, that with
respect to any such Casualty occurring after the original satisfaction of the
Construction Conditions, such restoration and rebuilding will be performed, and
the Improvements, as applicable, will be restored and rebuilt, in accordance
with the Plans and Specifications as in existence on the date on which the
certificate of occupancy for the affected Improvements was issued, as such Plans
and Specifications may have been modified in respect of Alterations completed
prior to the occurrence of such Casualty pursuant to Section 7.2, with such
additional modifications to such Plans and Specifications as Lessor shall
consent to in writing, which consent shall not be unreasonably held or delayed.
SECTION 11.4 Condemnation. If a Condemnation shall occur, Lessee shall
rebuild and restore the affected Property to the extent practicable, will
complete the same prior to the Lease Termination Date, and will cause the
conditions set forth in Section 3.3 of the Participation Agreement to be
fulfilled with respect to such restoration and rebuilding prior to the Lease
Termination Date; provided, however, that within sixty (60) days after Lessee's
receipt of any Awards with respect to such Condemnation, Lessee shall pay to the
Lender, which amounts shall be applied as a Qualified Payment to the prepayment
of the Notes, (a) the portion, if any, of
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such Awards which are identified, by the condemner, as being allocable to the
Land or (b) if no such identification is made by the condemner, the portion, if
any, of such Awards which are, in Lessee's good-faith and reasonable judgment,
allocable to the Land; and provided, further, that with respect to any such
Condemnation occurring after the original satisfaction of the Construction
Conditions, such restoration and rebuilding will be performed, and the
Improvements, as applicable, will be restored and rebuilt, in accordance with
the Plans and Specifications as in existence on the date on which the
certificate of occupancy for the affected Improvements, as applicable, was
issued, as such Plans and Specifications may have been modified in respect of
Alterations completed prior to the occurrence of such Casualty pursuant to
Section 7.2 or modified to adjust for a Condemnation of the Leased Property
pursuant to Section 11.3, with such additional modifications to such Plans and
Specifications as Lessor shall consent to in writing, which consent shall not be
unreasonably withheld or delayed.
SECTION 11.5 Verification of Restoration and Rebuilding. Lessee will
promptly notify Lender and Lessor of the completion of the restoration or
rebuilding of the Improvements, as applicable, after a Casualty or Condemnation.
After completion of such restoration and rebuilding and in order to verify
Lessee's compliance with the foregoing Sections 11.3 and 11.4, Lessor, the
Lender and their authorized representatives may, upon three (3) Business Days'
notice to Lessee, inspect the Leased Property and the completion of the
restoration and rebuilding of the Improvements, as applicable. All reasonable
and documented out-of-pocket costs of such inspection incurred by Lessor and the
Lender will be paid by Lessee promptly after written request. No such
inspection shall unreasonably interfere with Lessee's operations or the
operations of any other occupant of the Leased Property. None of the inspecting
parties shall have any duty to make any such inspection or inquiry and none of
the inspecting parties shall incur any liability or obligation by reason of not
making any such inspection or inquiry. None of the inspecting parties shall
incur any liability or obligation by reason of making any such inspection or
inquiry unless and to the extent such inspecting party causes damage to the
Leased Property or any property of Lessee or any other Person during the course
of such inspection.
SECTION 11.6 Application of Payments. (a) All proceeds (except for
payments under insurance policies maintained other than pursuant to Article IX
of this Lease) received at any time by Lessor, Lessee or the Lender from any
Governmental Authority or other Person with respect to any Condemnation or
Casualty to the Leased Property or any part thereof or with respect to an Event
of Loss or an Event of Taking, plus the amount of any payment that would have
been due from an insurer but for Lessee's self-insurance or deductibles ("Loss
Proceeds"), shall (except to the extent Section 11.9 applies) be applied as
follows:
(i) In the event Lessee purchases the affected Property pursuant to
Section 11.1 or Section 11.2, such Loss Proceeds shall be applied as set
forth in Section 11.1 or Section 11.2, as the case may be;
(ii) In the event of a Casualty at such time when or Event of Default
has occurred and is continuing and Lessee is obligated to repair and
rebuild the
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Leased Property pursuant to Section 11.3, Lessee may, in good faith and
subsequent to the date of such Casualty, certify to the Lender and to the
applicable insurer that no Default or Event of Default has occurred, in
which event the applicable insurer shall pay the Loss Proceeds to Lessee
and, if requested by Lessee, the Lender and Lessor shall so direct the
insurer;
(iii) In the event of a Condemnation at such time when or Event of
Default has occurred and is continuing and Lessee is obligated to repair
and rebuild the Leased Property pursuant to Section 11.4, Lessor and Lender
(if required) shall upon Lessee's request assign to Lessee Lessor's and the
Lender's (if applicable) interest in any applicable Awards except for
Awards (or portions thereof) described in Section 11.4(a) or (b); and
(iv) As provided in Section 11.8 if such Section is applicable.
(b) During any period of repair or rebuilding pursuant to this Article,
this Lease will remain in full force and effect and Basic Rent shall continue to
accrue and be payable without abatement or reduction. Lessee shall maintain
records setting forth information relating to the receipt and application of
payments in accordance with this Section. Such records shall be kept on file by
Lessee at its offices and shall be made available to Lessor and the Lender upon
request.
SECTION 11.7 Prosecution of Awards. (a) If, during the continuance
of any Event of Default, any Condemnation shall occur, Lessee shall give to
Lessor and the Lender promptly, but in any event within sixty (60) days after
the occurrence of such Condemnation, written notice of such occurrence and the
date thereof, generally describing the nature and extent of such Condemnation.
With respect to any Event of Taking or any Condemnation, Lessee shall control
the negotiations with the relevant Governmental Authority as to any proceeding
in respect of which Awards are required, under Section 11.6, to be assigned or
released to Lessee; provided, however, that if an Event of Default shall have
occurred and be continuing Lessor shall control such negotiations. Lessee
hereby irrevocably assigns, transfers and sets over to Lessor all rights of
Lessee to any Award made during the continuance of an Event of Default on
account of any Event of Taking or any Condemnation and, if there will not be
separate Awards to the Lessor and the Lessee on account of such Event of Taking
or Condemnation, irrevocably authorizes and empowers Lessor during the
continuance of an Event of Default, with full power of substitution in the name
of Lessee or otherwise (but without limiting the obligations of Lessee under
this Article), to file and prosecute what would otherwise be Lessee's claim for
any such Award and, in the case of Lessor, to collect, receipt for and retain
the same; provided, however, that in any event Lessor may participate in any
such negotiations, and no settlement will be made without Lessor's prior
consent, not to be unreasonably withheld or delayed.
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(b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor shall
have no interest in, any claim with respect to Lessee's trade fixtures, other
personal property and equipment and Lessee's relocation expenses.
SECTION 11.8 Application of Certain Payments Not Relating to an Event of
Taking. In case of a requisition for temporary use of all or a portion of the
Leased Property which is not an Event of Taking, this Lease shall remain in full
force and effect, without any abatement or reduction of Basic Rent, and the
Awards for the Leased Property shall, unless an Event of Default has occurred
and is continuing, be paid to Lessee.
SECTION 11.9 Other Dispositions. Notwithstanding the foregoing
provisions of this Article, so long as an Event of Default shall have occurred
and be continuing, any amount that would otherwise be payable to or for the
account of, or that would otherwise be retained by, Lessee pursuant to this
Article shall be paid to Lessor as security for the obligations of Lessee under
this Lease and, at such time thereafter as no Event of Default shall be
continuing, such amount shall be paid promptly to Lessee to the extent not
previously applied by Lessor in accordance with the terms of this Lease or the
other Operative Documents.
SECTION 11.10 No Rent Abatement. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of the Leased Property, and Lessee shall continue to perform and
fulfill all of Lessee's obligations, covenants and agreements hereunder
notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date. The foregoing notwithstanding, if and to the
extent that, pursuant to the provisions of this Lease and the other Operative
Documents, Loss Proceeds or Awards are paid over to and permanently retained by
the Lender or Lessor, Lessee shall receive as a credit against its obligation to
pay Basic Rent or, as applicable, the Lease Balance, in the amount of any such
Loss Proceeds or Awards.
ARTICLE XII
INTEREST CONVEYED TO LESSEE
If a bankruptcy court or other court of competent jurisdiction determines
that the transaction represented by this Lease will not be enforced as a true
lease, or will be treated as a financing or other transaction, then in such
event it is the intention of the parties hereto (i) that this Lease be treated
as a mortgage and security agreement, deed of trust and security agreement, or
other similar instrument encumbering the Leased Property, (ii) that Lessor shall
have, as a result of such determination, all of the rights, powers and remedies
of a mortgagee or trustee under a deed of trust available under Applicable Law
to take possession of and sell upon the occurrence of an Event of Default
(whether by foreclosure or otherwise) the Leased Property, (iii) that the
effective date of such mortgage and security agreement, deed of trust and
security agreement, or other similar instrument shall be the effective date of
this Lease, (iv) that the recording of this Lease, each Memorandum of Lease, or
any other instrument referencing this provision shall be deemed to be the
recording of such mortgage and security agreement,
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deed of trust and security agreement, or other similar instrument and (v) that
the obligations secured by such mortgage and security agreement, deed of trust
and security agreement, or other similar instrument shall include the payment of
all Basic Rent and Supplemental Rent, the Lease Balance and all other
obligations of and amounts due from Lessee hereunder and under the Operative
Documents but without duplication.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) Lessee shall fail to make any payment of Basic Rent when due and such
failure shall continue for a period of five (5) days after such failure;
(b) Lessee shall fail to make any payment of Supplemental Rent when due
and such failure shall continue for a period of ten (10) days after Lessee's
receipt of written notice of such failure from Lessor;
(c) Lessee shall fail to pay (i) the amount required for purchase of the
affected Property when due pursuant to Sections 11.1, or 11.2, or (ii) the Lease
Balance when due in connection with the exercise of the Purchase Option pursuant
to Section 15.1, or when due for the purchase of the Leased Property pursuant to
Section 15.2, or (iii) the Recourse Deficiency Amount when required pursuant to
Article XV;
(d) Lessee shall fail to maintain insurance as required by Article IX
hereof;
(e) The occurrence of any breach of the financial covenants set forth in
Section 5.5 of the Participation Agreement and Appendix III thereof;
(f) The occurrence of an "Event of Default" as defined in either or both of
the Guaranty or the Investment Property Security Agreement;
(g) The filing by Lessee of any petition for dissolution or liquidation of
Lessee, or the commencement by Lessee of a voluntary case under any applicable
bankruptcy, insolvency or other similar law for the relief of debtors, foreign
or domestic, now or hereafter in effect, or Lessee shall have consented to the
entry of an order for relief in an involuntary case under any such law, or the
appointment of or taking possession by a receiver, custodian or trustee (or
other similar official) for Lessee or any substantial part of its property, or a
general assignment by Lessee for the benefit of its creditors, or Lessee shall
have taken any corporate action in furtherance of any of the foregoing; or the
filing against Lessee of an involuntary petition in
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bankruptcy which results in an order for relief being entered or,
notwithstanding that an order for relief has not been entered, the petition is
not dismissed within ninety (90) days of the date of the filing of the petition,
or the filing under any law relating to bankruptcy, insolvency or relief of
debtors of any petition against Lessee which either (i) results in a finding or
adjudication of insolvency of Lessee or (ii) is not dismissed within ninety (90)
days of the date of the filing of such petition;
(h) A "default", "event of default" or other similar occurrence shall have
occurred and be continuing under (i) that certain $200,000,000 Credit Agreement
(the "Credit Agreement") dated as of August 15, 1996 among the Lessee as
Borrower, the lending institutions (including the Lender) listed in Annex I
thereto, PNC Bank, National Association as Administrative Agent, PNC Bank,
Kentucky, Inc., as Managing Agent, National City Bank of Kentucky as
Documentation Agent, and each of PNC Bank, National Association, National City
Bank of Kentucky and The Toronto-Dominion Bank, New York Agency, as Syndication
Agents, as the Credit Agreement may have been and as it shall be amended,
supplemented, restated or otherwise modified from time to time; and/or (ii) any
other loan agreement, credit agreement, revolving credit agreement, mortgage,
security agreement, lease agreement, participation agreement or other agreement
evidencing or securing any Indebtedness of Lessee or any one or more of its
Affiliates or by which any of them is bound, and to which Lender is a party or
the assignee of a party or a participant in the interest of a party.
(i) A "default", "event of default" or other similar occurrence shall have
occurred and be continuing under any other loan agreement, credit agreement,
revolving credit agreement, mortgage, security agreement, lease agreement,
participation agreement or other agreement between Lessee, or any Affiliate of
Lessee, and Lender or between Lessee, or any Affiliate of Lessee, and Lessor, or
any Affiliate of Lessor, evidencing or securing any Indebtedness of Lessee or
any one or more of its Affiliates in excess of $1,000,000;
(j) Any representation or warranty by Lessee in any Operative Document or
in any certificate or document delivered to Lessor pursuant to any Operative
Document shall have been incorrect in any material respect when made and has
resulted in a Material Adverse Effect on Lessee; or
(k) Lessee shall fail in any material respect to timely perform or observe
any covenant, condition or agreement (not included in clause (a), (b), (c), (d),
(e), (f), (g), (h), (i) or (j) of this Article) to be performed or observed by
it hereunder or under the other Operative Documents and such failure shall
continue for a period of 30 days after the earlier to occur of a Responsible
Officer becoming aware of such failure or the Lessee's receipt of written notice
thereof from Lessor (provided, however, if such failure is other than the
payment of money and is of such nature that it can be corrected but not within
the applicable period, then that failure shall not constitute an Event of
Default so long as Lessee institutes curative action within the applicable
period and diligently pursues that action to completion).
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ARTICLE XIV
ENFORCEMENT
SECTION 14.1 Remedies. Upon the occurrence of any Event of Default and
at any time thereafter, Lessor may, so long as such Event of Default is
continuing, do one or more of the following as Lessor in its sole discretion
shall determine, without limiting any other right or remedy Lessor may have on
account of such Event of Default (including, without limitation, the obligation
of Lessee to purchase the Leased Property as set forth in Sections 15.2 and
15.3):
(a) Lessor may, by notice to Lessee, rescind or terminate this Lease as of
the date specified in such notice; provided, however, that (i) no reletting,
reentry or taking of possession of the Leased Property by Lessor will be
construed as an election on Lessor's part to terminate this Lease unless written
notice of such intention is given to Lessee, (ii) notwithstanding any reletting,
reentry or taking of possession, Lessor may at any time thereafter elect to
terminate this Lease for a continuing Event of Default, (iii) no act or thing
done by Lessor or any of its agents, representatives or employees and no
agreement accepting a surrender of the Leased Property shall be valid unless the
same be made in writing and executed by Lessor, and (iv) Lessor shall be under
no obligation whatsoever to mitigate its damages hereunder but shall be entitled
to maintain an action for the payment in full of all amounts due hereunder
(including but not limited to payment of the Recourse Deficiency Amount, but
subject to the terms and provisions of this Section 14.1), except as may be
required by Applicable Law.
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the written
demand of Lessor, return the Leased Property promptly to Lessor in the manner
and condition required by, and otherwise in accordance with all of the
provisions of, Articles VII and XV hereof as if the Leased Property were being
returned at the end of the Lease Term, and Lessor shall not be liable for the
reimbursement of Lessee for any costs and expenses incurred by Lessee in
connection therewith and (ii) without prejudice to any other remedy which Lessor
may have for possession of the Leased Property, and to the extent and in the
manner permitted by Applicable Law, enter upon the Leased Property and take
immediate possession of (to the exclusion of Lessee) the Leased Property or any
part thereof and expel or remove Lessee and any other Person who may be
occupying the Leased Property, by summary proceedings or otherwise, all without
liability to Lessee for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise and, in addition to Lessor's other damages, Lessee shall be
responsible for the reasonable and documented costs and expenses of reletting,
including brokers fees and the reasonable and documented costs of any
alterations or repairs made by Lessor.
(c) Lessor may (i) sell all or any part of the Leased Property at public
or private sale, as Lessor may determine, free and clear of any rights of Lessee
and without any duty to account to Lessee with respect to such action or
inaction or any proceeds with respect thereto (except to the extent required by
clause (ii) of this subsection if Lessor shall elect to exercise its rights
thereunder) in which event Lessee's obligation to pay Basic Rent hereunder for
periods
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commencing after the date of such sale shall be terminated or proportionately
reduced, as the case may be and (ii) if Lessor shall so elect, demand that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date of such sale,
as liquidated damages for loss of a bargain and not as a penalty (the parties
agreeing that Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of such
amount) (in lieu of Basic Rent due for periods commencing on or after the Rent
Payment Date coinciding with such date of sale (or, if the sale date is not a
Rent Payment Date, the Rent Payment Date next preceding the date of such sale)),
an amount equal to (A) the excess, if any, of (1) the sum of all Rent due and
unpaid to and including such Rent Payment Date plus an amount equal to the Lease
Balance as of the date of sale (or, if the Event of Default occurs prior to the
Completion Date, an amount equal to the sum of the principal of and all interest
accrued on, and Breakage Costs, if any, in respect of, the Notes plus an amount
equal to the outstanding balance of the Contribution plus all accrued and unpaid
Contribution Returns) over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by Lessor incident to such conveyance
(including, without limitation, all costs, expenses, fees, premiums and taxes
described in Section 15.5(b)), plus (B) interest at the Overdue Rate on the
foregoing amount from such Rent Payment Date until the date of payment. Any
amounts so collected pursuant to this subsection shall be applied (after first
deducting amounts expended by Lessor in connection with the Leased Property and
the Operative Documents and not then reimbursed) to reduce the Lease Balance.
Lessor agrees, upon Lessee's written request and at Lessee's sole expense, to
provide Lessee with an accounting showing in reasonable detail the application
of amounts collected pursuant to this subsection.
(d) Lessor may, at its option, elect not to terminate the Lease, and
continue to collect all Basic Rent, Supplemental Rent and all other amounts due
Lessor (together with all costs of collection) and enforce Lessee's obligations
under this Lease as and when the same become due, or are to be performed, and at
the option of Lessor, upon any abandonment of the Leased Property by Lessee and
re-entry of same by Lessor, Lessor may, in its sole and absolute discretion,
elect not to terminate this Lease and may make such reasonable alterations and
necessary repairs in order to relet the Leased Property, and relet the Leased
Property or any part thereof for such term or terms (which may be for a long
term extending beyond the term of this Lease) and at such rental or rentals and
upon such other terms and conditions as Lessor in its reasonable discretion may
deem advisable. Upon each such reletting, all rentals actually received by
Lessor from such reletting shall be applied to Lessee's obligations hereunder in
such order, proportion and priority as Lessor may elect in Lessor's sole and
absolute discretion, and if such rentals received from such reletting during any
Rent Period are less than the Rent to be paid during that Rent Period by Lessee
hereunder, Lessee shall pay any deficiency, as calculated by Lessor, to Lessor
on the Rent Payment Date in such Rent Period.
(e) If the Leased Property has not been sold, the Lessor may, whether or
not the Lessor shall have exercised or shall thereafter at any time exercise any
of its rights under paragraph (b), (c) or (d) of this Section with respect to
the Leased Property, demand, by written notice to the Lessee specifying a date
(the "Final Rent Payment Date") not earlier than ten (10)
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days after the date of such notice, that the Lessee purchase, on the Final Rent
Payment Date, the Leased Property in accordance with the provisions of Sections
15.2, 15.4 and 15.5; provided, however, that (i) such purchase shall occur on
the date set forth in such notice, notwithstanding the provision in Section 15.3
calling for such purchase to occur on the Lease Termination Date and (ii) the
Lessor's obligations under Section 15.5(a) shall be limited to delivery of a
deed without warranty and bill of sale without warranty of the Leased Property,
without recourse or warranty, but free and clear of the Lessor's Liens.
(f) To the extent not inconsistent with subsection (e), Lessor may
exercise any other right or remedy that may be available to it under Applicable
Law, or proceed by appropriate court action (legal or equitable) to enforce the
terms hereof or to recover damages for the breach hereof. Separate suits may be
brought to collect any such damages for any Rent Period(s), and such suits shall
not in any manner prejudice Lessor's right to collect any such damages for any
subsequent Rent Period(s), or Lessor may defer any such suit until after the
expiration of the Lease Term, in which event such suit shall be deemed not to
have accrued until the expiration of the Lease Term.
(g) Lessor may retain and apply against Lessor's damages all sums which
Lessor would, absent such Event of Default, be required to pay, or turn over, to
Lessee pursuant to the terms of this Lease.
SECTION 14.2 Remedies Cumulative; No Waiver; Consents. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law
(subject in all events to Section 14.1(e) hereof), each and every right, power
and remedy herein specifically given to Lessor or otherwise in this Lease shall
be cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by Lessor, and the exercise or the
beginning of the exercise of any power or remedy shall not be construed to be a
waiver of the right to exercise at the same time or thereafter any right, power
or remedy. No delay or omission by Lessor in the exercise of any right, power
or remedy or in the pursuit of any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any default on the part of Lessee or to
be an acquiescence therein. Lessor's consent to any request made by Lessee
shall not be deemed to constitute or preclude the necessity for obtaining
Lessor's consent, in the future, to all similar requests. No express or implied
waiver by Lessor of any Event of Default shall in any way be, or be construed to
be, a waiver of any future Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor to sell, lease or otherwise use the
Leased Property or part thereof in mitigation of Lessor's damages upon the
occurrence of an Event of Default or that may otherwise limit or modify any of
Lessor's rights or remedies under this Article.
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ARTICLE XV
SALE, RETURN OR PURCHASE OF LEASED PROPERTY
SECTION 15.1 Lessee's Option to Purchase. Subject to the terms and
conditions and provisions set forth in this Article, Lessee shall have the
option (the "Purchase Option"), exercisable at any time during the Lease Term on
or prior to the 120th day next preceding the Lease Termination Date, to purchase
from Lessor, Lessor's entire interest in all, but not less than all, of the
Leased Property at the purchase price equal to the Purchase Option Price. Such
option must be exercised by written notice to the Lessor and the Lender, which
exercise shall be irrevocable, and such notice shall specify the closing date
for Lessee's purchase of all of the Leased Property, which date shall be (i) not
less than sixty (60) days or more than ninety (90) calendar days following the
Lessor's receipt of such notice and (ii) in any event not later the Lease
Termination Date. If the Purchase Option is exercised pursuant to the
foregoing, then, subject to the provisions set forth in this Article, on such
closing date, Lessor shall convey to Lessee, and Lessee shall purchase from
Lessor, Lessor's interest in all, but not less than all, of the Leased Property.
If Lessee fails to exercise the Purchase Option in a timely manner, then the
Purchase Option shall thereupon automatically terminate without any further
action of Lessor, and the Purchase Option shall thereafter be of no force or
effect. The Purchase Option granted to Lessee pursuant to this Section is
exclusive of the purchase option provided to Lessee pursuant to Section 14.1(e).
SECTION 15.2 Purchase Obligation. Unless (i) the Lessee and the Lessor
shall have extended the Lease Term pursuant to a supplement to this Lease
containing conditions and terms mutually agreeable to the Lessee and the Lessor
and approved by the Lender, (ii) Lessee shall have properly exercised the
Purchase Option and purchased the Leased Property pursuant thereto, (iii) Lessee
shall have properly exercised the Remarketing Option and shall have fulfilled
the conditions of Section 15.6 hereof and Lessor shall have sold its entire
interest in the Leased Property pursuant thereto or (iv) Lessee shall have
properly exercised the Remarketing Option and shall have fulfilled the
conditions of Section 15.6 hereof but the Lessor shall have rejected such sale
pursuant to Section 15.6(xi) and Lessee shall then have timely fulfilled all of
its obligations under Section 15.7 and 15.8 hereof, then, subject to the terms,
conditions and provisions set forth in this Article, Lessee shall purchase from
Lessor, and Lessor shall convey to Lessee, on the Lease Termination Date
Lessor's entire interest in all, but not less than all, of the Leased Property.
Lessee may designate, in a notice given to Lessor not less than ten (10)
Business Days prior to the closing of such purchase (time being of the essence),
the transferee to whom the conveyance shall be made (if other than to Lessee),
in which case such conveyance shall (subject to the terms and conditions set
forth herein) be made to such designee; provided, however, that such designation
of a transferee shall not cause Lessee to be released, fully or partially, from
any of its obligations under this Lease.
SECTION 15.3 Acceleration of Purchase Obligation. Lessee shall be
obligated to purchase Lessor's entire interest in all, but not less than all, of
the Leased Property immediately, automatically and without notice upon the
occurrence of any Event of Default specified in clause
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(g) of Article XIII; provided, however, that (without affecting any of Lessee's
obligations under Section 15.5 or otherwise) Lessor's obligations under Section
15.5 (a) shall be limited to delivery of a quit claim deed of the Leased
Property.
SECTION 15.4 Determination of Purchase Price. Upon the purchase by
Lessee of the Leased Property pursuant to Sections 15.2 or 15.3, the purchase
price therefor shall be an amount equal to the Lease Balance as of the closing
date therefor.
SECTION 15.5 Purchase Procedure.
(a) If Lessee shall purchase Lessor's interest in the Leased Property
pursuant to any provision of this Lease (other than as provided in Section
15.3), (i) Lessee shall accept from Lessor, and Lessor shall convey to Lessee,
such Leased Property by one or more duly executed and acknowledged special
warranty deeds of such Leased Property in recordable form, (ii) upon the date
fixed for any purchase of Lessor's interest in such Leased Property hereunder,
Lessee shall pay to the order of Lessor the Lease Balance by wire transfer of
federal funds and (iii) Lessor shall convey to Lessee Lessor's entire interest
in all of the Leased Property via the special warranty deed or deeds described
above and Lessor will execute and deliver to Lessee such other documents as may
be legally required in order to effect such conveyance, and such other documents
as may be required by any escrow agent in order to close escrow in connection
with such conveyance and issue to Lessee an ALTA owner's title policy subject
only to (A) the exceptions set forth on Schedule B of the Title Policy for each
Property other than the Mortgage(s) therefor and the Assignment of Lease and
Rents, (B) such exceptions created or caused by Lessee, or otherwise resulting
from any act or failure to act by Lessee, or consented to by Lessee and (C)
taxes and assessments not yet due and payable.
(b) In the event that Lessee exercises the Remarketing Option pursuant to
Section 15.6 and fulfills all of the conditions set forth in clauses (i) through
(xiii) thereof, and if Lessor does not reject the purchase offer for the Leased
Property as provided in Section 15.6 (xi), then upon payment of the purchase
price and the satisfaction by such purchaser of all of the applicable closing
conditions, Lessor shall convey to such purchaser Lessor's interest in the
Leased Property by a duly executed special warranty deed or deeds in recordable
form, and Lessor will execute and deliver to such purchaser (or the Lessee, as
appropriate) such other documents as may be legally required in order to effect
such conveyance, and such other documents as may be required by such purchaser's
title insurance company in order to issue to such purchaser an ALTA owner's
title insurance policy subject only to (i) the exceptions set forth on Schedule
B of the Title Policy, other than the Mortgage(s) therefor and the Assignment of
Lease and Rents, (ii) such exceptions created or caused by Lessee, or otherwise
resulting from any act or failure to act by the Lessee, or consented to by the
Lessee and (iii) taxes and assessments not yet due and payable.
(c) Lessee shall, at Lessee's sole cost and expense, obtain all required
governmental and regulatory approval and consents and shall make such filings as
required by Applicable Law.
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In the event that Lessor is required by Applicable Law to take any action in
connection with such purchase and sale, Lessee shall pay all costs incurred by
Lessor in connection therewith. In addition, all charges incident to such
conveyance, including, without limitation, Lessee's attorneys' fees, Lessor's
reasonable attorneys' fees, commissions, Lessee's and Lessor's escrow fees,
recording fees, title insurance premiums and all applicable documentary transfer
or other transfer taxes and other taxes required to be paid in order to record
the transfer documents that might be imposed by reason of such conveyance and
the delivery of such deed shall be borne entirely and paid by Lessee.
(d) Upon expiration or termination of this Lease resulting in conveyance
of Lessor's interest in the title to the Leased Property to Lessee, there shall
be no apportionment of taxes, insurance, utility charges or other charges
payable with respect to the Leased Property, all of such taxes, insurance,
utility or other charges due and payable with respect to the Leased Property
prior to termination being payable by Lessee hereunder and all due after such
time being payable by Lessee as the then owner of the Leased Property.
SECTION 15.6 Option to Remarket. Subject to the fulfillment of each of
the conditions set forth in this Section, Lessee shall have the option (the
"Remarketing Option") to market all, but not less than all, of the Leased
Property and to procure a purchaser therefor. Lessee's effective exercise and
consummation of the Remarketing Option shall be subject to the due and timely
fulfillment of each of the following provisions, the failure of any of which
shall render the Remarketing Option and Lessee's exercise thereof null and void,
in which event, Lessee shall remain obligated to perform all of its obligations
under Section 15.2 (the "Purchase Obligation"):
(i) Not later than three (3) months before the Scheduled Termination
Date, Lessee shall give to Lessor written notice of Lessee's exercise of
the Remarketing Option, which exercise shall be irrevocable unless
otherwise agreed in writing by the Lender.
(ii) Not later than thirty (30) Business Days prior to the Scheduled
Termination Date, Lessee shall deliver to Lessor an environmental
assessment of each Parcel of the Leased Property dated not later than
forty-five (45) days prior to the Scheduled Termination Date. Each such
environmental assessment shall be prepared by an environmental consultant
selected by Lessee and reasonably acceptable to Lessor and the Lender,
shall be in form, detail and substance reasonably acceptable to Lessor and
the Lender, and shall otherwise indicate the environmental condition of the
Leased Property to be the same as described in the Environmental Audit
delivered pursuant to Section 3.2 of the Participation Agreement.
(iii) On the date of Lessee's notice to Lessor of Lessee's exercise
of the Remarketing Option, each of the Construction Conditions shall have
been timely satisfied and no Event of Default shall exist, and thereafter,
no Event of Default shall exist under this Lease.
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(iv) Lessee shall have completed all Alterations, restoration and
rebuilding of the Leased Property pursuant to Sections 7.2, 11.3 and 11.4
(as the case may be) and shall have fulfilled all of the conditions and
requirements in connection therewith pursuant to said Sections, in each
case by the date on which Lessor receives Lessee's notice of Lessee's
exercise of the Remarketing Option (time being of the essence), regardless
of whether the same shall be within Lessee's control.
(v) Once Lessee has exercised the Remarketing Option as provided in
clause (i) hereof, Lessee shall, as nonexclusive agent for Lessor, use
commercially reasonable efforts to sell Lessor's interest in each Parcel of
the Leased Property and will attempt to obtain the highest purchase price
therefor. Lessee will be responsible for hiring brokers and making the
Leased Property available for inspection by prospective purchasers. Lessee
shall promptly provide any maintenance records relating to each Parcel of
the Leased Property to Lessor and any potential purchaser thereof upon
request, and shall otherwise do all things necessary to sell and deliver
possession of each Parcel of the Leased Property to the purchaser thereof.
All such marketing of the Leased Property shall be at Lessee's sole
expense. Lessee shall allow Lessor, the Lender and any potential qualified
purchaser access to each Parcel of the Leased Property for the purpose of
inspecting the same.
(vi) Lessee shall submit all bids to Lessor and the Lender and Lessor
and the Lender will have the right to review the same and the right to
submit any one or more bids. All bids shall be on an "all-cash" basis (at
least up to the Lease Balance amount). Lessee shall procure bids from one
or more bona fide prospective purchasers of any Parcel of the Leased
Property and shall deliver to Lessor and the Lender not less than ninety
(90) days prior to the Lease Termination Date a binding written irrevocable
offer by such purchaser offering (subject to customary conditions which do
not violate the provisions of clause viii, below) the highest "all-cash"
bid to purchase the Leased Property. Such purchaser shall not be Lessee or
any Subsidiary or Affiliate of Lessee. The written offer must specify the
Lease Termination Date as the closing date.
(vii) On the Lease Termination Date, Lessee shall surrender the
Leased Property in accordance with Section 15.8 hereof.
(viii) In connection with any such sale of the Leased Property,
Lessee may provide to the purchaser any such customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor's Liens) and the condition of the Leased Property,
including, without limitation, an environmental indemnity, as Lessee may
determine to provide in the exercise of its business judgment and sole
discretion, provided, however, that no such indemnities, representations or
warranties shall be binding on Lessor, nor shall they create liabilities,
charges, offsets or Claims, contingent or otherwise, which could diminish,
offset or impose a lien upon the amount of the cash proceeds payable to
Lessor under such purchase offer, nor shall Lessor be
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under any obligation to join in or become obligated for the same, except
that Lessor shall fulfill all of the requirements set forth in clause (b)
of Section 15.5, and such requirements are incorporated herein by
reference. As to Lessor, any such sale shall be made on an "as is, with all
faults" basis without representation or warranty by Lessor other than the
absence of Lessor's Liens.
(ix) Lessor shall pay from the sale proceeds, all prorations, credits,
costs and expenses of the sale of the Leased Property, including without
limitation the cost of all title insurance, surveys, environmental reports,
appraisals, transfer taxes, Lessor's reasonable attorneys' fees,
commissions, escrow fees, recording fees, and all applicable documentary
and other transfer taxes.
(x) Lessee shall pay to the Lender on the Lease Termination Date (or
to such other Person as Lessor shall notify Lessee in writing or, in the
case of Supplemental Rent, to the Person entitled thereto) an amount equal
to the Recourse Deficiency Amount in the type of funds specified in Section
4.3 hereof.
(xi) If the aggregate selling price (net of closing costs and
prorations and other amounts payable by Lessor under clause (ix) above, as
reasonably estimated by Lessor) for all Parcels plus the Recourse
Deficiency Amount is less than the Lease Balance, then Lessor may, by
notice to Lessee and in Lessor's sole and absolute discretion, reject such
offer to purchase, in which event the parties will proceed according to the
provisions of Section 15.7 "Rejection of Sale" hereof.
(xii) If Lessor does not reject such purchase offer as provided
above, the closing of such purchase of the Leased Property by such
purchaser must occur on the Lease Termination Date, contemporaneously with
Lessee's surrender of the Leased Property in accordance with Section 15.8
hereof.
(xiii) If Lessor does not reject the purchase offer as provided
above, then the purchase shall be consummated on the Lease Termination Date
and the gross proceeds of the sale (i.e., without deduction for any
marketing, closing or other costs, prorations or commissions) shall be paid
directly to Lessor; provided, however, that if the sum of the gross
proceeds from such sale plus the Recourse Deficiency Amount exceeds the
Lease Balance, as of such date, then the excess shall be paid to Lessee on
the Lease Termination Date.
If one or more of the foregoing provisions shall not be fulfilled as of the
Lease Termination Date or if the Leased Property is not purchased as aforesaid
for any other reason whatsoever other than solely due to rejection by Lessor of
such sale pursuant to subsection (xi) above, then Lessor may, at Lessor's option
and in Lessor's sole discretion, (i) declare by written notice to Lessee the
Remarketing Option to be null and void (whether or not it has been theretofore
exercised by Lessee), in which event all of Lessee's rights under this Section
shall immediately terminate and
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Lessee shall be obligated to purchase the Leased Property pursuant to Section
15.2 on the Lease Termination Date or (ii) permit and require Lessee on behalf
of Lessor to consummate the sale of the Leased Property to such purchaser, in
which event the gross proceeds shall be paid as set forth in Section 15.6(xiii)
above and all of Lessor's rights and remedies set forth herein, in the other
Operative Documents, at law or in equity or otherwise shall be preserved as set
forth in Section 14.2 hereof. If the prospective purchaser breaches its offer to
purchase, then Lessor may, in Lessor's sole discretion, declare the Remarketing
Option to be null and void, in which event all of Lessee's rights under this
Section shall immediately terminate and Lessee shall be obligated to purchase
the Leased Property pursuant to Section 15.2. The Lessee shall have no right,
power or authority to bind the Lessor in connection with any proposed sale of
the Leased Property.
SECTION 15.7 Rejection of Sale. (a) Notwithstanding anything contained
herein to the contrary, if Lessor rejects the purchase offer(s) for the Leased
Property as provided in Section 15.6(a)(xi) then (i) Lessee shall pay to the
Lender (or to such other person as Lessor shall direct) the Recourse Deficiency
Amount pursuant to Section 15.6(xi), (ii) Lessor shall retain title to the
Leased Property and (iii) in addition to Lessee's other obligations hereunder,
Lessee will reimburse Lessor within ten (10) Business Days after written
request, for all reasonable costs and expenses incurred by Lessor, during the
period ending on the first anniversary of the Remarketing Date in connection
with the marketing, sale, closing or transfer of the Leased Property which
obligation shall survive the Lease Termination Date and the termination or
expiration of this Lease with respect thereto.
(b) Following any rejection by the Lessor of the purchase offer(s) for
the Leased Property pursuant to the provisions of Section 15.6(xi), subject to
the condition that Lessee shall have:
(i) timely paid the Recourse Deficiency Amount to Lessor on
or before the Lease Termination Date,
(ii) duly and timely fulfilled each of the other provisions of
clauses (i) through (xiii) of Section 15.6 on or before the Lease
Termination Date, and
(iii) on and after the Lease Termination Date, timely fulfilled
each and every obligation of the Lessee under the Lease, the
Participation Agreement and the other Operative Documents on its part
to be performed, and no Event of Default shall have occurred,
then,
upon the subsequent sale of all, but not less than all, of the Leased Property
by Lessor to one or more third parties, Lessor shall pay to Lessee an amount
equal to the Lessor's gain (if any)
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on the sales, computed taking into account Lessor's total investment in the
Leased Property (including, without limitation, the unpaid balance of the Loan,
if any, and the unrecovered balance of the Contribution) plus all of Lessor's
unreimbursed costs and expenses (capital or otherwise) relating to the Leased
Property, plus an annual return thereon for up to twelve (12) months following
the Lease Termination Date (but not thereafter) computed at the Overdue Rate,
less the net avails of any reletting of such Leased Property or any part
thereof. To the extent that Lessor shall receive payment in the form of
purchase-money indebtedness in connection with any such sale, Lessor's duty to
account to Lessee pursuant to this Section 15.7(b) shall be suspended until such
time as Lessor receives payment thereon.
SECTION 15.8 Return of Leased Property. If Lessor retains title to the
Leased Property pursuant to Section 15.7 hereof, then Lessee shall, on the Lease
Termination Date, and at its own expense, return possession of the Leased
Property to Lessor for retention by Lessor. If Lessee properly exercises the
Remarketing Option and fulfills all of the conditions of Section 15.6 hereof and
the Lessor does not reject such purchase offers pursuant to Section 15.6(xi),
then Lessee shall (unless by agreement with the purchaser Lessee is to remain in
possession of the Leased Property), on the Lease Termination Date and at its own
cost, transfer possession of the Leased Property to the independent purchaser
thereof, in each case by surrendering the same into the possession of Lessor or
such purchaser, as the case may be, free and clear of all Liens other than
Lessor Liens, Liens for Taxes not yet payable and Liens described in clause (vi)
of the definition of Permitted Liens, in as good condition as it was on the
Completion Date (as modified by Alterations permitted by this Lease), ordinary
wear and tear excepted, and in compliance with Applicable Law. Lessee shall, on
and within a reasonable time before and after the Lease Termination Date,
cooperate with Lessor and the independent purchaser of the Leased Property in
order to facilitate the ownership and operation by such purchaser of the Leased
Property after the Lease Termination Date, which cooperation shall include the
following, all of which Lessee shall do on or before the Lease Termination Date
or as soon thereafter as is reasonably practicable: providing all books and
records regarding the maintenance and ownership of the Leased Property and all
know-how, data and technical information relating thereto to the extent in
Lessee's possession, providing a current copy of the Plans and Specifications
for the Leased Property, assigning all licenses necessary for the operation and
maintenance of the Leased Property to the extent Lessee has the legal right to
do so and cooperating in seeking and obtaining all necessary Governmental Action
relating to occupancy but not special use by the purchaser thereof. Lessee
shall have also paid the cost of all Alterations with respect to the Leased
Property commenced prior to the Lease Termination Date. The obligation of
Lessee under this Article shall survive the expiration or termination of this
Lease.
SECTION 15.9 Effect of Conveyance to Lessee. Upon conveyance of the
Leased Property after the exercise by Lessee of any of its rights to purchase
the Leased Property, including its rights under Section 14.1(e), or after
exercise of the Remarketing Option and the fulfillment of the applicable
conditions of clauses (i) through (x) of Section 15.6, this Lease shall
automatically terminate unless Lessee otherwise elects in writing.
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ARTICLE XVI
LESSEE'S EQUIPMENT
After any repossession of the Leased Property (whether or not this Lease
has been terminated), Lessee, at its expense and so long as such removal of such
Alteration shall not result in a violation of Applicable Law, shall, within a
reasonable time after such repossession or within sixty (60) days after Lessee's
receipt of Lessor's written request (whichever shall first occur), remove all of
Lessee's trade fixtures, personal property and equipment from the Leased
Property (to the extent that the same can be readily removed from the Leased
Property without causing material damage to or materially impairing the value of
the Leased Property); provided, however, that Lessee shall not remove any
fixture, equipment or personal property which constitutes part of the Leased
Property. Any of Lessee's trade fixtures, personal property and equipment not
so removed by Lessee within such period shall be considered abandoned by Lessee,
and title thereto shall without further act vest to Lessor, and may be
appropriated, sold, destroyed or otherwise disposed of by Lessor without notice
to Lessee and without obligation to account therefor and Lessee will pay Lessor,
upon written demand, all reasonable and documented costs and expenses incurred
by Lessor in removing, storing or disposing of the same and all costs and
expenses incurred by Lessor to repair any damage to the Leased Property caused
by such removal. Lessee will immediately repair at its expense all damage to
the Leased Property caused by any such removal (unless such removal is effected
by Lessor, in which event Lessee shall pay all reasonable costs and expenses
incurred by Lessor for such repairs). Lessor shall have no liability in
exercising Lessor's rights under this Article, nor shall Lessor be responsible
for any loss of or damage to Lessee's personal property and equipment in
connection therewith.
ARTICLE XVII
RIGHT TO PERFORM FOR LESSEE
If Lessee shall fail to perform or comply with any of its agreements
contained herein Lessor may, on thirty (30) days' prior notice (or such lesser
period afforded by Applicable Law or any third party, except that no notice
shall be required in the case of a default in the observance of the obligations
to maintain insurance pursuant to Article IX, or in the event of emergency) to
Lessee, perform or comply with such agreement, and Lessor shall not thereby be
deemed to have waived any default caused by such failure, and the amount of such
payment and the amount of the expenses of Lessor (including reasonable
attorney's fees and expenses) incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, shall be
deemed Supplemental Rent, payable by Lessee to Lessor within ten (10) days'
after written demand therefor.
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ARTICLE XVIII
MISCELLANEOUS
SECTION 18.1 Reports. To the extent required under Applicable Law and
to the extent it is reasonably practical for Lessee to do so, Lessee shall
prepare and file in timely fashion, or, where such filing is required to be made
by Lessor or it is otherwise not reasonably practical for Lessee to make such
filing, Lessee shall prepare and deliver to Lessor (with a copy to the Lender)
within a reasonable time prior to the date for filing and Lessor shall file, any
material reports with respect to the condition or operation of the Leased
Property that shall be required to be filed with any Governmental Authority.
SECTION 18.2 Binding Effect; Successors and Assigns; Survival. The
terms and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and Lessee, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer the Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
to the benefit of their respective permitted successors and assigns, and the
rights hereunder of the Lender shall inure (subject to such conditions as are
contained herein) to the benefit of the Lender's permitted successors and
assigns.
SECTION 18.3 Quiet Enjoyment. Lessor covenants that, so long as no
Event of Default has occurred and is continuing, it will not interfere in
Lessee's or any of its sublessees' quiet enjoyment of the Leased Property in
accordance with this Lease during the Lease Term.
SECTION 18.4 Notices. Unless otherwise specified herein, all notices,
offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in accordance
with Section 8.2 of the Participation Agreement.
SECTION 18.5 Severability. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Law, the parties hereby
waive any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 18.6 Amendment; Complete Agreements. Neither this Lease nor any
of the terms hereof may be terminated, amended, supplemented, waived or modified
orally, except by an instrument in writing signed by Lessor and the Lessee in
accordance with the provisions of Section 8.4 of the Participation Agreement.
This Lease, together with the other Operative Documents, is intended by the
parties as a final expression of their lease agreement and as a complete and
exclusive statement of the terms thereof, all negotiations, considerations and
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<PAGE>
representations between the parties having been incorporated herein and therein.
No course of prior dealings between the parties or their officers, employees,
agents or Affiliates shall be relevant or admissible to supplement, explain, or
vary any of the terms of this Lease or any other Operative Document. Acceptance
of, or acquiescence in, a course of performance rendered under this or any prior
agreement between the parties or their Affiliates shall not be relevant or
admissible to determine the meaning of any of the terms of this Lease or any
other Operative Document. No representations, undertakings, or agreements have
been made or relied upon in the making of this Lease other than those
specifically set forth in the Operative Documents.
SECTION 18.7 Construction. This Lease shall not be construed more
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.
SECTION 18.8 Headings. The Table of Contents and headings of the
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.
SECTION 18.9 Counterparts. This Lease may be executed in any number of
counterparts as may be convenient or necessary, and it shall not be necessary
that the signatures of all parties hereto or thereto be contained on any one
counterpart hereof or thereof. Additionally, the parties hereto agree that for
purposes of facilitating the execution of this lease, (a) the signature pages
taken from the separate individually executed counterparts of this lease may be
combined to form multiple fully executed counterparts and (b) a facsimile
transmission shall be deemed to be an original signature for all purposes. All
executed counterparts of this Lease shall be deemed to be originals, but all
such counterparts taken together or collectively, as the case may be, shall
constitute one and the same agreement.
SECTION 18.10 Governing Law. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
KENTUCKY EXCEPT, WITH RESPECT TO LEASED PROPERTY LOCATED IN ANY STATE OTHER THAN
KENTUCKY, FOR ISSUES WHICH ARE MANDATORILY SUBJECT TO THE LAWS OF THE STATE IN
WHICH ANY PART THE LEASED PROPERTY IS LOCATED, WHICH ISSUES SHALL BE
INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN
WHICH SUCH PART OF THE LEASED PROPERTY IS LOCATED.
SECTION 18.11 Discharge of Lessee's Obligations by its Affiliates.
Lessor agrees that performance of any of Lessee's obligations hereunder by one
or more of Lessee's Affiliates or one or more of Lessee's sublessees of the
Leased Property or any part thereof shall constitute performance by Lessee of
such obligations to the same extent and with the same effect hereunder as if
such obligations were performed by Lessee, but no such performance shall excuse
Lessee from any obligation not performed by it or on its behalf under the
Operative Documents.
- 34 -
<PAGE>
SECTION 18.12 Liability of Lessor Limited. Except as otherwise expressly
provided below in this Section, it is expressly understood and agreed by and
between Lessee, Lessor and their respective successors and assigns that nothing
herein contained shall be construed as creating any personal liability of Lessor
or any of its constituent members or other Affiliates, or JH Management
Corporation, or any of their respective incorporators, stockholders, officers,
directors, employees or agents, individually or personally, to perform any
covenant, either express or implied, contained herein, all such personal
liability, if any, being expressly waived by Lessee and by each and every Person
now or hereafter claiming by, through or under Lessee, and that, so far as
Lessor or any of its constituent members or other Affiliates, or JH Management
Corporation, or any of their respective incorporators, stockholders, officers,
directors, employees or agents, individually or personally, is concerned, Lessee
and any Person claiming by, through or under Lessee shall look solely to, and
the liability of Lessor hereunder shall be limited to, the right, title and
interest of Lessor in the Leased Property, any proceeds from Lessor's sale or
encumbrance thereof, and any Awards or Loss Proceeds (provided, however, that
Lessee shall not be entitled to any double recovery) for the performance of any
obligation under this Lease and under the Operative Documents and the
satisfaction of any liability arising therefrom.
SECTION 18.13 Estoppel Certificates. Each party hereto agrees that at
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to the Lender, any
prospective purchaser (if such prospective purchaser has signed a commitment or
letter of intent to purchase the Leased Property or any part thereof), assignee
or mortgagee or third party designated by such other party, a certificate
stating (i) that this Lease is unmodified and in force and effect (or if there
have been modifications, that this Lease is in force and effect as modified, and
identifying the modification agreements), (ii) the date to which Basic Rent has
been paid, (iii) whether or not there is any existing default by Lessee in the
payment of Basic Rent or any Supplemental Rent, and whether or not there is any
other existing default by either party with respect to which a notice of default
has been served, and, if there is any such default, specifying the nature and
extent thereof, (iv) whether or not, to the knowledge of the signer, there are
any setoffs, defenses or counterclaims against enforcement of the obligations to
be performed hereunder existing in favor of the party executing such certificate
and (v) other matters concerning the status of this Lease and of any of the
Operative Documents to which the Lessee is a party that may be reasonably
requested; provided, however, that no such certificate may be requested unless
the requesting party has a good faith reason for such request.
SECTION 18.14 No Joint Venture. Any intention to create a joint venture
or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
SECTION 18.15 No Accord and Satisfaction. The acceptance by Lessor of
any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall any such acceptance be
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<PAGE>
construed, to constitute an accord and satisfaction of any dispute between
Lessor and Lessee regarding sums due and payable by Lessee hereunder, unless
Lessor specifically deems it as such in writing.
SECTION 18.16 No Merger. In no event shall the leasehold interests,
estates or rights of Lessee hereunder merge with any interests, estates or
rights of Lessor in or to the Leased Property, it being understood that such
leasehold interests, estates and rights of Lessee hereunder shall be deemed to
be separate and distinct from Lessor's interests, estates and rights in or to
the Leased Property, notwithstanding that any such interests, estates or rights
shall at any time or times be held by or vested in the same person, corporation
or other entity.
SECTION 18.17 Survival. The obligations of Lessee to be performed under
this Lease prior to the Lease Termination Date and the obligations of Lessee
pursuant to Articles IV, XI, XII, XIV, Sections 15.2, 15.3, 15.4, 15.5 and 15.8,
Articles XVI, XVII, and Sections 18.09 and 18.11 shall survive the expiration or
termination of this Lease. The extension of any applicable statute of
limitations by Lessor, Lessee, the Lender or any Indemnitee shall not affect
such survival.
SECTION 18.18 Chattel Paper. To the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code in any
applicable jurisdiction), no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the original
counterpart, which shall be identified as the original counterpart by the
receipt of Lessor on its signature page.
SECTION 18.19 Time of Essence. Time is of the essence of this Lease.
SECTION 18.20 Recordation of Lease. Lessee will, at its expense, cause
either the Lease or each Memorandum of Lease to be recorded in the proper office
or offices in the State and the municipality in which the Land is located.
SECTION 18.21 Investment of Security Funds. Any amounts not payable to
Lessee (which amounts shall be paid to or retained by Lessor), pursuant to any
provision of Article IX, XI or XV or this Section solely because an Event of
Default shall have occurred and be continuing, shall be held by the Lender, on
behalf of Lessee, as security for the obligations of Lessee under this Lease and
the Participation Agreement. At such time as no Event of Default shall be
continuing, such amounts, net of any amounts previously applied to Lessee's
obligations hereunder or under the Participation Agreement, shall be paid to
Lessee or such sublessee or transferee, as the case may be. Any such amounts
which are held by the Lender pending payment to Lessee or such sublessee or
transferee, as the case may be, shall until paid to Lessee or such sublessee or
transferee, as the case may be, as provided hereunder or, as long as the Loan
Agreement is in effect, until applied against Lessee's obligations herein and
under the Participation Agreement and distributed as provided in Section 3 of
the Loan Agreement or (after the Loan Agreement is no longer in effect) in
connection with any exercise of remedies
- 36 -
<PAGE>
hereunder, be invested by the Lender as directed from time to time in writing by
Lessee (provided, however, if an Event of Default has occurred and is continuing
such investment will be directed by Lessor) and at the expense and risk of
Lessee, in investments reasonably approved by the Lender. Any gain (including
interest received) realized as the result of any such investment (net of any
fees, commissions and other expenses, if any, incurred in connection with such
investment) shall be applied in the same manner as the principal invested.
SECTION 18.22 No Illegal Interest to be Charged. All agreements between
the Lessee and the Lessee under this Lease or the Participation Agreement are
expressly limited so that in no contingency or event whatsoever shall the amount
paid or agreed to be paid to the Lessor or its successors or assigns for the
use, forbearance or detention of the money to be advanced to the Lessee exceed
the highest rate permissible under law applicable thereto by a court of
competent jurisdiction. If, from any circumstances whatever, fulfillment of any
provisions of this Lease or any of the Operative Documents at the time
performance of such provision shall be due, shall involve payment of interest at
a rate that exceeds the highest lawful rate as so determined, then ipso facto
the obligation to be fulfilled shall be reduced to such highest lawful rate. If
from any circumstances whatsoever, the Lessor or its successors or assigns shall
ever receive interest, the amount of which would exceed such highest lawful
rate, the portion thereof that would be excessive interest shall be applied to
the reduction of the unpaid Scheduled Rent; provided, however, that nothing
contained herein, in the Participation Agreement, this Lease or any of the
Operative Documents shall be deemed to create a defense, contractual or
otherwise, to any sums due or to become due or coming due under this Lease, the
Participation Agreement or any of the Operative Documents where no such defense
exists at law, as for example, where corporations are barred from asserting the
defense of usury or in a case wherein no limit exists upon the rate of interest
that may be charged.
SECTION 18.23 Submission to Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally (i) submits for itself and its property
in any legal action or proceeding relating to this Lease or any other Operative
Document, or for recognition and enforcement of any judgment in respect thereof,
to the non-exclusive general jurisdiction of the courts of the State of
Kentucky, the courts of the United States of America for the Western District of
Kentucky and appellate courts from any thereof, (ii) consents that any such
action or proceedings may be brought to such courts, and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same, (iii) agrees that service of
process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such party at its address set forth in Section 8.2 of
the Participation Agreement or such other address of which the other parties
hereto shall have been notified pursuant to said Section 8.2 and (iv) agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law. Each party, to the extent permitted by law,
hereby irrevocably and unconditionally waives any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise, among or between the parties
- 37 -
<PAGE>
hereto arising out of, in connection with, related to, or incidental to the
relationship established among the parties in connection with this Lease, any
other Operative Document or any other document executed or delivered in
connection herewith or the transactions related hereto. This waiver shall not in
any way affect, waive, limit, amend or modify the Lessor's ability to pursue any
remedies contained in this Lease, the other Operative Documents or any other
agreement or document related hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease and
Development Agreement to be executed by their respective duly authorized
officers as of the day and year first above written.
WITNESSES: ASSET XVIII HOLDINGS COMPANY,
L.L.C., as Lessor
__________________________________ By: Asset Holdings Corporation I, as
Print Name:_______________________ Managing Member
__________________________________ By:____________________________________
Print Name:_______________________ Anne Brennan, Secretary
ATRIA COMMUNITIES, INC.,
as Lessee
__________________________________ By:____________________________________
Print Name:_______________________ J. Timothy Wesley,
Chief Financial Officer
__________________________________
Print Name:_______________________
- 39 -
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this _____ day of
_______________________, 1998, by Anne Brennan, Secretary of Asset Holdings
Corporation I, a Delaware corporation, on behalf of Asset XVIII Holdings
Company, L.L.C., as such person's and its free act and deed.
(SEAL) __________________________________
Notary Public
My commission expires:
__________________________
STATE OF KENTUCKY )
) ss:
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this _____ day of
______________________, 1998, by J. Timothy Wesley, Chief Financial Officer, of
Atria Communities, Inc., a Delaware corporation, on behalf of the corporation,
as each such person's and its free act and deed.
(SEAL) __________________________________
Notary Public
My commission expires:
- 40 -
<PAGE>
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT, MASTER LEASE AND
DEVELOPMENT AGREEMENT AND MASTER TRUST INDENTURE
------------------------------------------------
DEFINITIONS AND INTERPRETATION
[See separate text]
<PAGE>
APPENDIX II
Form of Parcel Lease Supplement
-------------------------------
PARCEL ______ LEASE SUPPLEMENT
------------------------------
THIS PARCEL _____ LEASE SUPPLEMENT dated as of __________________, 199__
(this "Parcel Lease Supplement"), between ASSET XVIII HOLDINGS COMPANY, L.L.C.,
a Massachusetts limited liability company, as Lessor, and ATRIA COMMUNITIES,
INC., a Delaware corporation, as Lessee. Unless the context shall otherwise
require, capitalized terms used and not defined herein shall have the meanings
assigned thereto in the Lease for all purposes hereof and the rules of
interpretation set forth in Appendix I to the Lease shall apply to this Parcel
Lease Supplement.
Preliminary Statement
---------------------
In accordance with and subject to the terms and provisions of the Lease and
the other Operative Documents (i) the Lessor agreed, inter alia, to acquire
certain Properties, (ii) the Lessor has agreed to lease such Properties to the
Lessee pursuant to the Lease and Parcel Lease Supplements, (iii) [if applicable]
the Lessee has agreed to construct on behalf of and as the agent for the Lessor
all Improvements on the Parcels in accordance with the terms of the Operative
Documents, (iv) [if applicable] Lessor has agreed to lease and demise such
Improvements to Lessee and Lessee has agreed to rent and hire the same from the
Lessor as part of the Leased Property, (v) the Lender, in order to finance the
cost of the acquisition of such Properties [and Construction of such
Improvements], has agreed to lend up to $47,750,000 to the Lessor pursuant to
the Loan Agreement, and (vi) the Lessee has identified, on behalf of the Lessor,
Property ___, consisting of Parcel __ of the Land and the Improvements thereon
described on Appendix I hereto, [and upon which Lessee intends to construct
certain additional Improvements,] which Property, together with such additional
Improvements, the parties hereto desire to become part of the Leased Property.
Agreement
---------
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Parcel Lease Supplement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. As used herein:
"Lease" means that certain Master Lease and Development Agreement, dated as
of January 30, 1998, between the Lessor and the Lessee, as amended by [previous
Lease Supplements and] this Parcel Lease Supplement, which may be further
amended, supplemented or restated from time to time.
"Lease Term" means, with respect to Property ________, the period
commencing on the Parcel __ Closing Date and ending on the Scheduled Termination
Date.
"Parcel______" means the Parcel located in ______________, a description of
which is attached hereto as Appendix I.
"Parcel ___ Closing Date" means ___________ __, 19__, being the date as of
which this Parcel Lease Supplement is executed and delivered.
"Parcel _____ Completion Date" means the Parcel Completion Date for
Parcel ____.
"Parcel ______ Improvements" means those Improvements located on Parcel
____ on the Parcel Closing Date together with the additional Improvements to be
Constructed pursuant to the provisions of Section 4, below.
"Parcel Lease Supplement" means this Parcel ______ Lease Supplement.
-----------------------
"Participation Agreement" means the Master Participation Agreement dated as
of January 30, 1998 among the Lender, the Lessor and the Lessee, together with
all amendments and supplements thereto.
<PAGE>
SECTION 2. Lease of Parcel _______. In accordance with and subject to the
terms and provisions of this Parcel Lease Supplement, the Lease (in particular
Section 2.3 thereof), and the other Operative Documents, Lessor does hereby
demise and lease Lessor's interest in Parcel ____ to Lessee, and Lessee hereby
rents and leases Lessor's interest in Parcel ___ from Lessor, for the Lease
Term.
SECTION 3. Lease of Parcel _______ Improvements. Lessor hereby demises
and leases Lessor's interest in the Parcel _______ Improvements (whether or not
the Construction thereof has been completed) to Lessee and Lessee hereby rents
and leases Lessor's interest in the Parcel _______ Improvements (whether or not
the Construction thereof has been completed) from Lessor, for the Lease Term.
The demise and lease of the Parcel _______ Improvements pursuant to this Section
3 shall include any additional right, title and interest in the Parcel _______
Improvements which may at any time may be acquired by Lessor, whether in
connection with the Construction of such Improvements on an additional Parcel of
the Land, as the result of an Alteration, or otherwise, the intent being that
all right, title and interest of Lessor in and to all of the Parcel _____
Improvements, whenever constructed, and wherever located, shall at all times be
demised and leased hereunder.
SECTION 4. Construction of Parcel _______ Improvements. [if applicable]
(a) Lessee shall, for the benefit of Lessor, cause the Construction of
additional Parcel _______ Improvements to be commenced following the later of
the Commencement Date, or the closing of the acquisition of Parcel ______, and
to cause such Construction to be performed and completed in accordance with the
Plans and Specifications pursuant to the provisions of subsection (b) below.
Until such Construction is completed, the portions of the Parcel ________
Improvements under Construction, and upon completion of such Construction, the
completed Parcel _______ Improvements, shall be a part of Property ______ and
the Leased Property.
(b) Lessee shall cause the Construction of the Parcel _______ Improvements
to be completed on or prior to the Completion Deadline. Lessee's obligations
under this Section 4 shall not be diminished or affected by any insufficiency of
the proceeds of the Loans, or as the result of the costs of acquisition of the
Land or the Construction of the Improvements or any part thereof exceeding
amounts received from the sale of the Notes. In the event that the cost of
acquisition of the Land and the Construction of the Improvements, or any part
thereof, exceeds the proceeds of the Loans, such excess shall be paid by Lessee
from Lessee's own funds.
SECTION 5 Payment of Rent.
5.1 Basic Rent. Lessee shall pay Basic Rent in accordance with the Lease.
[If applicable, add provisions for capitalization of interest during
construction period, it being understood and agreed that any such provisions
shall remain subject to agreement of the parties at the time of execution of
each Parcel Lease Supplement.]
5.2 Supplemental Rent. Lessee shall pay Supplemental Rent in accordance
with the provisions of Section 4.2 of the Lease.
SECTION 6. Condition of Parcel ________. Lessee acknowledges that (as of
the Commencement Date), Parcel ______ is [vacant and unimproved and no part of
the [parcel] Improvements has been constructed thereon, nor has such
Construction commenced] [improved]. During the Lease Term, Lessor's interest in
the Parcel _______ Improvements (whether or not completed) and Parcel _____ is
demised and let by Lessor "AS IS" subject to (i) the rights of any parties in
possession thereof, (ii) the state of the title thereto existing at the time
Lessor acquired its interest in Parcel ______, (iii) any state of facts which an
accurate survey or physical inspection might show (including the survey
delivered on the Commencement Date), (iv) all applicable law and (v) any
violations of Applicable Law which may exist upon or subsequent to the
commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL
OWN AND HOLD TITLE TO PARCEL _______ PROPERTY, LESSEE IS SOLELY RESPONSIBLE FOR
THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE IMPROVEMENTS AND ANY
ALTERATIONS. NEITHER LESSOR NOR THE TRUSTEE HAVE MADE OR SHALL BE DEEMED TO
HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED
<PAGE>
TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE,
HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF PROPERTY
_______ (OR ANY PART THEREOF) OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO PROPERTY _______ (OR ANY PART
THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR NOR
THE TRUSTEE SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR PATENT DEFECT THEREIN OR
THE FAILURE OF PROPERTY ________, OR ANY PART THEREOF, TO COMPLY WITH ANY
APPLICABLE LAW except that Lessor hereby represents and warrants Property
________ is and shall at all times remain free of Lessor Liens. As between
Lessor and Lessee, Lessee has been afforded full opportunity to inspect Parcel
_____, is satisfied with the results of its inspections of Parcel _____ and is
entering into this Parcel Lease Supplement solely on the basis of the results of
its own inspections and all risks incident to the matters discussed in the two
preceding sentences, as between Lessor, on the one hand, and Lessee, on the
other, are to be borne by Lessee. The provisions of this Section 6 have been
negotiated and, except to the extent otherwise expressly stated, the foregoing
provisions are intended to be a complete exclusion and negation of any
representations or warranties by Lessor or the Trustee, express or implied, with
respect to Property ________ that may arise pursuant to any law now or hereafter
in effect or otherwise.
SECTION 7. Relationship of Lease and Parcel Lease Supplement. This Parcel
Lease Supplement shall form a part of the Lease. All terms and conditions
contained in this Parcel Lease Supplement shall be deemed to be a part of the
terms and conditions of the Lease for any and all purposes. Property _______
shall be deemed to be demised and leased under and subject to the burdens and
benefits of the Lease.
SECTION 8. Binding Effect. This Parcel Lease Supplement shall inure to
the benefit of and shall be binding upon the Lessor and Lessee and their
respective successors and assigns, subject, however to the limitations set forth
in the Lease and other Operative Documents.
SECTION 9. Counterparts. This Parcel Lease Supplement may be executed in
any number of counterparts as may be convenient or necessary, and it shall not
be necessary that the signatures of all parties hereto or thereto be contained
on any one counterpart hereof or thereof. Additionally, the parties hereto
agree that for purposes of facilitating the execution of this Parcel Lease
Supplement, (a) the signature pages taken from the separate individually
executed counterparts of this Parcel Lease Supplement may be combined to form
multiple fully executed counterparts and (b) a facsimile transmission shall be
deemed to be an original signature for all purposes. All executed counterparts
of this Parcel Lease Supplement shall be deemed to be originals, but all such
counterparts taken together or collectively, as the case may be, shall
constitute one and the same Parcel Lease Supplement.
SECTION 10. Severability. Any provision of this Parcel Lease Supplement
that shall be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction, and Lessee shall
remain liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Law, the parties hereby
waive any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 11. Amendment; Complete Agreements. Neither this Parcel Lease
Supplement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified orally, except by an instrument in writing signed by Lessor
and Lessee in accordance with the provisions of Section 8.4 of the Participation
Agreement. This Parcel Lease Supplement, together with the other Operative
Documents, is intended by the parties as a final expression of their lease
agreement in respect of Property _________ and as a complete and exclusive
statement of the terms thereof, all negotiations, considerations and
representations between the parties having been incorporated herein and therein.
No course of prior dealings between the parties or their officers, employees,
agents or Affiliates shall be relevant or admissible to supplement, explain, or
vary any of the terms of the Lease or any other Operative Document. Acceptance
of, or acquiescence in, a course of performance rendered under this or any prior
agreement between the parties or their Affiliates shall not be relevant or
admissible to determine the meaning of any of the terms of this Lease or any
other Operative Document. No representations, undertakings, or agreements have
been made or relied upon in the making of this Parcel Lease Supplement other
than those specifically set forth in the Operative Documents.
<PAGE>
SECTION 12. Governing Law. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS, EXCEPT, WITH RESPECT TO LEASED PROPERTY LOCATED IN ANY OTHER STATE THAN
KENTUCKY, FOR ISSUES THAT ARE MANDATORILY SUBJECT TO THE LAWS OF THE STATE IN
WHICH ANY PART OF THE LEASED PROPERTY IS LOCATED, WHICH ISSUES SHALL BE
INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN
WHICH SUCH PART OF THE LEASED PROPERTY IS LOCATED.
SECTION 13. Memorandum of Lease. A Memorandum of Lease (substantially in
the form of Exhibit ____ to the Participation Agreement) relating to this Parcel
Lease Supplement shall be recorded in the office of the ___________________ of
___________ County, ______________.
SECTION 14. Recourse Deficiency Amount. From and after the Parcel __
Closing Date, the Recourse Deficiency Amount shall be $ , subject to
adjustment in accordance with the terms and provisions of Appendix I to the
Lease.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Parcel _____ Lease
Supplement to be executed by their respective duly authorized officers as of the
day and year first above written.
WITNESSES: ASSET XVIII HOLDINGS COMPANY, L.L.C.,
as Lessor
__________________________________ By: Asset Holdings Corporation I, as
Print Name:_______________________ Managing Member
__________________________________ By:____________________________________
Print Name:_______________________ Name:
Title:
ATRIA COMMUNITIES, INC.,
as Lessee
__________________________________ By:____________________________________
Print Name:_______________________ Name:
Title:
__________________________________
Print Name:_______________________
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this _____ day of
_______________, 199_, by ____________________________, the
______________________ of Asset Holdings Corporation I, a Delaware corporation,
on behalf of Asset XVIII Holdings Company, L.L.C., as such person's and its free
act and deed.
(SEAL)
Notary Public
My commission expires:
STATE OF TEXAS )
) ss:
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this _____ day of
_______________, 199__, by _______________________, the __________________, of
Atria Communications, Inc., a Delaware corporation, on behalf of the
corporation, as each such person's and its free act and deed.
(SEAL) Notary Public
My commission expires:
APPENDIX I
A. Description of Parcel________ Land.
B. Description of Parcel ______ Improvements acquired on Parcel ____ Closing
Date.
[C. Description of Parcel ______ Improvements to be Constructed after the
Parcel ____ Closing Date with Financing Proceeds.]
<PAGE>
APPENDIX III
Form of Memorandum of Lease
---------------------------
<PAGE>
EXHIBIT 99
Wednesday January 7, 12:32 pm Eastern Time
Company Press Release
Atria Acquires Additional Facilities In Texas
Transaction Expands Geographic Presence In Southwest
LOUISVILLE, Ky.--(BUSINESS WIRE)--Jan. 7, 1998--Atria Communities, Inc.
(Nasdaq/NM:ATRC-news) today announced that it has reached an agreement to
acquire five healthcare facilities in Texas. The transaction, valued at $31.7
million, is expected to close by February 1, 1998. The facilities include the
Briarcliff Village complex in Tyler, Texas that encompasses a 62-unit assisted
living community, a 100-unit independent living community and a 242-bed nursing
center. The other two facilities are the Village at Copeland, a 72-unit assisted
living center also located in Tyler, and the Chandler Health Care Center, a
90-bed nursing center in nearby Chandler, Texas.
"Although our strategic plan remains firmly focused on developing and operating
assisted living communities, this transaction represented an attractive
opportunity to accelerate our presence in this region of Texas," remarked W.
Patrick Mulloy II, Atria's president and chief executive officer. "We have four
assisted living communities under development in the metropolitan area of
Dallas. We also are currently operating one assisted living community in Houston
and have three other communities under development there. The facilities in
Tyler and Chandler match well geographically with the units under development."
Atria, based in Louisville, Kentucky, is a leading national provider of assisted
and independent living services for the elderly. Including these newly acquired
facilities, the Company currently operates 46 communities in 19 states with a
resident capacity of 4,736 units, including 2,407 assisted living units, 1,997
independent living units and 332 skilled nursing beds. Atria has 44 additional
communities currently under development.
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Contact:
Atria Communities Inc., Louisville
J. Timothy Wesley, 502/596-7178
